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Manager\'s Guide to Salary Review


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Slides used in lecture with managers from Icelandic Employer\'s Federation on application of bargaining agreement requirements.

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Manager\'s Guide to Salary Review

  1. 1. Manager’s Guide to Planning a Salary Review Randy Fleckenstein / Icelandic Federation of Trade / Oct. 2007
  2. 2. Salary Reviews – Do I have to? 2 R. C. Fleckenstein
  3. 3. The Contract Says So Objectives of the market-based wage contract• To make employment terms and changes more transparent• To insure that employment terms are competitive• To retain and support the best employees• To encourage employees to improve their performance 3 R. C. Fleckenstein
  4. 4. Emphasis in the New Contract1. Review required once a year.2. The employer should initiate the discussion.3. Salaries shall reflect employee performance, competence, accomplishments, fl exibility in assuming new tasks, special work hours, the nature of the job, level of accountability and educational level if appropriate.4. Employer must adhere to the conditions of the equal rights law.5. It is permitted to agree upon a fixed total salary if maximum overtime hours are given. 4 R. C. Fleckenstein
  5. 5. Market-Based Wages Consider• Salary changes on the job market• Performance and “value” of individual employees 5 R. C. Fleckenstein
  6. 6. Preparing and Organizing the Salary Review 6 R. C. Fleckenstein
  7. 7. What Do We Have to Work With?• Salary surveys• Salary structure within organization• Length of service/tenure and job history• Goals attained• Current wages and benefits• Level of education, training records• Attendance figures• Other data? 7 R. C. Fleckenstein
  8. 8. Market-based Salary Comparisons Heimild: 8 R. C. Fleckenstein
  9. 9. Data from VR Trade Union• Salary reviews result in 5% higher wages – 3rd year in a row.• ISK 368,000 per month in total salary vs. ISK 351,000 per month for those who don’t participate.• 60% of union members participated in a salary or performance review in 2006.• Men participated more than women in 2005 and 2006.• Those with higher education are more likely to participate.• Younger employees more likely to participate than older.• Women are more likely to use salary survey information.• More education – more likely to use salary survey data.• 77% of those who participated received a raise – a dramatic change over the past few years. 9 R. C. Fleckenstein
  10. 10. Information from the VR Trade UnionHighest wages are in financial, computer and other specializedservices sectorsAverage total wages – change from 2006• Wages rose between 9% - 13% over all sectors.Larger companies – higher wages• Salaries were 11% lower at firms with less than 20 employees vs. firms with 100 employees or more.• The biggest difference was among managers or 18%. 10 R. C. Fleckenstein
  11. 11. Retail services salaries went up the most (VR) Avg. Total Change Wages from 2006 CEO’s and other Senior 565.000 15% Managers Directors, managers 545.000 8% Lawyers 511.000 5% CFO’s 489.000 8% Business grads 486.000 15% Cafeteria workers and 242.000 12% journeymen chefs Receptionists 238.000 10% Retail workers 233.000 29% Grocery store clerks 225.000 1% 11 R. C. Fleckenstein
  12. 12. VR salary survey results (example) 12 R. C. Fleckenstein
  13. 13. How Do You Determine Wages? 13 R. C. Fleckenstein
  14. 14. Performance Factors (according to the bargaining contract)• Work during special hours• Job tasks and demands• Accountibility• Education• Work completed• Competence• Personal drive• Flexibility/ability to deal with other tasks 14 R. C. Fleckenstein
  15. 15. Are you a valued employee?• Positive toward changes• Deals with weaknesses – exhibits confidence• Goes beyond the job description• Uses the company to develop own competence• Makes the job a constant opportunity to learn• Is a risk taker• Knows and understands the firm’s needs and values• Takes on as much responsibility as possible• Positive and contagious attitude• Follows up on ideas and suggestions – shows initiative• Works hard and doesn’t waste time 15 R. C. Fleckenstein
  16. 16. How Big Will the Pot Be? –consider...• Inflation and wage index hikes over the previous 12 months• Other bargaining agreements• Costs and earnings of the company 16 R. C. Fleckenstein
  17. 17. Price and wage developments (Statistics Iceland)Wage index for major employee groups 2005-2007 Employees in general labour force Change from the previous year(%)2007 2nd quarter 11.7 17 R. C. Fleckenstein
  18. 18. Employee Review WorksheetEmployee:____________________________________________________ ID #:__________________________Position:______________________________________________________________________________________Current salary:_________________________ Other arrangement/perqs:_____________________________Goals/accomplishments over the past year – contribution to results:a. ___________________________________________________________________________b. ___________________________________________________________________________c. ___________________________________________________________________________d. ___________________________________________________________________________Other factors to consider:a. Wages in comparison to others & the market e. Market demand for his/her skillsb. Competence – special or high value f. Special hours of workc. Wage hikes in past g. Level of responsibilityd. Ability to assume more responsibility, promotion h. EducationRecommendation:Monthly salary to: ____________________________________________________________________________Perquisites/work arrangements: _______________________________________________________________Signed: _______________________________________________________________Position: ____________________________________Date: _____________________ App. HR _____________Decision communicated to employee (date): ___________________________ 18 R. C. Fleckenstein
  19. 19. What Can We Offer? 19 R. C. Fleckenstein
  20. 20. Total RewardsThe importance and value of these factors vary by sector, company, employee life styles and ages 20 R. C. Fleckenstein
  21. 21. Wage Composition•Base pay•Contractual obligations - vacation, tenure, raises stipulated in bargaining agreement, pension•Performance-based pay R. C. Fleckenstein 21
  22. 22. Examples of Perquisites• Vacation days • Business credit card• Employee cafeteria, coffee • Entertainment budget bar, snacks • Personal use of• Raises tied to cost of living corporate facilities index • Sign-up bonus• Lump sum upon reaching • Grants for certain years of service education, wellness fees• Store discounts • Car, cell• Work clothes, cleaning phone, computer, VP services N, etc.• Interest-free loans 22 R. C. Fleckenstein
  23. 23. Popular Perquisites - VR findings -Cell phone 35%Fitness centre grant 35%Phone subscription 32%Store discounts 20%Net services subscription 19%Automobile costs 15%Education grant 13%Home computer from employer 11% 23 R. C. Fleckenstein
  24. 24. Work Culture/Environment– Recognition – Cultural factors • Service awards, praise, in- • Management house newsletter, etc. style, diversity, level of formality, communications,– Work-Life Balance empowerment, trust, etc. • Flexible schedules, sports facilities, massage, financi – Environmental factors al • The job – advice, childcare, various challenging, resources, vari services through employee ation, co-workers. association. • Work facilities & conditions– Personal Growth • The firm – • Training, succession products, image, market track, mentoring, feedback position, drive, strategy , problem solving group participation, etc. 24 R. C. Fleckenstein
  25. 25. Total Rewards List (example)Benefits to Employees Benefit Value Note: Employees pay a lunchLunch and snacks (savings) 15.602 perq tax of 480 kr. per mealClothing allowance* 3.750Life insurance 1.500Debit card transaction fee (savings) 650Transportation stipend* 1.500Gym and sports stipend 2.500Sickness insurance 1.500Yearly eye examination 500Summer cottage rental (savings) 1.000Education and training 6.250Performance bonus (variable)* 8.333 Total Benefits 43.086*upon permanent hireEmployees receive discounts at a variety of stores, stipend for purchase of prescriptionglasses*, special terms at banks, interest-free computer purchase loan, etc. that individualemployees use in varying ways between months and years. 25 R. C. Fleckenstein
  26. 26. Negotiations 26 R. C. Fleckenstein
  27. 27. Key Points• Be positive, have conviction• Communicate clearly: What!• Explain: Therefore!• Discuss any matters that remain unclear• Get acceptance: Can I count on you? 27 R. C. Fleckenstein
  28. 28. Concluding the Discussion• Summarize the final points and confirm that you both are in agreement.• Sign the document – send to HR• End on a positive note• Revise the employment contract? 28 R. C. Fleckenstein