Setting salaries and benchmarking

1
Setting salaries and benchmarking

• Zhanna Dobritskaya
• Ernst Young

2
Compensation strategies

• Factors to be considered
• Internal Factors
• Alignment with corporate strategy
• Shareholders interests and global compensation
  policy
• HistoryCulture
• Total reward design (not just salaries)
• Current Financial Situation
• External factors
• Legislative environment (tax rules)
• Benchmarking

3
Setting salaries job grading

• Job grading grouping jobs based on their
  importance for the company
• Assists in establishing competitive pay
  structures and rates
• Produces a job-worth hierarchy that reflects a
  companys internal structure and priorities
• Provides a system for assigning pay rates to
  newly created positions
• Sets a platform for effective performance
  management for various job levels
• Ensures compliance with legal requirements (pay
  system policy, equal pay for equal work)
• Easy to explain to employees - clearly indicate
  relativities
• Useful in communicating opportunities to progress
  through the range
• Job grading does not
• Set pay levels as such
• Evaluate performance

4
Setting salaries job evaluation

• How do you determine relative importance of a
  job? Job evaluation methodologies
• Factor/points based job evaluation (focus on
  internal priorities)
• A job is evaluated in respect of several factors
  and is assigned with a number of points
• Resultant number of points is used for
  grouping/grading jobs
• Market based (focus on external practice)
• A job is evaluated in terms of its value in the
  market, i.e. how other companies view this jobs
  importance

5
Setting salaries pay ranges

• Pay ranges for a graded structure
• provide flexibility of pay within a grade
• allow to increase salary without moving to
  another grade

Basic Salary
Role Size/job importance
6
Pay range spreads
7
Benchmarking

• Why do benchmarking?
• How to do benchmarking?
• Knowledge sharing
• Executive search companies
• Compensation surveys
• When to do benchmarking?
• Who are the comparators?

8
Benchmarking hints

• Where do I want to be in the market and why?
• Overall policy where do I stand as the employer
• Specific jobs policy what happens if they leave
• Not only cash
• Less cash more benefits or vice versa

9
Important steps

• Communication - How do you communicate your pay
  policy to employees?
• Monitor and revise regular market monitoring,
  participating in compensation surveys
• Get feedback what do employees think and value

10
Questions