Executive Salary Reviews: How Do Companies Decide on Timing and Hike Percentages?

Hi everyone,

How do companies determine the salary review of their executives?

1. Whether it's to be done yearly, once every two years, every three years, etc.?
2. What percentage of a hike should be given?
3. How can they determine what other companies are paying or what the industry rate is?

Regards

Hi Kaushika,

It would help the viewers to respond to your query if you can let us know what kind of industry your company is in. The frequency of the salary hikes, the percentage, and the market rate differ from industry to industry. Please provide more inputs to your question, and you will see desired results shortly thereafter.

Regards,

Raghav V

Hi,

Proposed salary increase should be given every year, whether in the financial year or the calendar year.

The percentage increase depends upon the size of the company; for example, a group company may offer different rates compared to a single company. The increase is directly related to the profit the company makes and has made in previous years. For small group companies, the increase may range between 10% and 12%, while for larger group companies, it could be as high as 20% to 25%. Companies often differentiate increment criteria among departments such as Manufacturing, Marketing, and Sales. Typically, Marketing and Sales see higher increases due to employee turnover.

Comparative analysis within similar industries can only be achieved through compensation surveys.

Regards,
Bharathi

Hi,

The compensation, increments, and incentives will always depend on your financial status, market rate, and your anticipated production in the coming financial year. A lot of planning and specifically job evaluation has to go behind the decision.

Hope it clears your doubt. If it doesn't, can you please specify the exact area you want to know?

Regards, Santosh Verma (9886609605).

Thanks, Bharathi for the answer. How does one find out what the competitors are paying? Is there any organized body that keeps such info? I'm talking in terms of the agri-sector.

Following are the factors that determine salary hike percentage or amount:

1. Compensation Survey Data.
2. Inflation Rate in the economy.
3. Geographical disparities/similarities in compensation if the company has multilocational operations.
4. Willingness to position the company in the salary range identified through compensation data (Minimum, Average, and Maximum) wherein average refers to the band/pay reference point.
5. Performance rating patterns emerged in the bell curve (based on the rating scale).
6. Business affordability.

Regards,
Vivek

There are a lot of agencies conducting these types of surveys including:

- McKinsey
- Gallup
- Mafoi

Regards,
Bharathi

Inflation rate increases every year, so you need to appraise it at least once a year.

Regards,
Anil

Hi Bharathi,

We worked with Mafoi & Mercer. However, I feel Mercer has better capability in conducting C&B studies. One of the reasons they are better is because they have a certified job evaluation tool in place.

Vivek

Kaush,

You need to find out whether there is any C&B Survey going on in your industry. If yes, then participate in it after discussing with the management team. If not, you can sponsor a survey study by seeking assistance from consultants.

For budget affordability, please refer to the manpower budgets to see how much you have budgeted. This will serve as a 'check and balance' mechanism during the exercise of Post-Review Consequence Management.

Regards,
Vivek

Hi,

Based on my experience, the evaluation is centered on the performance appraisal of a specific executive.

Regards,
Vandana

Hi,

This can be done based only on profits of your organization for the last financial year and the scope of business for the current year. Other factors that influence the hike are the role they play or the hierarchy. It need not always be cash or a check; it may be given in the form of allowances or facilities as well (Check on the FBT).

Regards,
Vijayakumar

Kaushika, please get in touch with the regional/local office of the compensation survey organizations like Ma Foi or Gallup. They'll help you out with it.

Hi,

I would like to give you a generic view of compensation planning, survey, and determination.

Different companies have different compensation planning periods; some do it annually, while others do it every 2 years or so. Typically, every company partners with a consultancy for compensation benchmarking. The consultancy gathers industry data related to compensation structures from various organizations and provides mean and median values of the industry to their client company.

After receiving the necessary data from the consulting partner, the company initiates the pay planning process. The Compensation and Benefits team conducts an expectation survey or internal compensation survey with the assistance of line HRs to determine the compa-ratio. The Compensation and Benefits department performs regression analysis and, based on the available budget, recommends salary increases. The recommendations then go to the organization's strategic team for review and approval of the salary hike. This approval also encompasses incentives and bonus components of the reward.

Please let me know if you have any other points to discuss.

Thank you and regards,

Suryakant

Dear Suryakant,

Thank you for the brief. However, I am still a bit confused. Do we receive feedback from one consulting firm conducting C&B surveys, and then do we also need to conduct a survey at our end? If so, can you kindly explain to me in what ways? Also, could you suggest a few firms that conduct these surveys in the agriculture sector companies in Kerala?

Regards,
Kaushika