1 / 17

Compensation 101

Consulting Inc. Compensation 101. Creating & Administering your Variable pay strategy. Our Agenda. Identifying your variable pay goals Establishing eligibility Determining your cash compensation mix Identifying variable pay triggers Establishing variable pay formula Evaluating the program.

kobe
Download Presentation

Compensation 101

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Consulting Inc. Compensation 101 Creating & Administering your Variable pay strategy

  2. Our Agenda • Identifying your variable pay goals • Establishing eligibility • Determining your cash compensation mix • Identifying variable pay triggers • Establishing variable pay formula • Evaluating the program

  3. Variable Pay goals OBJECTIVE: To increase company performance by focusing and shaping employee behaviour GOALS: • Ensure performance targets reflect the behaviour and results that matter most • Ensure rewards adequately reflect different levels of contribution and performance • Ensure individual rewards align with corporate performance

  4. Determining compensation mix

  5. Identifying variable pay triggers • Company financial performance • Net income • Profitability • Other company metrics • Competitive ranking • Customer growth targets • Safety • Team performance • Individual performance • Results achievement • Alignment with company values

  6. Establishing the formula • Modifiers • Thresholds • Performance Multipliers

  7. Establishing the formula INTEGRATIVE – results in company and/or team performance modifying the individual’s reward. Company performance establishes pool available. • If company achieves targets, pool available is 100%. 100% of pool reflects the amount needed to pay out 100% bonus targets to all employees. • If company exceeds targets, pool available will exceed 100%, to the extent that financial results can support a higher overall payout.

  8. Establishing the formula INTEGRATIVE: Financial Target Payout

  9. Establishing the formula INTEGRATIVE : Multipliers If the company achieved 110% of financial targets, then bonus pool would be 120% of budget. If the company just met threshold targets, then bonus pool would be 80% of budget. (Are qualifiers required?)

  10. Establishing the formula INTEGRATIVE : Multipliers Individual and team performance combine together to establish payout.

  11. Establishing the formula INTEGRATIVE EXAMPLE 1 • Employee eligible for 10% bonus. • Company achieves 110% financial target • Team achieves threshold targets. • Individual meets targets. • Payout = 10% x (120% x 75%) = 9% payout EXAMPLE 2 • Employee eligible for 10% bonus. • Company achieves 100% financial targets • Team exceeds meets targets. • Individual exceeds targets. • Payout = 10% x (100% x 200%) = 20% payout

  12. Establishing the formula ADDITIVE – results in company and/or team performance adding together with individual performance to define the payout. • Company performance comprises a percentage of the total eligible payout. • Team performance comprises a percentage of the total eligible payout. • Individual performance comprises a percentage of the total eligible payout.

  13. Establishing the formula ADDITIVE : Bonus Composition Line of Sight helps determine weight

  14. Establishing the formula ADDITIVE : Multipliers are established

  15. Establishing the formula ADDITIVE EXAMPLE 2 • Manager eligible for 10% bonus. • Company meets targets. • Team exceeds targets. • Individual achieves threshold targets. • Payout = • 10% x 30% x 100% + • 10% x 20% x 200% + • 10% x 50% x 50% = • 3% + 4% + 2.5% = 9.5% EXAMPLE 1 • Manager eligible for 10% bonus. • Company exceeds targets. • Team achieves threshold targets. • Individual meets targets. • Payout = • 10% x 30% x 200% + • 10% x 20% x 50% + • 10% x 50% x 100% = • 6% + 1% + 5% = 12%

  16. Establishing the formula • Is it shaping the right behaviours? • Does it have integrity? • Are managers effectively distinguishing between different levels of performance? • Is there a correlation between cumulative individual/team and company performance? • Is there a correlation between individual merit increases and bonus awards? • Is it sustainable? • Has it resulted in an entitlement attitude? • Is it competitive?

More Related