Global compensation is the total package of salary, benefits, and incentives organizations provide to employees across different countries while maintaining fair and compliant payment practices.
Also known as total global rewards, global compensation refers to an employer’s direct and indirect compensation for its distributed workforce. Direct compensation includes salaries and performance bonuses. In contrast, indirect compensation consists of all employee benefits beyond base salary, such as health insurance contributions, retirement funds, and employee stock options.
Employers must have a global compensation strategy that is not only competitive across borders but also fair, compliant, and within budget. The strategy should provide equitable salaries and tailored benefits packages while complying with international labor laws.
Compensation is a driving force in acquiring and retaining global talent. Gallup research found that 64% of professionals consider an increase in pay or benefits “very important” when choosing their next job. PeopleKeep’s Employee Benefits Survey revealed that 81% of employees view a company’s benefits package as a pivotal factor in whether they accept a job offer.
This guide outlines the key elements of global compensation and breaks down the process of creating a solid global compensation strategy to attract and retain talent worldwide.
4 elements of global compensation
The four primary elements of a global compensation policy are base pay, variable pay, employee benefits, and additional employee perks. Below, we discuss each of these in detail.
Base pay
Base pay refers to employees’ monthly salary or wage. Employers generally approach base pay in one of two ways:
- Role-based pay. Wages are based on role and experience, regardless of the employee’s location. While this is the easiest strategy to manage, it is often the most costly because it usually means setting salaries at a rate tied to a city with a high cost of living. Otherwise, a company couldn’t hire employees from large metropolitan areas.
- Location-based pay. The employer offers location-specific wages based on factors like local market rates and cost of living. This option allows employees in more expensive regions to receive competitive salaries without creating pay equity gaps.
In either approach, employers must always account for local minimum wage laws when paying international employees to avoid fines, litigation, and other noncompliance penalties.
Learn more: What Are Wages?
Variable pay
Variable pay, or supplemental pay, refers to direct compensation beyond an employee’s base pay, such as job performance or tenure bonuses. Variable pay plays a crucial role in global compensation strategies by providing flexibility and performance-based incentives across different markets.
Organizations typically allocate between 8% and 19% of base pay for variable compensation, with the percentage varying significantly by company size—small-cap companies average 69%, and large-cap companies reach up to 87% in variable payments.
Variable compensation for international workforces must be carefully designed to account for regional differences. Companies must consider local tax implications, currency fluctuations, and market-specific performance metrics when implementing variable pay programs.
Employee benefits
Employee benefits refer to statutory and supplemental benefits:
- Statutory benefits. These are the required minimum benefits that local employment laws mandate. Statutory benefits include health insurance, social security contributions, and worker’s compensation. Requirements vary per country or state worldwide.
- Supplemental benefits. These are additional benefits beyond the statutory minimums, such as supplemental health insurance, retirement contributions, and extended leave. Supplemental benefits improve employees’ overall quality of life and make them feel valued, giving employers a competitive edge in attracting and retaining top talent.
Additional employee perks
Additional employee perks, or fringe benefits, are non-wage benefits or indirect compensation that supplement an employee’s regular salary beyond statutory and supplemental benefits. These include employee equity incentive plans like stock options or stock grants, gym memberships, access to coworking spaces, and relocation stipends.
Fringe benefits are essential to competitive global employee benefits packages as they provide a well-rounded approach to employee health and work-life balance.
Learn more: What Are Fringe Benefits?
What is a global compensation strategy?
A global compensation strategy ensures fair and competitive pay for employees worldwide. The strategy should consider various factors, such as job role, employee location, market competition, and local employment laws.
According to Alicia Scott-Wears, Director at WorldatWork, “Metrics are key to managing effective rewards strategies. As companies navigate the complexities of pay equity and performance-based compensation, the ability to measure and demonstrate the impact of these initiatives will be critical in driving success.”
Beyond measuring success, a sound global compensation plan offers transparency into how a business strategically compensates its internationally distributed workforce and establishes locally tailored benefits packages to attract and retain talent across multiple jurisdictions.
3 Reasons companies need a global compensation strategy
A global compensation strategy helps international companies ensure compliance across multiple countries and pay equity across a diverse workforce, along with remaining attractive to top talent.
Compliance
Global companies must comply with the local employment laws of every jurisdiction in which they conduct business. They must navigate factors such as minimum wage, income taxes, statutory benefits, and equal pay legislation to avoid fines, litigation, and other penalties for non-compliance.
“Geographic pay policies have existed for many years but in the past were more about an organization’s multiple physical work locations rather than where the work was being performed, including employees’ homes like with remote work,” adds Scott-Wears.
Competition
Today, employees want more than their base bay and minimum benefits—they seek employers who improve their quality of life and make them feel valued.
Alan Beaulieu, President of ITR Economics and one of the U.S.’s most informed economists, succinctly summarizes the competition, “We’re in a bidding war for talent that will go on for a long time.”
Offering competitive salaries with attractive, locally tailored benefits packages helps employers stand out and secure top talent.
Read also: Top 10 Countries for Employee Benefits
Pay equity
A fair global compensation strategy ensures employers pay equal wages to talent in similar roles with comparable education and experience, regardless of differences like race, gender, or ethnicity. Not only is ensuring pay equity the right thing to do, but putting workforce diversity and equity at the core of any global compensation strategy ensures employees feel valued.
For example, Spotify adopted a location-neutral compensation model, paying employees the same salary regardless of where they live, to attract and retain global talent.
HR teams should regularly perform salary reviews to evaluate pay equity over time and ensure talent receives fair and competitive compensation.
Also, many countries adopt equal pay laws, so companies without internal controls risk non-compliance. For example, below are the two most notable federal laws governing pay equity in the U.S.:
- Equal Pay Act of 1963. This law states that men and women employed at the same company and working under similar conditions must receive equal pay for equal work.
- Title VII of the Civil Rights Act of 1964. This law prohibits pay discrimination based on factors other than gender, such as race, religion, and nation of origin.
Noncompliance penalties in the U.S. involve fines of up to US$10,000 or six months’ imprisonment.
How to create a global total rewards strategy
Creating a global total rewards strategy requires establishing company priorities, determining budgets, researching target markets, analyzing competition, and potentially partnering with third-party experts to handle global payroll, compliance, and benefits administration.
1. Establish priorities
Organizations must establish their global total rewards strategy goals and how they support overall business goals. This involves reevaluating current global compensation strategies, considering necessary changes, and researching potential benefits that reflect the company’s brand and values.
2. Determine budget
Compensation represents a large percentage of total employee costs. Organizations should determine how much of the company budget can be allocated to competitively compensate and support globally distributed teams.
Key considerations include the number of employees planned for hire and compensation factors like base pay, statutory contributions, supplementary benefits, additional perks, and bonuses.
3. Research target markets
Organizations need to research living costs, minimum wage, standard salaries, expected supplemental benefits, and labor laws in target markets. This research provides insight into required salary ranges and the scope of benefits packages.
4. Analyze the competition
It is critical to know the salaries, benefits, and perks direct competitors offer employees in target markets. Companies should identify what they can match, gaps they can fill, and additional benefits they can offer to compete for talent in the local market.
5. Partner with an EOR
Organizations may consider partnering with an Employer of Record (EOR) to administer all mandatory and supplementary benefits, run payroll, and ensure compliance.
An EOR is a third-party organization that provides support throughout each phase of global expansion, including hiring, onboarding, payroll, benefits administration, and compliance. A vetted EOR has the local knowledge and expertise to advise on region-specific benefits and perks and administer them while running global payroll and ensuring compliance.
Partnering with an EOR allows organizations to focus on building, retaining, and supporting international teams while expertly managing the administrative burden of global expansion.
Retain global talent with compliant pay + competitive rewards
Establishing a sound global compensation strategy requires local expertise in multiple markets and involves significant noncompliance risks. Eliminate the guesswork and risks by partnering with Velocity Global.
Velocity Global’s integrated Global Benefits solution makes it easy to create a global total rewards strategy for talent in more than 185 countries. Our expert team crafts location-specific benefits packages so growing companies can compete for top talent in any market.
Partnering with an EOR like Velocity Global ensures compliance with local labor laws while providing competitive, tailored benefits for global teams. As part of our EOR solution, we also manage benefits administration, payroll, and compliance to lift this burden and help grow global workforces.
Contact Velocity Global today to learn how to effectively attract and retain top talent worldwide.
Disclaimer: The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. © 2025 Velocity Global, LLC. All rights reserved.
