Compensation structure
The remuneration structure of a company is an instrument of personnel policy . It is a company-specific system for determining the level of the salary of each employee. The implementation of a remuneration structure in the company aims to provide a decision-making aid for determining the salary level of the individual employees and to legitimize the decision made to all stakeholders of a company.
compensation
The question of adequate remuneration concerns three levels: the individual (employee-related) level, the market level and the level of corporate policy. Specifically, four remuneration targets can be specified:
Fair remuneration is
- performance-based,
- in line with the market,
- fair,
- consistent.
An appropriate remuneration of an employee is ideally based on the work performed (individual level), the remuneration of employees of other companies in comparable positions (market level) as well as ethical and moral values and is determined for all employees of all companies according to the same criteria (level corporate policy).
Instruments can be derived from the remuneration structure with which the salary of each employee can be determined in such a way that the remuneration targets can be (approximately) achieved on all three levels. The operationalized goals can be expressed by variables of a function for determining the ideal salary.
The graphic shows a schematic representation of a compensation structure. The salary (w) of an employee depends on their hierarchy level (h), their time in the company (or in their job) (t) and the salary adjustment rate (α). If an employee receives a promotion-related salary adjustment, this change has a sudden effect on (w); therefore the graph runs “step-like”. The jump between the salary levels is the so-called differential. Within a salary level, (w) i. d. Usually subject to a steady positive change, expressed by the salary adjustment rate α. (α) depends on external factors (Σxe), e.g. B. the inflation rate or collective bargaining regulations, and the individual performance (l) of the employee.
practice
In practice, a consistent application of a remuneration structure that follows the above scheme turns out to be too complex, since the quantifiability of performance in particular raises problems. In order to take into account the individual skills of the employees, a performance profile and an individual career path must be created for each employee and compared with those of other employees. This process turns out to be too time-consuming, especially for large companies with a large number of employees in different job families. In order to be able to implement and apply a corresponding remuneration structure in a company, different procedures are used.
The individual employees are assigned generic position descriptions (see summary job matching), which are created in an orderly position family structure.
The roles of the individual employees are analytically evaluated with the help of a standardized position evaluation system and combined into clusters (Bands & Grades, Watson Wyatt : Global Grading System or Points, Hay Group : Hay Guide Charts or Mercer : International Position Evaluation ).
The salary is then determined in a market comparison. Ie the remuneration for the specific position of an employee is compared to the remuneration of comparable positions in other companies or derived from it (→ salary benchmarking ).
In many companies, the introduction of a remuneration structure between employer and employee representatives is regulated within the framework of a works agreement.
Cluster analysis
The analytical evaluation of the positions and the division into clusters help with the systematization and analysis of the existing remuneration practice. In addition, various needs for action can be derived from the results of such a cluster analysis.
The division into the individual clusters illustrates the need for certain personnel management measures. In the case of performance-based remuneration, the position of an employee within a cluster describes the performance compared to other employees in the same cluster. If an employee is in the lower half of a cluster, it can be deduced from this that they are performing less well than their colleagues. Corresponding follow-up measures, such as employee training, workplace ergonomics, target agreements, etc. a. derive. Top performers, i.e. employees who perform above average, should be tied to the company through certain HR measures (e.g. non-monetary remuneration, promotion, etc.).
criticism
- Often, performance is not indirect or difficult to quantify. A performance assessment therefore only reflects the subjective point of view of the person responsible.
- The exact weightings of the factors that affect salary remain unknown.
- In many industries, the remuneration practice is not based on work performance, but is the result of collective bargaining regulations that are subject to the influence of various interest groups (e.g. trade unions, employers' associations).
- Social factors do not play a role in this type of salary determination unless they are regulated by law.
Individual evidence
- ↑ Archived copy ( Memento of the original from July 29, 2009 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ↑ Archived copy ( Memento of the original from June 25, 2009 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice.
- ↑ Archived copy ( Memento of the original from July 28, 2009 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice.
