Salary & Compensation

Welcome to the Class of Spring 2011

About Me

• Pakistan

• Family

• Travel

• Music

• Literature

• Rekie

• Volunteer

Today’s Economic Challenges Slow economic growth in many parts of the world Globally there is a conservative approach to

spending as reward budgets remain limited; emphasis on distributing funds more effectively through variable pay

Legislative mandates are forcing companies to review their pay programmes

Globalization and competition has companies adopting lean staffing models and looking at restructuring and outsourcing non-core activities

Companies are putting a strong emphasis on profitability and the demands on employees to perform at higher levels continue to grow

Today’s Talent Challenges

People investments are significant bottom line cost Attraction and retention continue to be challenges

20% of employers report moderate to great difficulty in attracting critical-skill employees

44% are having significant difficulty attracting top performers

Compensation continues to be one of the top attraction factors and employees are unhappy about it, particularly in Asia

47%

39%

22%

0% 10% 20% 30% 40% 50%

WorkUSA

WorkIndia

WorkAsia

Pay Satisfaction

Today’s Talent Challenges

There is a significant opportunity to improve the return on people investments

Alignment with business strategies Successful attraction and retention of top-performing

employees Effective monetary reward through short-term incentives

to differentiate performance

Global trends in reward management

Financially high performing companies continue to put greater emphasis on their people investments by offering more short-term (STI) and long-term incentives (LTI) to their employees

High performing organizations are changing their reward mix to maintain their competitive position and to increase emphasis on STI

Executive compensation issues, are prompting many companies to carefully re-evaluate their compensation programs; Compensation committees have become more assertive

More multinational companies are moving towards a globally consistent reward program as they strive to build a common culture and internal equity across borders

Trends in North America

Base salary is primarily seen as an effective attraction, retention and cost management tool

Short-term incentives are effective reward tools for:

Aligning behavior with goals and culture

Achieving key strategic goals

Attraction and retention (after base pay)

Controlling costs

Employers are reducing eligibility among non-executives for long-term incentives

Nearly half of those revising plans are decreasing eligibility

High-performing firms are almost twice as likely as low performers to offer LTI eligibility to all employees

Trends in Europe

Globalization and competition has resulted in local and multinational companies in Europe setting aggressive targets and business plans

There is increased speculation in Central Europe for shared services centres (Czech Rep & Hungary in particular)

Competition for talent is fierce This goes double in Russia! Experienced professionals & managers are in high demand to

fuel new business initiatives There is a convergence of multinational & local companies’

people and reward strategies Greater attention paid to structuring, benchmarking &

retention Continuing to move beyond “just cash”…but not too far!

Pay for performance is rapidly becoming a fixture in many markets

Non-cash elements are also becoming increasingly important

Company cars: valued as much as ever by employees Typically offered to direct sales staff and all levels of

management Most companies have clear allocation guidelines in

place Other most common perquisites:

Mobile phones (Professional level and above) Free medical check-ups Free/discounted company products Social/sports club membership Subsidised transportation (non Management)

Trends in Asia Pacific

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Australia China HongKong

India Indonesia Japan Malaysia Philippines Singapore SouthKorea

Taiw an Thailand

GDP

Inflation

Salary Increase

Salary increases in Asia Pacific are on the higher side, with India, Indonesia, China, Philippines and South Korea having more than 6% increase in salaries

On comparing the fastest growing markets in Asia –China and India, compensation levels in China are lower than in India

…yet employees are dissatisfied Compensation listed as the #1 reason why

employees chose to leave their company Employees believe their pay is linked to their

company’s performance But, they are neither satisfied with their pay nor

their benefits

 

13% 9%

More Meaningful Work 17%

10% Better Benefits

30% 15%

Better Opportunities to Utilise My Skills Success

60% 19%

Better Career Opportunities 62%

24% Better Compensation Package

REASONS CITED FOR WANTING TO LEAVE COMPANY --INDIA*

So what can be done to address this issue?

Review the employment deal…Employer

Value Creation Through People:

• Attract• Develop• Focus and

engage• Productivity• Build

commitment, ownership and loyalty

Employee

A meaningful work experience:

• Personal fulfillment

• Wealth accumulation

• Competitive Pay

• Security

Remember what employees want…

Employment Priorities % Responding to “Critically Important”

Compensation

Corporate Culture

Freedom to Work Independently

Opportunities for promotions

Start-up Opportunity

Job Security

Benefits 18%

25%

25%

42%

50%

53%

53%

63%Opportunity to Develop Skills

Top Performers’ Priorities when Considering to Accept Employment

Adopt a holistic approach: The Total Rewards approach

TOTAL REWARDS STRATEGY

MONETARY NON-MONETARY

Base Pay

Benefits

Annual Incentives & Cash Recognition

Long TermIncentives

Growth & Career Development

Communication & Nonmonetary Recognition

PerformanceManagement

WorkEnvironment

Business Strategy

OrganizationalStructure Work

DesignDesired Culture

Systems

Human Capital Strategy

The Employment Deal

Best Practices

The most successful companies

Differentiate rewards by performance and ensure top-performing and critical-skill employees are rewarded the best

Ensure incentive plans are driving the right outcomes – to engage employees to improve financial performance

Apply globally consistent reward strategies to create a common culture, to focus employees on achieving desired results and to deliver rewards accordingly

Best Practices

The most successful companies

Ensure costs are in line with the results achieved (e.g., competition for talent, turnover, attraction of desired talent and business performance)

Support reward strategy execution with an effective performance management system, ensuring clarity surrounding expectations and the pay-performance link

Manage rewards in their totality and make appropriate trade-offs among reward elements to get better ROI in terms of business results and employee value

Develop effective communication strategies to help employees better understand the value of their total compensation packages

Compensation Activities

Job Evaluation

Job Analysis & Description

System Market Pricing

Job Design

Individual Pay Assessment

Organization Research

Organization Design

Incentive Plan Design

Performance Management

Sales CompGainsharing

Stock Options

Recognition

ExperiencePerformance

Peer Comparisons

Job Enrichment

Job Enlargement

Whole Job Ranking

Market Pricing

Point Factor (Hay)

Turnover

Retention

Attraction

Structured Questionnaires and Interviews

PAQ

The Aims of Reward Management

Reward people according to the value they create

Align reward practices with business goals and with employee values and needs

Reward the right thing to convey the right message about what is important in terms of behaviours and outcomes

Help to attract and retain the high-quality people the organization needs

Motivate people and obtain their engagement and commitment

Achieving The Aims

Reward philosophy Distributive justice Procedural justice Fairness Equity Consistency Transparency Strategic alignment Contextual and culture fit Fit for purpose Developing a high performance culture

Defining The Reward System

Reward strategies Reward policies Reward practices Reward processes Reward procedures

Elements of A Reward System Business strategy Reward strategy & policy Base pay or basic pay Continent pay Employee benefits Allowances Total earnings Total remuneration Job analysis Market rate analysis Grade & pay structures Performance management Non financial rewards Total rewards

Factors Affecting Reward Management Policy & Practice

The internal environment The external environment Strategic management Total reward Human capital management The factors affecting levels of pay Motivation Engagement and commitment The psychological contract

Q & A