99braz2

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Compensation Review made up at Compaq 1999 and recognized as the best in Supply Chain division outside of US.

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99braz2

  1. 1. COMPENSATION REVIEW - 1999 BRAZIL - DEMAND FULFILLMENT
  2. 2. <ul><li>Compensation Philosophy </li></ul><ul><li>Base Compensation System Design Process </li></ul><ul><li>Current Market Conditions </li></ul><ul><li>Executive Summary </li></ul><ul><li>Total Compensation Components </li></ul><ul><li>Recommendations </li></ul><ul><ul><li>Salary Structures </li></ul></ul><ul><ul><li>Merit Grids </li></ul></ul><ul><ul><li>Total Cash Compensation </li></ul></ul><ul><ul><li>Promotions </li></ul></ul><ul><ul><li>Salary Adjustments </li></ul></ul><ul><ul><li>Reward & Recognition </li></ul></ul><ul><li>Performance Rating & Position in Range Distribution </li></ul><ul><li>Market Trends, & Projections </li></ul>AGENDA
  3. 3. Compaq’s overall compensation philosophy is to pay performance relative to the market, focusing on total compensation. PURPOSES Attract Outstanding External Candidates Not Retain Low Performing Employees Motivate Employees To Perform At Their Highest Level Focus Each Employee On Specific Contributions They Make To The Overall Success Of Compaq Put Compensation Decision-making In The Hands Of Managers Foster Empowerment Environment 1 2 3 4 5 6 COMPENSATION PHILOSOPHY
  4. 4. BASE COMPENSATION SYSTEM DESIGN PROCESS OBJECTIVE: REVIEW PAY PHILOSOPHY STEPS PARTICIPATE IN EXTERNAL SALARY SURVEYS VERIFY BENCHMARK JOB MATCHES IN SURVEYS COLLECT & EVALUATE SURVEY DATA DEVELOP SALARY STRUCTURES EVALUETE COST & DEVELOP MERIT GRIDS DISTRIBUTE COMMUNICATION PACKET MANAGEMENT PREPARES AND SUBMITSPERFORMANCE REVIEWS AS APPROPRIATE (MANAGEMENT TO CONTACT HUMAN RESOURCES WITH ANY QUESTIONS) 1 2 3 4 5 6 7
  5. 5. TOTAL COMPENSATION COMPONENTS
  6. 6. <ul><li>1999 Inflation Rate : 18% </li></ul><ul><li>(Source: Brazilian Electrical and Electronics Industry Association ) </li></ul><ul><li>1999 Gross National Product Growth : -2,5% </li></ul><ul><li>(Source: Brazilian Electrical and Electronics Industry Association ) </li></ul>PROJECTED MARKET CONDITIONS
  7. 7. <ul><li>The Latin American Region has, in recent years, become one of the most dynamic markets in the world. </li></ul><ul><li>Driving this dynamism are three major factors: the dramatic change in the political environment, an almost universal shift to democracy, and the liberalization of the various Latin economies. Economically, the region is dominated by Brazil (representing 45% of the region's economy) plus Argentina and Mexico. Together, these three countries account for over 80% of regional economic power. </li></ul><ul><li>Almost all global enterprises maintain a presence in the region and there is a growing number of large local companies. Many of the latter are rapidly becoming global players. While many multinationals have long-standing investments in the region, recent positive changes in the environment, including extensive privatization of government-owned companies and infrastructures, have encouraged dramatically expanded levels of investment and attracted numerous new players. </li></ul>CURRENT MARKET CONDITIONS
  8. 8. <ul><li>The growth of informatic area was motivated by the corporative market, mainly in the banking, commercial and government automation. The authorities’s actions to inhibit the irregular importations, have benefited this sector. The perspectives are favorable in function Brazil’s modernization process, where the computer equipment is integrant part. </li></ul>BRAZIL PERSPECTIVE
  9. 9. December 1998 Expected Year End 1999 Exempt 75 81 Non-Exempt 45 45 Direct Labor 152 170 Contractors Temporary 72 23 Total 344 319 HEADCOUNT
  10. 10. 1997 TURNOVER
  11. 11. 1998 TURNOVER
  12. 12. Annual Payroll= ~ R$ 8,08m EXECUTIVE SUMMARY
  13. 13. <ul><ul><li>Salary Structures </li></ul></ul><ul><ul><li>Merit Grids </li></ul></ul><ul><ul><li>Total Cash Compensation </li></ul></ul><ul><ul><li>Promotions </li></ul></ul><ul><ul><li>Salary Adjustments </li></ul></ul><ul><ul><li>Reward & Recognition </li></ul></ul>RECOMMENDATIONS
  14. 15. <ul><li>Recommendation </li></ul><ul><ul><li>Exempt Salary Structure: </li></ul></ul><ul><ul><ul><li>0% structure movement: No change from November 1998 </li></ul></ul></ul><ul><ul><ul><li>Cost to bring to minimum : 0% </li></ul></ul></ul><ul><ul><ul><li>Range Minimum: Number of employees below range minimum 0 </li></ul></ul></ul><ul><ul><ul><li>Range Maximum: Number of employees at range maximum currently 0 vs at range maximum with recommended structure 0 </li></ul></ul></ul><ul><ul><li>Non-Exempt Salary Structure: </li></ul></ul><ul><ul><ul><li>0% structure movement: No change from November 1998 </li></ul></ul></ul><ul><ul><ul><li>Cost to bring to minimum : 0% </li></ul></ul></ul><ul><ul><ul><li>Range Minimum: Number of employees at range minimum currently 1 vs at range minimum with recommended structure 0 </li></ul></ul></ul><ul><ul><ul><li>Range Maximum: Number of employees at range maximum currently 0 vs at range maximum with recommended structure 0. </li></ul></ul></ul><ul><ul><li>DL Salary Structure: </li></ul></ul><ul><ul><ul><li>0% structure movement: No change from November 1998 </li></ul></ul></ul><ul><ul><ul><li>Cost to bring to minimum : 0% </li></ul></ul></ul><ul><ul><ul><li>Range Minimum: Number of employees at range minimum currently 0 vs at range minimum with recommended structure 0 </li></ul></ul></ul><ul><ul><ul><li>Range Maximum: Number of employees at range maximum currently 0 vs at range maximum with recommended structure 0 </li></ul></ul></ul><ul><ul><ul><li>Note: there are not range minimum or range maximum to New DL Salary Structure, just a base salary point for each function. </li></ul></ul></ul>Salary Structure Recommendation
  15. 16. <ul><li>No need to change salary structure </li></ul><ul><li>Merit increase according to proposed merit grid </li></ul><ul><li>Inflation adjustment as per Union Agreement up to R$ 1.750,00 </li></ul>1999 Exempt Plan - Recommendation
  16. 17. 1999 Exempt Salary Structure
  17. 18. Market data used to determine appropriate salary structure midpoints - Exempt
  18. 19. Exempt Average Salary
  19. 20. Exempt Total Compensation
  20. 21. <ul><ul><li>No change to salary structure (inflation adjustment only) </li></ul></ul><ul><ul><li>Merit increase according to proposed merit grid </li></ul></ul><ul><ul><li>Inflation Adjustment as per the Union Agreement up to </li></ul></ul><ul><ul><li>R$ 1750,00 month salaries </li></ul></ul>1999 Non-Exempt Plan - Recommendation
  21. 22. 1999 Non-Exempt Salary Structure
  22. 23. Market data used to determine appropriate salary structure midpoints - Non-Exempt
  23. 24. Non-Exempt Average Salary
  24. 25. Non-Exempt Total Compensation
  25. 26. 16 <ul><li>No change to salary structure </li></ul><ul><li>No merit increase (no change from past practice) </li></ul>1999 Direct Labor Plant Plan - Recommendation
  26. 27. 1999 Direct Labor Salary Structure
  27. 28. Market data used to determine appropriate salary structure midpoints - Direct Labor
  28. 29. DL - Average Salary
  29. 30. Dl- Total Compensation
  30. 32. 1999 INFLATION / MERIT APPROACH
  31. 33. 1999 INFLATION /Salary Evolution
  32. 34. <ul><li>Recommendation </li></ul><ul><ul><li>Proposed Merit Budget : </li></ul></ul><ul><ul><ul><li>Executive/Exempt and Non-Exempt Merit Budget: 5% Increase; Management will be instructed to only deliver 5% in merit increases. HR will monitor individual increases to stay within this budget. </li></ul></ul></ul><ul><ul><ul><li>Rationale for change: </li></ul></ul></ul><ul><ul><ul><ul><li>According Towers Perrin, Merit levels are still high in Brazil when compared to international standards. In average merit increases represented 5% of payroll in 1998 and companies are budgeting 5% for 1999. These figures do not include mandatory CPI increases granted in union agreements. The major reason is the demand for qualified professionals in the high technology industry, boosted now by the privatization of telecommunications sector in brazil. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>During 1998, the market growth based on replacement of cost purchasing power have diminished and we have the following situation: </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Example for grade 104 base salary = R$ 6,000 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Novl 1998 ==> If we had had flat increase 2.5% ==> amount R$ 150.00 </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Nov 1998 ==> Fixed Amount R$ 44,00 ==> increase 0.73% </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Difference==> 1,77% </li></ul></ul></ul></ul><ul><ul><ul><ul><li>The increase of merit budget is necessary to replace this gap between the prior union agreement increases based on past inflation and the new union agreement increases (Inflation adjustment up to R$ 1,750) and to consolidated the growing trend toward remuneration adjustments based on results. </li></ul></ul></ul></ul><ul><ul><li>Summary: Compaq and some other companies are establishing the practice of capping inflation increases; however, this isn’t is a prevalent market practice. Therefore, the 5% merit increase is meant to bring us more in line with market practice. </li></ul></ul>Merit Grid Recommendation
  33. 35. 1999 Merit Grid Recommendation
  34. 37. <ul><ul><li>Total Cash -- Defined as base salary, plus variable pay components: </li></ul></ul><ul><ul><ul><li>Executives </li></ul></ul></ul><ul><ul><ul><ul><li>Management Incentive Program </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Long Term Bonus Program </li></ul></ul></ul></ul><ul><ul><ul><li>Exempts </li></ul></ul></ul><ul><ul><ul><ul><li>Profit Sharing </li></ul></ul></ul></ul><ul><ul><ul><li>Non-Exempts </li></ul></ul></ul><ul><ul><ul><ul><li>Profit Sharing </li></ul></ul></ul></ul><ul><ul><ul><li>DL </li></ul></ul></ul><ul><ul><ul><ul><li>Profit Sharing </li></ul></ul></ul></ul>Total Cash Compensation
  35. 39. <ul><ul><li>Variable Pay: 1998 </li></ul></ul><ul><ul><ul><li>Executives: </li></ul></ul></ul><ul><ul><ul><ul><li>Management Incentive Program </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Long Term Bonus Program </li></ul></ul></ul></ul><ul><ul><ul><li>Exempts: </li></ul></ul></ul><ul><ul><ul><ul><li>Profit Sharing </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>On average represents 3.08% of base pay; 0.4 month base pay </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Industry average represents 2 months of base pay for maximum outstanding performance </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Reward and Recognition (.5% of payroll budget) </li></ul></ul></ul></ul><ul><ul><ul><li>Non-Exempt: </li></ul></ul></ul><ul><ul><ul><ul><li>Profit Sharing </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>On average represents 3.08% of base pay; 0.4 month of average base pay </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Industry average represents 2 months of base pay for maximum outstanding performance </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Reward and Recognition (.5% of payroll budget) </li></ul></ul></ul></ul><ul><ul><ul><li>DL: </li></ul></ul></ul><ul><ul><ul><ul><li>Profit Sharing </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>On average represents 3.08% of base pay; . 0.4 month average base pay </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Industry average represents 2 months of base pay for maximum outstanding performance </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Reward and Recognition (.5% of payroll budget) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>CPQ (In implementation) </li></ul></ul></ul></ul>Variable Pay
  36. 41. <ul><li>Guidelines </li></ul><ul><ul><li>Administering Salaries </li></ul></ul><ul><ul><li>Responsibility for administering salaries exists at several organizational levels within the company. However, the first and most important level is the immediate supervisor who makes salary recommendations for all of his or her assigned employees. The supervisor is guided by practices originated by HR Staff. Within reasonable limits, corporate practices are adapted for local use and no supervisor is a free agent in administering salaries. </li></ul></ul><ul><ul><li>One of the most important considerations when reviewing the salary progress of employees is determining where their salaries should fall in the salary range in relation to their performance. In determining the appropriate salary for an employee within the salary range, these general guidelines are used: </li></ul></ul><ul><ul><li>Lower Band : Employees who require some on-the-job training and employees who meet or exceed the minimum qualifications and performance standards for a position but who have not fully demonstrated the capacity to sustain such performance should normally be paid in this area. </li></ul></ul><ul><ul><li>Middle Band : In general, employees who meet the normal operating standards for their positions and have demonstrated competence in the performance of their assignments with a minimum of supervision should be paid in this band. </li></ul></ul><ul><ul><li>Upper Band : This area of payment is for employees whose contributions substantially and consistently exceed normal job requirements. Time-in-grade or time-on-position alone does not necessarily qualify an employee for payment in this band. </li></ul></ul>Promotions
  37. 42. <ul><li>Average Promotional Increases (%)*: </li></ul><ul><ul><li>DL: 23% </li></ul></ul><ul><ul><li>Exempt: 15% </li></ul></ul><ul><ul><li>Non-Exempt: 20% </li></ul></ul><ul><li>Estimated Average Number of Promotions: 20% of employee population </li></ul><ul><li>* Estimates noted above based soled on previous years experience. Business conditions may impact the estimates. </li></ul>Promotions
  38. 44. <ul><li>Current Practice: No formal program in place </li></ul><ul><li>Recommendation: This program will be implemented according rules from Compaq Houston </li></ul>Reward & Recognition
  39. 46. Exempt Last Performance Rating Distribution
  40. 47. Non-Exempt Last Performance Rating Distribution
  41. 48. Market data used in the analysis as of Towers Perrin August-1998 NOVELL ORACLE PROGRESS SOFTWARE QAD QUALCOMM RAYCHEM SAP SIEMENS SILICOM GRAPHICS SUN MICROSYSTEMS TEKTRONIX UNISYS VARIAN XEROX HEWLETT-PACKARD IBM INFORMIX INTEL JOHNSON & JOHNSON JD EDWARDS KODAK LOTUS LUCENT TECHNOLOGIES MICROSOFT NCR NEC NEWBRIDGE NORTHERN TELECOM 3COM ALCATEL ANIXTER AT&T BAAN BAY NETWORKS BCP TELECOMUNICAÇÕES CISCO SYSTEMS COMSAT DIGITAL DUPONT EMC GESSY LEVER GLOBAL ONE Survey Data Benchmark Companies
  42. 50. Pension Plan <ul><ul><li>48% of the participants of High Technology Industry Survey offer a pension plan </li></ul></ul><ul><ul><li>Government is stimulating companies to implement private pension plans through tax incentives </li></ul></ul><ul><ul><li>Typically defined contribution, contributory with company match, designed to provide 45-60% of social security gap </li></ul></ul><ul><ul><li>Companies review total remuneration position when considering offering a pension plan </li></ul></ul>
  43. 51. <ul><ul><li>Typically, Executives and Senior Managers are provide a car and 100% of expenses </li></ul></ul><ul><li>(insurance, maintenance, fuel and licensing fees) </li></ul><ul><ul><li>Senior Managers are defined by the market (not just according to reporting structure) </li></ul></ul>Company Cars - % of Granting
  44. 52. Profit Sharing <ul><ul><li>About 35% companies indicated (High Tech Survey ) having a profit sharing program.Profit sharing will become more prevalent, but many companies are changing the strategic direction to put more emphasis on preestablished goals.. </li></ul></ul><ul><ul><li>Typical amounts paid equal 1 month salary for achieved goals and 2 months salary maximum for outstanding performance . </li></ul></ul>
  45. 53. Stock Programs - Long Term Incentive <ul><ul><li>65 % of the participants of High Technology Industry Survey having a stock Program either formal or informal. All plans follow the same rules as headquarters or global plans </li></ul></ul><ul><ul><li>The most common model is still the stock options (44% of the participants) when the employee has the right to exercise/buy stocks from the company </li></ul></ul><ul><ul><li>Typically the elegible levels to long-term incentive programs are senior managers and above. However, the number of companies (18.6%) that provide this type of program to all levels is significant </li></ul></ul>
  46. 54. Telecommunication sector will continue to grow over the next 2 years. Increasing search for top-notch individuals. Market Trends Led by forward thinking domestic and global companies, larger employers in South America region are eager to adopt human resources and compensation methods from North America and elsewhere. Employers are looking for ways to vary the compensation mix. Variable pay will become more common for broader groups of employees. Large employers will increasingly seek to improve company performance through enhanced performance measurement and management systems, including competency-based human resources applications. The focus in this region will continue to be on controlling total compensation costs, as is demonstrated by the introduction of company wide profit-sharing plans and interest in the cost/value of total remuneration in general, human resources programs are expected to become more sophisticated rapidly.
  47. 55. Market Trends

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