Variety of labour relations and compensation

Labor relations are regulated by legislation in many countries. Law determines working hours, duration of work, employer’s obligations towards the employee, minimum wage, number of days off per week or month, duration of paid holidays. Chapter 8 describes and illustrates these differences in legal regulations. The prevailing cultural approach to labor relations and traditions in countries are often formalized and described in written law. Differences emerge between cultural clusters. However, not all employment relationships are regulated by legislation, but are left to the companies and employees to decide on their own.

Quite a few differences emerge in the provision of equal opportunities in the employment relationship. Some differences can be found in different countries in areas such as equality between men and women in hiring for the same job, the wage gap between women and men, and the wage gap between workers at different positions (Hofstede, 2005).

The gender pay gap is highest in the Asian cultural cluster and averages around 40 percent. In the member countries of Organization of Economic Cooperation and Development, this difference is less than 20 percent. However, there are countries where the opportunity for women to work is limited in general by cultural characteristics or religious traditions. In some Arabic cultural cluster countries, it is customary for a woman not to work, and the main mission of a woman is to raise children and take care of home. In Anglo, Germanic and especially Nordic cultural clusters, great efforts are being made to equalize the rights of men and women to work and equal pay by regulating it even in national legislation. For example, countries determine in legal acts what percentage of an organization boards must be women. Very different numbers of women and men can be seen in the management statistics. In the list of 500 leading corporations compiled by the US corporate rating agency Standard & Poor’s, about one-third are women in executive positions, while two-thirds are men. In the firms of Asian countries, the proportion of women managers is much lower, and in Arabic and African cultural clusters, women as chief executive officer is an extremely rare phenomenon. One of the most important cultural dimensions determining these differences between men and women is the individualism-collectivism balance. In collectivist cultural clusters, the value base is family and relatives, so a woman is mainly assigned a role in the family, and career is more of a secondary matter. In individualistic cultural clusters, women’s and men’s activities are more balanced. In collectivist cultural clusters, the role of women is under influence and the number of children is high. In individualistic cultural clusters, to have one or two children is often the norm, while in collectivist cultural cluster countries the number of children per mother is much higher. Mothers with five or more children are often forced to sacrifice their lives for raising children. On the other hand, such traditions are absolutely considered acceptable in these countries. At the time of evaluating the changes in the world population, there is an obvious tendency that the population of individualistic cultural cluster countries is decreasing, while the population of collectivistic countries is increasing. Because of the better economic performance and standard of living of individualistic cultures, migration occurs from collectivistic cultural clusters towards individualistic cultural cluster countries. Thus, Europe and North America become preferred location for migrants from Asian, African, and Latin American countries. However, when migrants move to countries with individualistic cultures, they bring traditions, attitudes and behavior with them.

In the cultural clusters of Anglo, Germanic and Nordic countries, it is accepted to observe the principle of ensuring equality when hiring employees, and a selection of candidates is based on knowledge and abilities and in no way on gender, age or race or, even more, on basis of family relations with employment decision maker. Equal employment opportunities are placed in legislation in many of these cultural cluster countries, and failure to ensure equality or any kind of prohibited discrimination can lead to the serious liability for the employer. Hiring an employee based on family ties is considered nepotism, which is considered as corruption. Meanwhile, in Asian, Arabic, African, and Latin American cultural clusters, a great deal of attention is paid to the employee’s loyalty when hiring, so family ties are considered a certain guarantee of loyalty and trust. Thus, it is common practice in Latin American and Asian companies to employ relatives or family members, and this is in not considered a crime or misconduct. The phenomenon of giving preference to the very familiar candidates is associated with the deep-rooted attitude that strangers cannot be trusted. A high level of mistrust encourages loyalty to be raised as one of the most important values in working relationships. The level of mistrust comes from the countries’ historical experiences.

Another cultural difference relevant in labor relations is the wage gap between the highest and lowest earners (Exhibit 10-8). In egalitarian countries with low power distance, it is culturally acceptable to have smaller wage differentials than in countries with high power distance. The fact that a top manager is paid several times, a dozen or even several dozen times more than a worker in the same organization is a common practice throughout the capitalist world, but these differences are not uniform. For example, in Denmark, Norway, Sweden, these differences vary from 50 to 80 times, while in the Spain, Germany, China about 150. However, the USA, UK and India stand out here, where the difference reaches 200 and more times. In other words, average CEOs of US corporations earn approximately 270 times more than the lowest level executives of the same corporations. Figures are indicative and vary year by year, but the general tendency is continuous increase of this ratio.

One of the most painful things is the still existing child labor, especially in Asian, African countries, and in some cases in Latin American countries. Global companies that have moved production to cheap labor countries face pressure from their customers to control their suppliers and ensure that child labor is not exploited.

Ex. 10‑8 Variety of wage differences

Keywords: wage, inequality, salary

Sources: Statista, www.statista.com; International labor organization, www.ilo.org

Often, multinational organizations create and approve social corporate responsibility policies at the level of the entire organization network, which define the boundaries of what is not appropriate behavior and appropriate processes in work relationships.

This kind of social responsibility policy is often used by organizations to inform their consumers and used in marketing champagnes. This is especially relevant in the field of textiles, as child labor in tailoring is widespread, especially in Asia, due to children’s ability to do such work according to their physical capabilities and small fingers. Thus, global clothing and footwear manufacturing companies make enormous efforts to abandon child labor and disseminate it to customers. In some Asian countries, child labor can also be found in heavy industries, such as metalworking, also in agriculture, food industry.

Differences between cultures also manifest themselves in the principles of employees’ wages. In many countries of the world, there is a form of constant payment, that is, the salary is paid for the time worked, per hour, per working day, per week or per month or per year. The calculation of salary per hour or per month is most often used, although when comparing countries, it is better to find numbers in the statistics of how much a person earns per year. Due to the difference in the number of working hours per day, the number of working days per year, the calculation for the purpose of comparing remuneration per year is more accurate. In order to make the employee work more efficiently and productively, employers in various countries apply a bonus system, which is not based on the time worked, but on the tangible results of the work. In factories, the criterion of planned goal achievement is often applied. When the planned volume of results, such as products manufactured or sales done, is achieved, the employee is paid a bonus for the achieved result according to a pre-agreed formula. The biggest differences in various cultural clusters appear in the ratio between the constant part of salary the employee receives and the variable part. In egalitarian cultural clusters, harmony-oriented cultural clusters, the share of stable salary in relation to the variable part is more significant than in hierarchical and mastery-oriented cultural clusters. A larger portion of the fixed salary guarantees greater social security and well-being for the worker, while a larger variable portion is attractive to people who tend to work harder and harder for their material well-being, but at the expenses of their personal lives.

Work-life balance is another relevant aspect of work relationships. In different countries, people work differently; the number of hours worked in a month varies by two or more times. If in the US it is quite common to work 50-60 hours a week, then in some European countries it is 35 hours a week and there is more and more debate about a four-day work week, which basically means 120-130 hours a month. Employees having shorter working day or week spend more time to their personal interests, hobbies, spending time with family and friends. The number of weekends off and the duration of paid vacations differ. In Europe, about a month of paid vacation per year is considered the norm, while in Asian and Latin American countries, the vacation duration varies from 1 to 2 weeks per year. In the US, the length of vacation is left to agreement between the employee and the employer, but about 2 weeks of paid vacation is considered an acceptable norm.

The process of agreement on the amount of salary, the principles of salary payment, the duration of paid vacation between the employee and the employer takes place differently in various countries. In some countries there are very strong trade unions, i.e. workers’ organizations that negotiate for and instead of employee with an employer. Employees who join a trade union and pay membership fees in return receive representation in negotiations with their employer. The bargaining power of a trade union to negotiate with an employer is significantly greater than that of an individual employee. Trade unions can declare an organized strike if the employer does not agree to the terms, which is a big threat to the employer’s business continuity, so employers tend to agree to the demands of the trade unions. In some countries, trade unions are compulsory for companies of a certain size. Trade unions are formed in a specific organization and unite the employees of that company, but trade unions can unite the employees of not one firm, but all firms in an entire industry at country level, for example, a construction trade union, a driver’s trade union. Sectoral unions are even more powerful in negotiating with employers, often even negotiating with government and legislators to pass more employee-friendly legislation. The largest number of trade unions and the strongest are in the United States, and they are also active in many European countries. Paradoxically, trade unions operate mainly in individualistic countries. In the countries of collectivist cultural clusters, especially in Asia, the activities of trade unions are not so developed. High power distance and societal hierarchies are both factors that restrict workers from joining organizations that protect their rights.