The effect of expatriate salary on host country nationals in South Africa : a study involving perceived compensation disparity, organisational commitment and job satisfaction

Abstract

Background and Aim: Skills shortages in international organisations are commonly remedied with the use of expatriates. These expatriates are well paid for their expertise as well as for relocation “inconvenience”. However, it has become widely known internationally that expatriates receive far more attractive remuneration than their Host Country National (HCN) colleagues (local employees). The need for this study was formed on the basis of the HCN’s perception of this disparity and whether it could have a negative effect on his / her job attitudes. The main purpose of the research study described herein is to investigate the relationship between the expatriate-HCN pay differential in perspective of the HCN’s perceptions of pay unfairness, and the impact thereof on the organisation commitment and job satisfaction of HCN’s. More specifically this research aimed at determining whether there is (1) a HCN-Perceived Compensation Disparity (HPCD) between (HCNs) and expatriates, whether there is (2) a relationship between HPCD and the HCN’s Organisational Commitment (OC), and whether there is (3) a relationship between HPCD and the HCN’s Job Satisfaction (JS). Method: A cross-sectional survey design was used, with a purposive sample (N = 86) taken from organisations across several industrial sectors in South Africa. A single-item scale for HPCD, the Minnesota Satisfaction Questionnaire (MSQ) and Organisational Commitment Questionnaire (OCQ) were administered to professional and skilled Host Country Nationals (HCNs) of South Africa, working on a same or similar hierarchal level as expatriates. Descriptive statistics, data analysis and hypothesis testing were performed using Statistical Package for the Social Sciences (SPSS) software, outputting frequency tables, mean, standard deviation, Cronbach’s alpha coefficients (testing for reliability) and Pearson correlation coefficients to investigate relationships. Results: Results showed existence of an HPCD (Host Country National Perceived Compensation Difference). No significant relationship was observed between the HPCD and Organisational Commitment (OC) (r(df = 86; p = 0.243) = -0. 129). A practically significant negative correlation (medium effect) was observed between HPCD and Job Satisfaction (JS), (r(df = 86; p = 0.002) = -0.336). These results were supported by the findings from a literature review, with the exception of the lack of statistical significance in the HPCD and OC relationship. Practical Relevance: Interpretations from all the results were made and future theoretical and practical recommendations to the HRM industry are proposed. This research provides valuable insight into the South African context, filling a literature gap in this area and provides knowledge with regards to the applicability of the equity theory and social comparison theory in the workplace.