Ed Llarena, Jr.
Owner/ Managing Partner
John Chiang
Consultant
Moniwali
Hr Officer
+1 Other

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Can anyone help me in giving the general idea which other companies are also following about the Salary review in IT Company. for developers senior positions also..
From India, Bangalore
Hi, Moniwali,

Salary Recommendations

Salary proposals should conform to the Company's current policies, practices and attitudes as presented in manual. Management who feel they have a need to differ from these stated positions must include appropriate justification and rationale as part of their proposal. In order to develop the salary proposal, it is necessary to determine specific recommendations on structure adjustment and spending. The costs must be determined to complete the process and to test for affordability.

All recommendations should be developed and based on the competitive salary position objective for the coming year. In some instances, it may be appropriate to develop recommendations that will achieve a competitive position over a longer period than one year.

I. Developing a Structure Adjustment

In developing a structure adjustment recommendation the following factors should be considered:

1. Current market position of the Company's structure to competitive paid salaries.

2. Comparison of the Company paid average salaries to competitive paid average salaries.

3. Differences in the slopes of the market trend line and the Company midpoint trend lines.

4. Expected market average salary movement for the year and merit spending plans by competition.

5. Company objective relative to position in the marketplace. (Current practice is to set our midpoints equal to the market average.)

6. Relationship of the Company's paid salaries to the current market midpoints.

From a technical viewpoint, the midpoint progression and minimum to maximum range spread should be considered. A uniform midpoint progression is desired.

Salary structures should usually be constructed with range spreads varying from 35-50% in order to provide for salary progression within the range based on significant differences in performance of job incumbents. Since progression is more rapid in lower levels, these range spreads are typically narrower than range spreads in upper levels where the incumbent may experience less frequent promotions.

II. Developing Spending Projections

Once the proposed structure has been developed, a spending plan for the year can be determined. Competitive spending projections, economic and business condition, the current paid salary deficiencies (to the market), desired market position, and internal conditions in the Company are among the primary factors to be considered. Based on these factors, projected overall spending levels should be formulated. Spending projections may vary for different segments of the organization based on specific problems or conditions; however, a high degree of consistency should be maintained throughout the entire organization.

Salary Planning should not occur until the structure adjustment and projected spending levels have been developed and approved. That is also the appropriate time to formalize a merit increase guide chart, if applicable.

III. Determining Cost

The Pay Program Proposal isn't complete without knowing the cost impact. The following steps should be followed:

1. Determine (or project) base annual salaries as of the beginning of the plan year.

2. Apply the average percentage merit spending projection to the base payroll to determine the merit cost.

3. Determine adjustment and promotion cost in the same manner.

4. Total the cost figures and beginning base payroll to Project the base annual salaries resulting from the pay proposal.

IIV. Considering Other Factors

When the salary program recommendations have been formulated, they should be examined for other factors that impact business requirements. Questions should be asked about affordability, employee relations issues, proposed legislation and other business related issues. After these factors have been considered and discussed with company top management, the recommendations should be finalized.

John

From China, Shanghai
Hi Jhon,
Thanks for your reply but my question is regarding the increment?? How much increment is to be given to the various levels/positions in an IT company.There must be some general slab of increment to be given(Yearly).
Like for developers...say between 5 to 10% of their CTC..like this..
Same can u just give me the general idea for same for Team lead n managers also....Please reply back soon.
Thanks

From India, Bangalore
Hi Moniwali,

In order to avoid delay in answering your inquiry, I would like to forward this policy for your reference, which I collected from my friend. What I can provide is the general idea in HR regard. Hope this information can help something.

SALARY PROGRESSION

1. COMPANY POLICY

To grant periodic salary increases to qualified employees on the basis of merit, within the Framework of a uniform salary scale.

To grant salary increases to promoted employees in recognition of their increased responsibilities.

2. SALARY SCALE

A uniform. salary scale provides the framework within which salaries are administered. HR Department is authorized to provide the salary scale applicable to each department.

Positions are classified by different ranges described in a separated policy. For each range the salary scale sets a minimum, a midpoint, and a maximum. The minimum is normally constructed at 80 percent of the midpoint. The percentage differential between the range minimum and maximum will be approximately 50 percent.

Average salaries paid by other employers in the community for comparable work are represented by a range of salaries between 96% and 104% of midpoint. These averages include salaries paid by other companies to their employees of same pay range.

Each employee should be told the range of the position to which he or she is assigned and the maximum salary that may eventually be attained if performance justifies it. Following formal approval, the employee should also be told when a salary increase is forthcoming and the amount of the increase. Similar information should be made available to the employee when promoted.

3. STARTING SALARIES

Every employee is paid at least the established starting salary but never more than the midpoint for the range of the position to which appointed.

Applicants with Previous Business Experience and/or Education

Starting salaries may be supplemented, where appropriate, by the following permissive additive arrangements:

• up to six percent of the basic starting salary for each year of related business experience, or

• an educational equivalent beyond the minimum requirements.

Use of these additives is subject to a maximum hiring rate equal to the midpoint of the range to which appointed.

1). Starting Salary Differentials

When employees are transferred from one job to another, particularly relatively new employees, salary differences can occur because of starting salary differentials between the two jobs. When management determines that some reasonable salary action is necessary to relieve such a situation, the adjustment is chargeable against the merit budget. All such adjustments should be made on Salary Increase Recommendation Form and should be identified as salary increases within the budget.

2). College Graduates

Starting salaries for college graduates to both general and technical assignments are jointly determined by management and HR Department.

3). Former Full Time Employees

Starting salaries for former full-time employees who are reinstated or re-appointed to full-time permanent positions are determined as follows:

a. Reinstatement (break in service of not more than 26 weeks)

• If reinstatement is at the same range, the salary will be the same as that received at the time of discontinuance. However, the salary will not be less than the established starting salary for the position at the time of reinstatement.

• If reinstatement is at a lower range, the salary will be the same as that received at the time of discontinuance reduced by five percent for each range below the former range.

• b. Reappointment (break in service of more than 26 weeks)

• Employees who leave the Company's service for more than 26 weeks will be re-appointed at the established starting salary for the position and range to which assigned. Previous Company experience may be considered when developing the starting salary.

4. MERIT INCREASE BUDGET

Merit increases are based on an annual merit increase budget that becomes effective on the . which is the common review date. The budget rate will be expressed as a percentage of salary range midpoints. Normally this budget rate takes into account the need to establish general market competitiveness and to recognize meritorious performance.

It also takes into consideration Company objectives, costs, the economic situation, government regulations, and unusual compensation problems.

The budget represents the maximum amount available for regular merit increases during the year. The actual funds that will be available vary from one budget year to the next depending upon the approved budget rate, the approved salary scale for the forthcoming budget year and the number of employees at each salary level as of the common review date.

1). Calculating the Merit Budget

The Merit Budget Worksheet is used to calculate the actual dollar amount of the merit budget.

• The range midpoints of the new salary scale coming into effect for the budget year are multiplied by the number of employees on each range in the particular budget grouping (e.g. section or department). The total is then multiplied by the approved merit budget rate to determine the maximum weekly dollar figure that may be spent for merit increases during the budget year.

• The number of employees to be used in calculating the merit budget should be the number of employees on the payroll as of the common review date. This will be the same number of employees as reported on the Merit Increase Lists.

Included in the budget calculation are:

- employees on temporary disability

- employees on leaves of absence

-part-time permanent employees working regularly scheduled hours and cooperative clerks on level.

Excluded from the budget calculation are:

- employees whose current base salaries are already at or above the new salary range maximums since these employees cannot benefit from the budget.

- employees transferred to Long-Term Disability on or before the effective date of the new budget.

- employees retiring on or before the effective date of the new budget.

- employees terminating on or before the effective date of the new budget.

- part-time permanent employees working variable hours.

- temporary employees.

The following salary increases are handled outside of the merit increase budget :

• promotion increases.

• special salary increases for new employees.

• certain equity adjustments.

2). Employee Eligibility for Merit Increases

It is management's responsibility to recommend salary increases far deserving employees and to withhold them from those who do not meet the necessary standards.

All weekly salaried employees will be eligible for regular merit increase consideration each year on the common review date. The amount of increase will vary from year to year depending upon the employee's overall evaluation, the approved budget rate and relationship of the employee's current salary to the appropriate maximum on the salary scale that will be in effect during the budget year.

All weekly salaried employees are evaluated annually prior to the common review date.

3). Procedures for Recommending Merit Increases

a. Merit Increase Guidelines

The merit budget program is designed to give management flexibility in salary increase matters. Therefore, no strict or specific controls will be imposed on individual increases where management wishes to accomplish some reasonable salary action within budgetary limits and salary range maximums. After the budget rate has been approved, HR Department sends management suggested guidelines for spending the budget based upon an employee's current overall evaluation and position within the salary scale. In addition, the following general guidelines apply:

• Each salary range has maximum that relate to employee performance ratings. Employees whose overall evaluations are above average may receive the salary progress within the salary range. In no case is an employee permitted to exceed the maximum of salary range for the position.

• Minimal increases may be granted on the common review date to employees rated as average performance, if management believes their performance will improve in near future. On the other hand, if management has serious doubts about the future performance of an employee rated as poor performance, the increase may be withheld. Employees rated as below average performance may be considered for increases later in the year provided the rating improves to average performance or better, and management has sufficient money left in the merit increase budget. Such increases will be made effective on a current date basis. Recommendations for these deferred regular merit increases should be submitted to the Payroll Unit on Salary increase Recommendation Form.

• No increases are granted on the common review date to employees whose evaluations are poor performance. However, these employees may be considered for increases later in the year provided their performance improves to average or above.

• The merit increase rates suggested by HR Department will be greater for good rating employees whose salaries are low in the salary range than for those employees whose salaries are high in the salary range. In so doing, the merit increase guidelines reflect the Company's philosophy of moving employee's salaries as quickly as practical toward the competitive market rates, which are represented by the range of salaries between 96% and 104% of midpoint.

b. Completion of Merit Increase Lists

Using the suggested guidelines for spending the budget, management prepares merit increase recommendations to be effective on the common review date for each employee on the Merit Increase List. Payroll Unit sends these lists to management together with budget spending guidelines usually two months before the effective date of the budget. Merit Increase Lists are organized so that each covers the same employee groupings covered by the Merit Rating Control List Form.

• Enter on the Merit Increase List the employee's current overall evaluation from the Merit Rating Control List, which should have been completed shortly before receiving the merit increase materials. This is the basis for the merit increase recommendations. As an aid to management, the appropriate performance control maximums are also provided.

• If the current base salary of an employee has changed since the list was prepared, or will change before the common review date, cross out the figure shown, enter the new rate, and use this figure when making the merit increase recommendation.

The base salary excludes the salary supplement for any previous service award.

• If the list includes any inaccuracies or if there have been personnel changes since the list was prepared such as appointments, promotions, transfers and discontinuance, make the necessary changes and enter any appropriate comments, e.g., appointed, transferred to (unit), etc., with the effective date.

• Enter on the Merit increase List the amount of the merit increase being recommended for each employee, the applicable percentage of the employee's current salary, and the new base salary. The salary supplement for a previous service award, if any, is shown separately on the list and should then be added to the new base salary. The new total salary should be entered in the appropriate column.

• All merit increase recommendations for full-time employees should be made in multiples of $ .

• For part-time permanent employees working regularly scheduled hours, the Merit increase List indicates full-time equivalent as well as actual salary. Increase recommendations should be determined by applying the increase guidelines to the full-time equivalent salary and by examining the relationship of the full-time equivalent salary to the appropriate performance control maximum. The details on how to calculate these increases and translate the results into actual part-time amounts are outlined in the table appearing at the separated policy.

• If no increase is being recommended for an employee, or if an increase is to be considered later in the year, enter "none" in the increase column and make an appropriate note in the "Comments" column on the List, e.g. "employee recently appointed or promoted;" "current base salary above new range of maximum;" "poor performance rating."

• Promotion increases and special salary increases effective on the common review date are determined after the merit budget increase has been applied.

c. Review of Merit Recommendations

• When individual merit increase recommendations have been made, the overall effect of the increases should be reviewed to determine whether appropriate salary relationships among employees have been achieved.

• The total amount of the increase recommendations should be compared to the merit budget total calculated on the Merit Budget Worksheet to be certain that the merit budget will not be exceeded.

• It should be kept in mind that it is not necessary or advisable for the entire budget to be spent on the common merit increase date. Sufficient budget money should remain available for increases needed later in the budget year, e.g., for employees returning from temporary disability, poor performance employees whose ratings improve to average, new employees or transfers into the unit, superior accomplishments that should be recognized. Also, budget money generated by employees who can only receive restricted increases or no increases at all should not necessarily be allocated to other employees.

• Completed Merit Increase Lists and Merit Budget Worksheets should be forwarded to Payroll Unit for review and approval at least four weeks before the common merit increase date. Merit Budget Worksheets for each department should be submitted as well as a summary Worksheet for the entire department.

d. Unspent Merit Budget

• Any unspent or unallocated budget money is available to management for individual merit increase recommendations and for equity adjustments later in the budget year. The use of unallocated budget money does not require advance approval from Payroll Unit. Transfers in or out of the department, turnover, and cumulative spending on an annualized basis do not affect this figure. Merit increases and equity adjustments, regardless of the date of implementation during the budget year, are subtracted From the unallocated weekly budget total until it is depleted.

• Recommendations for all salary increases to be effective after the common increase date should be submitted to the Payroll Unit on Salary Increase Recommendation Form. Reasons for any salary increases outside or above the maximum budget figure must be included on this form or in an accompanying memorandum.

4). Monitoring the Merit Budget

Under normal circumstances, merit increases chargeable to the budget should not exceed what is permitted under the merit increase budget, To aid management in controlling this spending, monitoring reports will be issued at the beginning of each month by Payroll Unit. In addition to showing the total weekly budget for the year, these reports will show the total weekly chargeable increases and remaining unallocated budget funds as of the date of the report.

Any discrepancies in budget figures or organization changes that would affect unallocated budget funds should be discussed with the HR Representative or HR Manager who, in tun, will resolve any problems with Compensation Planning of the Personnel Committee.

The monitoring report also includes information on increases outside of the merit budget, i.e., special salary increases and promotion increases .

5.SALARY INCREASES FOR NEW EMPLOYEES

1). Merit Increase Consideration

New employees are eligible for regular merit increase consideration on the common merit increase date, the same as other weekly salaried employees. Because the timing of this increase may occur a relatively short time after appointment, management must consider the total salary effect desired for new employees when recommending their first regular merit increase. The salaries of all employees evaluated average performance or better should be raised to at least the new hiring rate.

Basic starting salaries are usually increased at the same time the merit budget is implemented. The effect of these changes on the salaries of new employees should also be considered. In some cases, management may wish to delay the regular merit increase for a new employee. Such a delay is permitted. Deferred merit increase recommendations are made on Salary Increase Recommendation Form.

2). Special Salary Increases

In addition to regular merit increase consideration under the budget, all active employees appointed to weekly salaried positions are eligible for special salary increase consideration provided:

• length of service is less than two years.

• salary is below the minimum of the range for the position.

• current overall evaluation is above average performance or better.

a. increase Amount

The amount of the special salary increase is up to 10 percent of current salary provided the employee's current overall evaluation is fully competent or better. The resulting salary may not exceed the applicable salary scale.

Employees with salaries at or above this point are not eligible for special salary increase consideration since their salaries already represent reasonable pay rates for the assigned positions.

b. Timing

One special salary increase will be permitted during each of the eligible employee's first two years of service.

During the first year of service:

• The timing of the special salary increase should coincide with the first performance evaluation, i.e., when sufficient evidence has accumulated for appraising performance. As a general guideline, management should consider a new employee for a special salary increase at six months of service, but an increase recommendation may be submitted at an earlier or later date according to management's judgment.

• Eligibility for the first special salary increase expires on the employee's first anniversary of employment.

During the second year of service:

• An eligible employee should be considered for a special salary increase at a time deemed appropriate by management. Eighteen months of service is the guideline for the timing of this increase.

• Eligibility for the second special salary increase expires on the employee's second anniversary of employment.

There will be no holdback system for special salary increases. The total amount of the special salary increase that management feels is appropriate for an employee must be granted at one time during the particular year of eligibility.

In situations where eligibility expired because the employee was on a leave of absence or was on disability, special salary increase consideration after the year of eligibility will be permitted. However, no retroactive increases will be permitted.

Procedures for Recommending Special Salary Increases

Special salary increase recommendations originate with management. Management should submit a Salary Increase Recommendation Form indicating Special Salary Increase.

Indicate the overall evaluation and potential of the employee.

Enter an effective date for the increase. As is done for the other types of increases, special salary increase recommendations should be submitted to Payroll Unit at least two weeks before the effective date.

In leave of absence and disability cases where a special salary increase may be given after the year of eligibility, the reason for the increase should be entered on the appropriate line of the recommendation form.

3). Monitoring Special Salary Increases

The monitoring report issued at the beginning of each month showing merit budget information will also report on special salary increase spending. This spending is not chargeable to the merit budget. With regard to special salary increases, the monitoring report will show the following as of the date of the report:

• sum of special salary increases year-to-date.

• total number of increases granted.

• total of weekly salaries before application of special salary increases .

• average special salary increase.

4). Former Full Time Employee

Reinstated employees (break in service of not more than 26 weeks) and re-appointed employees (break in service of more than 26 weeks) will be treated the same as other employees with regard to merit increase and special salary increase consideration. Their eligibility for special salary increase consideration is based on their adjusted anniversary dates.

6. PROMOTIONS AND TRANSFERS

1). Objectives

To help every employee qualify for greater responsibilities and higher income through further training and education.

To fill vacancies from within the Company, whenever possible.

To consider an employee's demonstrated ability, potential, experience, training and length of service.

To make every conscientious effort to place each employee in the position best suited to individual ability, within the framework of Company needs and organization, without discrimination of any kind.

2). Development of Candidates for Promotion

Supervisors have the primary responsibility for developing the potential capacity of all employees under their supervision so that these employees may be eligible for promotion.

Plan on-the- job training to give new employees a proper start. Constant refresher training of more experienced employees is also essential if their skills are to be maintained and improved.

Learn about each employee's current knowledge, interests and skills. Form an estimate of how far each one can advance if the employee's potential is developed. When indicated, discuss with each employee possible opportunities for promotion in the future. Encourage the employee to take full advantage of the Company's training and self-development programs.

Emphasize the importance of studies about the nature and technical problems of the business.

3). Selection of Candidates for Promotion

Where to find qualified candidates.

Candidates for ladder type promotions will normally be found m the job ladder where the opportunity exists.

For non-ladder type promotions candidates will be referred through the Career Opportunity Program. Under this system, every Supervisor has a wide range of qualified candidates from which to choose. In turn, no employee's advancement is restricted solely to vacancies within his or her unit.

How to choose between candidates. When evaluating the qualifications of candidates to recommend for promotion, consider demonstrated skill, performance, aptitude, ability to get along with others, potential for further advancement, experience and training. A satisfactory attendance and punctuality record is also a prerequisite. When all other qualifications are equal, length of service should be the deciding factor between candidates.

It is the policy of the Company to use objective tests as part of the overall assessment of employees who are candidates for transfer and promotion, where such tests will contribute to the selection of qualified individuals.

Transfers Other Than Promotions

Make every conscientious effort to place each employee in the position best suited to individual ability, within the framework of Company needs and organization. If the employee's performance is below standard, poor placement may be to blame. An employee whose work is now average performance may do still better in another type of work within or outside the department.

Discuss placement problems with the Manager and the Department HR Representative or HR Manager.

Approval of Promotion and Transfer Recommendations

Management has the authority for final approval of promotions and transfers within the Company.

Such recommendations for promotion or transfer are initiated by the Supervisor and approved by the Manager, subject to established office and departmental controls. However, there may be occasions when HR Department will request that they be consulted in advance so that employees made available for reassignment because of procedural or organization changes elsewhere in the Company may be considered for suitable vacancies.

No commitment should be made to a candidate for promotion until the recommendation has been approved by General Manager.

Promotion Salary Increases

When promoted, an employee is eligible for a promotion increase as of the date when promotion is effective.

It is management's responsibility to consider carefully the amount of increase to be recommended on every promotion. The full amount available under the promotion increase guidelines should not be recommended automatically.

Consideration should be given to the employee's performance prior to promotion and to the effect of the increase on salary relationships with other employees in the department so that unnecessary salary inequities will not be created. For multiple level promotions in particular, the amount of the immediate remotion increase to be recommended should be carefully considered in relation to the employee's knowledge and ability to perform the duties of the new job.

No strict or rigid controls will be imposed on individual promotion increases where management wishes to accomplish some reasonable salary action within salary scale limits.

However, a minimum increase of $ per range must be granted.

Since all employees rated at least average performance must be paid the minimum salary for the range to which assigned, the amount of a promotion increase may exceed the suggested guidelines, if needed to achieve the minimum salary for the range to which promoted. The guidelines may also be exceeded to provide the minimum promotion increase of $ per range.

On an overall basis, promotion increases should average no more than 10 percent for promotions.

• The amount of promotion increase to be considered for a one-range promotion will normally be up to 10 percent of the employee's current salary for promotions, but not less than $ .

• * The amount of promotion increase to be considered for a two-range promotion will normally be up to 20 percent of the employee's current salary for promotions, but not less than $ .

• Promotions of more than two ranges or any unusual situation should receive individual consideration.

When a promotion involves transfer of the employee out of the department, the respective management personnel of the two areas should discuss and mutually agree on the amount of the immediate promotion increase to be recommended.

The new salary resulting from a promotion increase may not exceed the scale maximum of the salary range to which promoted, with one exception. Employees whose salaries, as a result of transfer from a department with a higher salary scale, are above the maximums of their new salary scale may be considered for a minimum promotion increase of up to 3 percent per range.

Promotion increase recommendations are made on Promotion and Transfer Recommendation Form. In the space provided, enter the amount recommended subject to the scale maximum limitations above. Deferred promotion increase recommendations should be made on a Salary Increase Recommendation Form.

To aid Management in controlling promotion increase spending, the monitoring reports issued at the beginning of each month providing merit information will also include promotion increase data. These reports will show as of the date of the report:

• number of promotions year-to-date.

• sum of the number of ranges promoted.

• total of weekly salaries before promotion.

• sum of the promotion increases.

• average promotion increase rate.

7. SALARY INCREASES FOR REEVALUATED POSITIONS

All reevaluations of positions that result in increased range classifications are treated as promotions for salary purposes. Salary increases are to be considered in accordance with the regular promotion rules. A one-range increase is to be treated as a one-range promotion, a two-range increase as a two-range promotion, etc.

For upward reevaluations affecting a number of employees, promotion increases should not be automatic, and particular attention should be given to preventing undeserving employees from benefiting from the change. In such cases, management should either transfer such employees from the job before the effective date of the reevaluation, or withhold all or part of the increase applicable to the other employees.

8. TRAINEES

For salary administration rules on trainees, consult Department HR Representative or HR Manager.

John

From China, Shanghai
Hi John,
we are able to implement variable pay plans in our company. The challenge here are 2 for us
1. How do we refelect this in the appraisal letters for exisiting employess and they feel motivated about variable compoenent and also feel that they have got necessary increment though its linked to performance
2. Next year when we have established the Fixed Salary and Variable salary how do the appraisal takes place. Does the Variable Component only grow or does the fixed also go.
3. How Do employees know what is thier total CTC specially when its a Sales profile.
Please assist with your thoughts

From India, Mumbai
Hi!

Merit increases are generally things of the past, before the "pay for performance" concept has evolved and gained wide acceptance. Merit increases burdens the company payroll and perpetually pushes upwards the company's salary structure irrationally and without justification.

The company would do right to pay performance bonus to employees who performs. Those who deserve recognition and reward due to their loyalty and tenure should be given Merit Allowance instead of a "base salary increment" so as not to unnecessarily burden the payroll cost.

The correct way of adjusting salaries, whether performance or merit based is by looking at the prevailing market trend in a given area/ location. Compensation people would do well to read compensation survey reports prepared by reputable organizations in their area, like those prepared by the HayGroup, Hewitt, and Watson Wyatt.

But, despite all points of view, any decision or action on compensation and benefits matters, including that on merit increases, must always be based on approved company policy. And, company policies must always take into consideration the four basic principles: internal equity, external competitiveness, affordability, and sustainability.

Besst regards.

Ed Llarena, Jr.

Riyadh, KSA

From Philippines, Paraρaque
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