The concept of International Human Resource Management (IHRM) is pretty simple to understand. This term can be apt for any organization that manages HRM activities like recruitment, selection, onboarding, training, etc. at an international level.
With the global talent shortage, the popularity of IHRM operations is expected to increase further in the coming years. Did you know that 45% of employers are unable to find the skills they’re looking for? Hence, with the widespread digital revolution, it is expected that these employers will search for new talents in other countries. In that case, it is necessary for HR professionals to possess an in-depth understanding of IHRM operations.
In this article, we’ll explain the idea of IHRM and various other concepts associated with it. So, without further ado, let’s get started.
What Is International Human Resource Management?
International Human Resource Management is all about the regular HRM activities but at the international level. IHRM helps an organization manage its objectives without sacrificing its competitive advantage in an international scenario.
The idea behind global human resource management is much similar to regular HRM. An IHRM professional is typically responsible for handling activities like hiring new talents, onboarding and training them, managing appraisals to expedite global HRM operations.
Multi-National Companies (MNCs) have an active IHRM team that manages the requirements of their universal employees at an international level. Wondering about the types of employees that IHRM departments handle?
Let’s find out.
The employees residing in your home country
This means the employees who are living in the home country of an organization where its headquarters are situated. For instance, Wal-Mart is a US-based company and the citizens of the US are its home country employees.
The employees residing in the host country
By this, we mean the employees of that very country where an MNC’s subsidiary is located. For instance, Wal-Mart has 2000+ stores in Mexico. Hence, the employees working in these stores will be the host country employees.
Any third-country employee
Employees who are neither from the home country nor from the host country have been hired additionally, fall under this category. For example, an Australian employee is working in the corporate headquarters of Wal-Mart, in the US. This person is a third-country employee of Wal-Mart.
HRM Vs. IHRM - an In-depth Comparison of HRM and IHRM
Is the fundamental concept of IHRM clear to you? Let us now move on to find out the differences between HRM and IHRM:
- The most basic difference between IHRM and domestic HRM is that IHRM takes into account the HRM operations of two or more countries while the focus of HRM remains strictly on home-country operations.
- As far as a complications are concerned, domestic HRM operations are much less complicated considering the fact that only home-country activities are involved here. On the contrary, International Human Resource Management is highly complicated with the involvement of several external and institutional factors.
- If you focus on the legal aspects, you’ll see that domestic HRM typically focuses on the legislations of your home country. However, for IHRM, various international legislations that are contextual, are also of prime importance.
- When we’re talking about domestic HRM, there are fewer risks involved as the scope of adaptation is much greater. Alternatively, for IHRM, the adaptation possibilities are limited since multiple cultures are involved. In that case, the risks involved are much higher.
- Under domestic HRM, HR professionals are responsible for limited operations while for IHRM, there are numerous activities that an HR professional should take care of.
What Are the Functions of Global Human Resource Management?
Global Human Resouce managers are responsible for diverse operations. Here’re a few functions of global human resource management that you should definitely know about:
- International recruitment and onboarding
Recruitment and onboarding is the most fundamental part of any HR professional’s responsibility. When it comes to IHRM, the same responsibilities are there but in an international context. An IHRM professional needs to develop job descriptions for the international markets, interact with candidates to select suitable individuals from a huge talent pool, create offers, and negotiate compensations if required. Executing all these tasks in the international context is pretty challenging considering IHRM challenges like language and cultural differences, varying educational systems, currency differences, and so on.
- International payroll management
One of the most significant functions of global human resource management is managing multi-currency payrolls. When you’re recruiting an international employee, it is essential that you pay them in their local currency. An MNC with multiple subsidiaries worldwide, it is a necessity to manage multi-currency payrolls. Also taking care of the employees’ social contributions like social security in the US, CPF in Singapore, are also part of an IHRM professional’s job.
- On-the-job training
Training a new employee is a mandatory requirement for organizations, no matter how skilled the new candidate is. In the case of IHRM too, on-the-job training becomes a critical function. The types or methods of training may vary from organization to organization. However, it is part of an HR professional’s job to ensure that all employee types are receiving necessary training after their joining.
In today’s scenario where most organizations have transformed digitally, conducting online training through courses, webinars, etc. is no longer difficult. However, it is part of an IHRM professional’s job to streamline such pieces of training and execute them in a structural manner.
- Managing benefits and compensations
When an employee joins your organization, they’re subject to certain benefits, irrespective of their home country or host country employees. These benefits are motivation boosters for employees and helping them avail those perks is one of the fundamental functions of global human resource management. Some of the common IHRM benefits may include health insurance, Covid-19 insurance, accidental coverage, etc. The more country-specific these benefits are the better for the employees.
- Handling legal compliances
It is also a critical function of IHRM to handle the stay compliant with the regulations of different countries. Every country has different labor laws, minimum wage legislation, data protection law, and more. IHRM aims to evaluate all these aspects and ensure that the employees are getting what they deserve.
Importance of Global Human Resource Management
When the global pandemic hit the world, majorities of countries went under nationwide lockdown. But for organizations, there was no stopping. Businesses had to continue their operations digitally to keep the work going. Covid-19 has forced 30% of global employees to work remotely.
This will probably explain the importance of IHRM. MNCs and international businesses are now maintaining a global workforce without the physical presence of the employees in their respective workplaces. Digitalization has made all these possible. So, when if you ask us, “What is the importance of global human resource management in the context of international employment?” Our answer will be “Huge”.
With IHRM, managing multinational workforces has become easier than ever. IHRM ensures that no matter where an employee resides, they’ll receive their share of salaries and benefits, seamlessly. It is part of an IHRM professional’s job to offer the employees what they deserve without considering any geographical roadblocks in the way.
Three Effective Tips for Successful IHRM
Here’re a few tips to manage IHRM operations successfully:
- Focus on hiring the apt talents
Your first focus should always be on hiring the right talents for international human resource management. The costs and time involved in an IHRM recruitment program are much higher. So, it is always preferable to take time but hire the candidate who can do justice to the open position. It is okay to screen the candidates for multiple rounds, but the end decision you make has to be appropriate.
- Never ignore the power of training
Training often becomes a less significant factor in IHRM. With so many additional aspects involved, training often takes the back seat. However, that’s a big mistake and enterprises may have to pay for it the hard way. Always focus on training the employees with the organizational processes, cultural differences, language training, etc. That way, it will be easier for the employees to adapt.
- Make sure that employees are getting compensated properly
Being an IHRM professional, you must always focus on compensating the employees correctly. We understand that several factors are involved in this process including currency differences, compliance differences. However, don’t forget that compensation plays a major role in motivating the employees. Around 18% of employees are disengaged from their jobs and in most cases, the reason behind such disengagements is insufficient compensation. So, work on compensations in order to create an engaged workforce.
What Are the Major Challenges of IHRM?
IHRM is subject to some of the most critical challenges. Here’re a few:
- Managing diversity in the workplace is one of the biggest challenges of IHRM. IHRM professionals' responsibility is to build and maintain a diverse workforce where each employee can stay engaged and there are no cultural differences.
- In an international scenario, HRM professionals need to bridge the gap between employees and executives in order to create an open communication channel. This can be a great challenge, especially in the international context.
- In IHRM, it is also a critical challenge to manage a global payroll while staying compliant throughout. This is also something that IHRM professionals should take into consideration.
- Removing gender-based differentiation and execute equal pay across different subsidiaries of an MNC is another major challenge of global human resource management.
How Multiplier can help International Human Resource Management?
Do IHRM operations sound like a lot of work for you? No worries. Shift to a SaaS platform that works like a local HR for every country. Yes, we’re talking about Multiplier. Multiplier can ease out some of the major IHRM activities like:
- Global payroll management
- Security and compliance
- Global benefits
Want to know more? Book your product tour now!