Enhanced employee retention : variable and other incentive pay

1. Enhanced employee retention: variable and other incentive pay June 17, 2005 Ekaterina Varga

2. ANCOR • Operates in the recruitment market since 1990 • Has 21 regional offices • Provides several HR-solutions: • Professional search and selection; • Express recruitment; • Staff leasing; • Outstaffing; • Temporary staffing; • Salary and benefit surveys; • Personnel testing, assessment and audit.

3. Why pay anything but base salary? • Reduce / optimize the costs • Flexibility in cost management • Company pays for employee’s achievements, no need to pay next year the same sum if the targets are not achieved • Enforce productivity • Company gets means to stimulate personnel productivity • Attract / Retain personnel

4. Forms of incentive payments (1) • Performance-based bonuses, paid for achievement of desired targets • of the individual • or group • Gain sharing (mostly for sales specialists) • sales commissions • Project bonuses, paid at successful completion or upon achievement of pre-agreed milestones

5. Forms of incentive payments (2) • Retention bonuses, lump sum paid when an employee remains with the company till specified date • Incentive payments paid discretionally for spontaneous achievements • Long-term incentives (mostly for senior management) • stock options

6. How many companies provide incentive payments? • Almost all • about 85% of companies are paying variable bonuses every year • the number of companies, providing retention / fixed bonus (13th salary) is growing *Salary Survey (ANCOR)

7. Retention bonuses paid on year basis:how many companies provide? *Salary Survey (ANCOR)

8. Variable bonuses:average volume is increasing • Average volume of variable payments provided has increased by 28% *Salary Survey (ANCOR), core analysis (salary data of those companies which participated in Salary Surveys for the first half of 2004 and 2005)

9. Average volume of incentive payments is increasing • Companies try to be more flexible in rewarding key personnel • Payment is provided not to position but to individual (personal appreciation) • Incentive paymentschallenge employees • Give people feeling that their personal efforts are valued

10. Variable bonuses:more positions included • Total number of positions receiving variable bonus has increased by 64% *Salary Survey (ANCOR), core analysis (salary data of those companies which participated in Salary Surveys for the first half of 2004 and 2005)

11. Now variable bonuses are not only for management • Variable bonuses are now provided more frequently to entry level and line personnel • Sales administrator +40% • Secretary +69% • Warehouse clerk +90% • IT user support specialist +102% • Electrician NEW! (+3 Companies)

12. Payout cycle for bonuses *Salary Survey (ANCOR)

13. Incentive payments: what else value? • Translation of the corporate culture • Possibility to select the people that fit company’s philosophy – they are the most loyal • Difficulties: The qualities company wants to reward are often hard to quantify

14. Our contacts • www.ancor.ru • ANCOR Holding Management Company • (095) 955-19-72, 937-36-01 • hq@ancor.ru • Moscow office • (095) 540-4100, 937-3601 • e-mail: info@ancor.ru • Ekaterina Varga • varga@ancor.ru