Salary Planning

1. Salary Planning Revised April 2006

2. What Do We Mean by Salary Planning? • Salary planning is budgeting or forecasting how much it will cost to give employees additional money • Topics covered: • Salary planning concept • Analyses • Models • Managing performance management systems • Creating a “bring to target” analysis • Creating a merit matrix analysis • Creating other types of analysis Note: April 2006 brings major change to this function. Comparisons to previous will be tagged> like this

3. What Do We Mean by Analyses and Models? • Each analysis answers a single question, e.g.: • How much will it cost to: • implement a merit matrix? • bring employees to minimum of range? • bring employees to market? • bring employees within 10% of market? • deliver an annual incentive? • Models are a chain or sequence of analyses • So any of the above analyses may be part of a model

4. What’s So Great About THAT? • YOU decide how the puzzle pieces should fit together • No model is predetermined • Models may consist of: • One bring to target analysis • One merit matrix • Multiple bring to target analyses • Multiple merit matrices • A combination of merit matrix and a bring-to-target analysis • A combination one or more merit matrices and one or more bring-to-target analyses

5. Salary Planning in REWARDIn the Abstract • Multiple types of analyses can be developed • Merit matrix • A distribution based on rating alone, or salary division alone • Bring-to-target, where target can be: • A point in a job’s pay range. How much would it cost us if we brought employees in this job to: minimum? midpoint? maximum? % range penetration? • A job’s market value or the market value aged to a particular date. How much would it cost us if we brought employees in this job to a current market value? • A fixed increase. How much would it cost us if we gave everyone $500? If we gave a 4% increase?

6. Salary Planning in REWARDin the Abstract • Another type of analysis is modeling annual incentive pay • Percent increase is aligned to salary structure grade • Target percentages are aligned with performance ratings • Threshold • Target • Cap • Increases can be based upon current programs or on “what-if” scenarios • Using a current salary structure • Developing what-if scenarios/structures • Lump sum may be used in lieu of adding to base pay

7. Is There An Orderly Way to Do This? YES!!! • Determine which employees will be included within each analysis • Ensure you have the appropriate performance rating system(s) in REWARD—both target incentives and merit matrices are tied to performance ratings • Ensure that target incentive percentages have been included in any salary structures you are using • Develop your analyses independently of one another • Group analyses into models and run the models

8. How Will Employees Be Grouped? • Some examples of employee groupings: • Business Unit, Division, or Department • Location/Country • Management/Non-Management • Job Family • Incentive Plan • Structure, or Grade • Employees may overlap in analyses • You’re trying different “what if” scenarios • For the best budgeting, do not put analyses with employee overlap into the same model— you may count the results for the same person twice, or even more!

9. What You Need to Begin • For a matrix, performance rating system and/or codes entered into REWARD • Multiple rating systems may be added • Codes may be numeric or character • For range-based increases, salary structures or pay/market ranges in the REWARD system • May also be bands and/or zones • To run scenarios regarding annual incentives, you will need incentive plan percentages: • Cap/Maximum • Target • Threshold

10. Click on Analysis or Models Getting There

11. Analyses Screen • Analyses may be copied from other users. You can delete yours. • Name your analysis! • Each analysis contains the date, time and person who created the analysis • You have the capability to filter on specific employee groups • Dimensions tell you it’s a bring-to-target (0), distribution (1) or merit matrix analysis (2) • The comment column allows you to describe the analysis more fully

12. Viewing Analyses Clicking on an analysis name brings up the Analysis View screen. The screen is made up of the following sections:

13. Viewing Analyses The screen is divided into 4 major sections: Section 1: Header. Defines the parameters. Section 2: Run stats. (If you have run this analysis at least once, under the headers you see a notice of the results.) Section 3: Guidelines* and Cost Summary figures for the run. Section 4: Truing options* * For merit-matrix type analyses only

14. Viewing Analyses Section 1: Header. Defines the parameters. > NEW: Four parameter sets replace the long scrolling edit pages for both bring to target and merit matrix. To run, click on calculate cost

15. Viewing Analyses Section 2: Run stats. If you have run this matrix at least once, under the headers you see a notice of the results: Tells you date/time of last time YOU ran it You can print the analysis and results. > NEW: You no longer have to go to the Print tab to print results. Now you can print right from here. You can create a label for each run Rerun the analysis after tweaking parameters, or after a new data feed

16. Viewing Analyses Section 3: Summary figures for the run. Use this section to quickly create a print-friendly pop-up view of selected components of the analysis General statistics regarding the run Cost results for the selected, eligible employees

17. Viewing Analyses Section 4: Truing options (matrices only) Overall info on eligible employees. There are three different approaches to truing the matrix. We’ll talk about them later.

18. Viewing Analyses Now for some detail on sections 2-3: Section 2: Run stats. (If you have run this analysis at least once, then you’ll see the date and time of the most recent run, plus a drop-down listing historical runs.) Section 3: Guidelines* and Cost Summary figures for the run. * For merit-matrix type analyses only

19. Viewing Analyses (Section 2) Printing Click print here to bring up the report-settings panel. Configure the settings, and hit print.

20. Viewing Analyses (Section 2) Report

21. Viewing Analyses Section 3: Summary figures for the run. In our example, 1,527 employees were selected (by means of the filter). Of these, 110 met the criteria for a pay increase. Specific info on eligible employees who actually received an increase.

22. Viewing Analyses (Section 3) then Summary by employee For list of the employees behind the numbers, click on any of these employee counts. Then click on a letter to pop up the employee detail panel for all the employees whose last name starts with that letter…

23. button for additional info Viewing Analyses (Section 3) then Further detail by employee To show the details of the calculations for each employee, click

24. Viewing Analyses (Section 3) If the analysis is a matrix, you see the guidelines Once the analysis is run, each cell displays the number of employees (clickable) and the increase amount: #ees $amt Click to see employees by column, by row, or by cell

25. button for additional info Viewing Analyses (Section 3) View guidelines – placement in row and column Clicking on a row or column label, or an employee count, pops up a detail view: • Increase Amount • Lump Sum Tells us which row/column each employee fell into -- and the conditions that got them there

26. Viewing Analyses (Section 3) View guidelines – calculation details Detail view shows each line item calculation: Proration amounts, if any, are broken out separately.

27. Viewing Analyses (Section 3) Summary can also show you the results of any previous run. Select from previous runs to see results ...or Delete previous runs

28. Creating Analyses Click here to add a new analysis—of any kind.

29. Creating Analyses Define new analysis in “Basic Settings” pop-up For a bring-to-target analysis, choose this. This is in effect a single-cell matrix, which is why we say it has 0 dimensions.

30. Creating A Bring-To-Target Analysis • Before creating a bring-to-target analysis, define your target, which may be • Current base pay plus a fixed-dollar amount, or • Market data aged to a specific date , or • A point within the pay range: e.g.: • Minimum • Midpoint • Maximum • Range penetration • Annual incentives may be modeled with a bring-to-target analysis

31. Creating A Bring-To-Target Analysis • Analyses may be adjusted by percentage or dollar amounts • What-if and bring-to-target analyses may use different salary structure scenarios • Target amounts can be delivered as lump sums, which is significant when chaining analyses together as models

32. Creating A Bring-To-Target Analysis In our example, we will ask the question: what would it cost to bring all US employees to within 95 percent of the minimum for their job’s pay-range? For every employee in the selected group, we’ll ask: What’s your job? What is the minimum of the pay-range for your job? What is your pay? If we can’t answer any of these questions, then we’ll put this employee into the “insufficient data” pile. Otherwise, we’ll subtract pay from 95 percent of range-minimum, and if the result is positive (i.e., the employee is below our target), then we’ll add that difference to the total cost of the analysis. This part of the document will detail the creation of such an analysis.

33. Creating A Bring-To-Target Analysis Section 1: Header. Defines the parameters. > NEW: Four parameter sets replace the long scrolling edit pages >Now this: >Not this:

34. Creating A Bring-To-Target Analysis Header. Defines the parameters. 4 major sections: Basic, Cell, Costing, and Definitions.

35. Creating an Analysis Header. Defines the parameters. section1 : Basic Click to define the set of employees to select for this analysis

36. Creating an Analysis Header. Defines the parameters. section1 : Basic – Define population Brings up the filter expression builder— > format not NEW: Same as before...

37. Creating an Analysis Header. Defines the parameters. section1 : Basic– Define population > NEW: Structure now available for filters! Define employee set, click add expression...

38. Creating an Analysis Header. Defines the parameters. section1 : Basic– Define population • Fields available for filters: • basic EE and job fields • job properties • employee properties • plus • annual hours worked • •   annual incentive pct (from the grade) • •   compa-ratio • •   grade code • •   grade rank • •   hours in a standard year • •   market ratio • •   max • •   mid • •   min • •   pay (as defined by the analysis) • •   range penetration • •   structure code • •   structure name • •   structure version > NEW: Structure fields now available for filters!

39. Creating an Analysis Header. Defines the parameters. section1 : Basic– Define population Enter filter description... Then press save

40. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell Click on text So now define the cell. Basic settings are defined...

41. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – What is being calculated? Enter a general description of the analysis It’s important to be clear and simple here.

42. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : The formula (for the single cell) that calculates the cost for each employee Each cell has its own formula. The formula can have many steps, or cell elements. Since this is a bring-to-target analysis, this analysis will have only one cell. Click to enter the cell and add formulae Then click to add the first element

43. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Elements of the formula This brings up the screen to define the formula for a cell. These identify the cell element These are the things a cell element can be These modify the result of the calculation

44. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Elements of the formula: FIRST ELEMENT Cell element identified. First operator is always “Starts with” Possible values for this element of the formula Click “define” to define pay or market, if chosen Adjustments to the value of this element

45. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula elements - multiplier Add multiplier for 95%

46. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – save this formula element Click save to save this element of the cell formula

47. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula element added Now we have the first element of the cell formula Click add to enter the next element of the cell formula

48. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula element - adding the next one New Cell element identified. Subtract operator What to subtract We are subtracting because we want the difference between 95% of range-minimum and base pay.

49. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula elements – defining pay Pay defined as pay type = “Annual Base Pay (Local)” Click save

50. Creating A Bring-To-Target Analysis Header. Defines the parameters. Section 2 : Cell – Formula – two elements added Now we have all the elements of the cell formula Summary of specification Specification Click Save here to keep all elements of the cell formula