nadhiyapm Started The Discussion:
I am an HR generalist of a construction firm. We are planning to introduce employee grading system and salary structure based on it. Someone please help me in this regard. If you have the format, please post the same.
Hei...Me too working in construction company only.
Setting formats based on experience, qualification and area of work is the general practice you should follow. Please send what you have worked out and I would express my views on it compiling with the present systems followed everywhere generally. My e-mail ID is
All The Best.
Dear nadhiyapm ,
I wish to suggest you to plan as per your Company Rules and to follow based on
A- By Designation Base:-
1. Qualification + Experience+ Job Knowledge
2. 50% to 70% of Gross Earning Can be set as Basic for different slabs as per above (A-1) defined groups and groups should be designation viz QEJ.
3. HRA can be made as 40% of Basic or 50% of Basic in cases where employee lives in Metro Cities (to follow Income Tax rules).
4. Allowances can be set as per your Company rules ranging from any sum as n thousand for a grade and M thousand for b grade
4. Conveyance can be set as a balancing figure to make the gross matchable with G Total cost.
Hope the above may be useful for your purpose.
If you prepare the grade and salary structure, please do share the same with us.
Please find below a brief of preparing grade structures and subsequently the salary structures:-
1. Job Descriptions (Properly done on the basis of Job Analysis. To be more accurate, you can follow Hays etc method of JA)
2. Job Evaluation (Hays, Mercers etc or the Internal Method)
3. Corporate Vision and Business Strategy
4. Know your Current Reward Mix
5. Pay Position (Organisation capacity to pay as per the Job Families, grades etc)
6. Market Survey (Who closely has the competitor participants in their list)
1. Evaluate all the jobs/positions on the basis of your current JE methodology and rate them.
2. Define if you want to have broad - band grades, single-step or double-step. As per the current trend, the mid size organisations have 9 - 12 grades and further sub grades (if required).
3. Once all jobs have been evaluated through a job evaluation system, and the relative hierarchy or rank-order of all jobs has been established, then cluster jobs of broadly similar job size into grades.
4. Define your pay position as per the company policy if it is upper quartile, median or lower quartile etc. It may vary for different job families (technical vs support jobs, core jobs etc), job locations, staff demography etc
5. Define reward mix in each grade.
Hope it helps.
The introduction of job grades and/ or bands in an organization that will become the framework of an orgnization's salary structure needs many pre-requisites. It is something that is better left in the hands of professionals like us who has been doing it for a long time. Simply copying certain models (like the one given above) will not be a good help because it opens to so many questions that must be answered. It can also create problems for the organization, that can cause your job because compensation is a very sensitive subject matter. This is where your competence and/ or incompetence can be uncovered.
Hence, if your organization really needs it, then allocate a budget and call the professionals.
Offhand, however, let me say the following:
1. Job Grades and Bands are not simply designed out of nothing. Whatever you will design will mean cost for the company. Hence, you need to understand the four basic compensation principles of: internal equity, external competitiveness, affordability, and sustainability.
If you are a new company, you need the owners pay philosophy and policy to be able to create a good and acceptable salary structure for them. If you are already operating, then you need the latest payroll list to be able to see and plot the current salary ranges of the different job classes in your organization, ie. the executive, managerial, supervisory, staff, clerical, and admin support personnel.
2. Each Job Grade or Band must have the following elements: minimum rate, median rate, and maximum rate. These rates must be properly benchmarked with the curent industry market where the company belongs so your pay will be competitive (external competitiveness). The rate ranges in each grade or band must be so designed that overlaps are rational and distortion is avoided at all times. Overlaps are to be observed according to the basic theories we learned in the textbooks.
3. The entire salary structure must be designed in such a way that it is not only affordable to the company, but is also sustainable by it for the long term (3rd & 4th principles).
I suggest that you attend a HayGroup or Watson Wyatt workshop on this subject matter.
Ed Llarena, Jr.
tel: 00966-54-223-7804 (ksa)
I am not aware of any specific law that is attributed to anyone person or organization that is universally accepted in the design of job grades/ bands. In my employment and consulting work, I have seen so many types of "grading systems" that are uniquely designed. I have seen ascending and descending job grades. I have seen something like a rectangle chart which I called "the hundred year salary chart". I have seen pure numbers (1-21), pure letters (a-m) mixed letters and numbers (cl1, so1). I have seen salary structures that have 12-22 job grades. I have also seen salary structures that only have eight (8) bands.
The guide to which type of design or model to adopt should be based on the available market data that is available in the area/ country where a company operates. The reason is: you will have to benchmark your rates on a regular basis with market and industry rates to keep your structure updated and competitive. And, benchmarking will be difficult if your grading system does not match the system being used by the compen survey available in your area.
Example: HayGroup market survey uses their traditional 21 job grade system in all their surveys. Each job grade has its corresponding Hay Points Score that can only be obtained through the use of the Hay Profile Method of Job Evaluation. If your salary structure is designed using Broad Banding (and your company has only ten (10) Job Bands), you need to establish a "credible conversion system" from job grades to bands to be able to use the Hay Survey and benchmark with their data.
As a rule of thumb, salary structures must be designed using international systems (e.g. HayGroup and Watson Wyatt) for better understanding and easy benchmarking. Also, salary structure designs must be understable and can be administered by others even if the employee/ manager who designed it is already out of the company.
Never accept a design that only one person is able to understand. That will make your company dependent perpetually on that person. Remember, in an organization, no one (except the owner/s) must be indespensable.
Best regards from the beautiful City of Paranaque, Metro Manila, Philippines.
Ed Llarena, Jr.
Tel: 00632-828-9842 (landline)
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