Compensation Design -
L L L-1 L-1 L-1 L-1 L-1 L-2 L-1 L-1 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-3 L-3 L-3 L-3 L-2 L-2 L-2 L-2 L-2 15 14 13 12 11 10 9 8 7
100,000 80,000 $ 60,000 40,000 20,000 80,000 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 GRADE 60,000 40,000 20,000 0 Grades V IV III II I 290 220 170 130 100
14 $200,000 $250,000 $300,000 13 $160,000 $200,000 $240,000 12 $128,000 $160,000 $192,000 11 $104,000 $130,000 $156,000 10 $88,000 $110,000 $132,000 9 $78,400 $98,000 $117,600 8 $68,800 $86,000 $103,200 7 $60,800 $76,000 $91,200 6 $52,800 $66,000 $79,200 5 $46,400 $58,000 $69,600 4 $40,000 $50,000 $60,000 3 $33,600 $42,000 $50,400 2 $28,000 $35,000 $42,000 1 $22,400 $28,000 $33,600
( )
1 2 3 4 5 1. 50% 2. 30% 3. 12% 4. 8% 50 30 12 8 100 70 24 24 150 110 36 40 200 150 48 250 60 - / /
/ / 82 1 4 2 7 3 / 3 4 6 5 / 3 6 4 7 5 8 4 9 6 10 6 11 5 12 6 13 7 14 5 15 7 16 4
1. 2. 3. 4.
- Salary Survey 1. 2. 3. 4. Job Matching 5. check data 6. 7. Job Matching 1 2 Identify benchmark jobs Benchmark jobs Benchmark jobs 3 benchmark jobs 70~80%
- Salary Survey 1. Mean 2. Median 3. Quartiles (75 th, 50 th, 25 th ) 4. Regression Analysis Mean Vs. Median Median is normally less than the Mean. Median Low Mean Salary Continuum High
Some Consideration: Mean is better when: sample size is small computing year-to-year changes Median is better when: a sample has widely varying values you want to identify a typical pay rate In most cases, the median is the best value to use. Quartiles (75 th, 50 th, 25 th ) Formula : P (n + 1) n =23 25th percentile 75th percentile = (0.25) (23 + 1) = (0.75) (23 + 1) = (0.25) (24) = (0.75) (24) = 6th data point = 18th data point = 420 = 462
$ $ 270,000 2 Base Salary $ 270,000 Total Cash 230,000 230,000 190,000 190,000 150,000 150,000 110,000 110,000 70,000 70,000 30,000 50 Grade 30,000 50 Grade Reference Salary Q 3 Median Q 1 Reference Salary (Midpoint) Grade
Regression Analysis Median By Job Size $ 35 30 25 20 15 10 5 0 0 50 100 150 200 250 300 350 Job Size
Line of Best Fit $ 40 35 30 25 20 15 10 5 0 0 50 100 150 200 250 300 350 Job Size Exponential Regression Rate of Pay increases by Geometric Progression $ y = a*(1+i) n-1 Pay = a*(1+i) job size-1 Job Size
Mid-Point Progression $ 40 35 30 25 20 15 10 5 0 10% 15% Increase by 30% the same X percent e.g. 21% Increase by X percent e.g. 21% 0 50 100 150 200 250 300 350 Job Size
3P Pay for
EI Self Awareness Social Awareness / Empathy Self Management Social Skills /
BARS BOS BES :, ; :, ; : ; ; : ; ;, :,,, ;
Q1 Developed Q2 Developing Q3 Learning Grade
Max Q1 Developed Q2 Developing Mid Max-Min = X 100% Min Mid= Max+Min 2 ( ) Q3 Learning Min Range Overlap
Range Overlap Overlapping more than three or four pay grade generally should be avoided. Compa-Ratio Compa-Ratio = = 13,500 = 15,000 Compa-Ratio = 13,500 15,000 = 0.90 or 90% or 90
3 2 3 3 3 3 3 2 3 4 / =93% 93% =1500 X 93%=1395 Compa-Ratio=93% 3 2.8 50% Max Max 120% P 50 Q 2 Median 4th quartile 3rd quartile 2nd quartile 1st quartile P 75 Q 3 Upper quartile P 25 Q 1 Lower quartile Q 3 110% Mid 100% Q 1 90% Min Min 80%
0 0 0 0 0 1 0 6% 8% 10% 12% 2 2% 8% 10% 12% 16% 3 4% 10% 12% 14% 18% 4 6% 12% 14% 16% 20% 5 >120% 108%-120% 94%-107% 80%-93% <80% 10% 3
3P Pay for
100% (Performance Mix) 0 0 0 0 0 (E) 1~1.7 0.7*30% 0.8*30% 0.9*30% 1*30% 1.1*30% (D) 1.8~2.5 0.8*30% 0.9*30% 1*30% 1.1*30% 1.2*30% (C) 2.6~3.4 0.9*30% 1*30% 1.1*30% 1.2*30% 1.3*30% (B) 3.5~4.2 1*30% 1.1*30% 1.2*30% 1.3*30% 1.4*30% (A) 4.3~5 112%~120% 104%~111% 96%~103% 88%~95% 80%~87% 7:3 5
3000 50% 5 2500 2800 3000 3500 7:3 B Grade
% % / 60000 7% 100% 4% 0~100% 12% 8% 5% 100% 9% 5% 3% 0~100% C B A % % / 30000 60000 160% 130% 140% 120% 120% 110% 100% 100% 75% 90% 50% 80% 0% 70% % % / 42000 60000 Linked Plan 25% 25% 10% 20% 0% 15% 42000 60000 6%
1 Call Center Job B Job A Job C
100% : 100%/0% 50%/50% 0%/100% ( / ) 1/9 1 2/8 2 3/7 3 4/6 4 5/5 4
: : RMB45,000/ : 70 / 30 : 37,800 31,500 40,500 ( 3 ) 13,500 13,500 : 25,200 31,500 31,500 31,500 64000 80000 8:2)
/ / A B / /
Outstanding Good Average Below Average (Stock Option) (Phantom Stock) (Long Term Performance Bonus) ( Formula Stock Plan ) ( Performance Shares ) ( Stock Appreciation Rights ) ( Restricted Stock ) ( Convertible Debentures ) ( Employee Stock Ownership Plans (ESOPs) ) ( Management Stock Purchase Plans ( MSPP) )
1 Consideration in Compensation Design Macro Factor Economic Issue: GDP Inflation CPI RPI Unemployment rate Government Issue: Demographic Issues: ( ) Social Issue:
2 Consideration in Compensation Design Micro Factor Industry High-Tech Competitor: Market position, Growth rate, Profitability, Labor cost, Employee relations, Mix of compensation and benefits Business plan and life cycles Financial Condition 3 Consideration in Compensation Design 1. ( ) 2. 3. ( HP IBM Motorola ) 4. 5. ( / / ) 6. ( / / ) 7. 8. ( )
(1) Compensation Elements Cash Fixed Pay Fixed Allowance Variable or Incentive Pay Deferred Pay Non-cash Benefits Perquisites What motivates and what don t? (2) Compensation Elements
(1) Comparison of Pay Philosophy (2) Comparison of Pay Philosophy
XXX (1) Pay for Position! 10 10 500
XXX (2) Q1 Developed Max Q2 Developing Q3 Learning Pay for Competency! Median competency, seniority, performance Min Skills Previous work experience How long the individual has been in the job Education Contributions Survey results, Internal normal distribution
XXX (3) Pay for Performance! (1) Decide Pay Policy Lag Policy Your Reference Salary EQUAL Updated Market Benchmark at start of year Lead Policy Your Reference Salary FULLLY AHEAD of Updated Market Benchmark at start of year - ( ) Lead-Lag Policy Your Reference Salary HALFWAY AHEAD of Updated Market Benchmark at start of year
(2) Decide Pay Policy 1. What market do we compare to, and at what level in the market? 2. Do we pay the same for all professions? In all locations? 3. How many grades? 4. How wide are salary ranges for the grades? 5. ( ) How are individual s salary positioned and adjusted within the ranges? (by performance, competency, market pricing?) 6. When begins salary reviews in each year? When begins salary strategy and structure review? / ( / / ) /
- ( ) (Flexible Benefits)»»»»»
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