Reward

Reward

Contents

Our approach to reward 1

Reward strategy 1

Developing a reward strategy 3

Total reward 4

Some definitions 5

Job evaluation 12

Appendices

Appendix 1 Base salary comparison analysis

Appendix 2 What is the best way to select and use reward consultants?

Appendix 3 Collinson Grant's approach – in summary

Appendix 4 Share schemes

Appendix 5 Job evaluation scheme

Collinson Grant

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1

Our approach to reward

We have defined our approach to reward in the following statement:

Pressures on margins are relentless. The need to reduce costs is constant. No

business can afford to take its eyes off these fundamentals. For most

companies the costs of employing people are greater than for any other single

resource. Effective management demands that managers strive for optimum

performance at least cost.

Our approach to reward is based on this essential proposition. We focus on

making certain that strategies for the pay and benefits of all employees are

directed at adding value and are concentrated on the bottom line. This means

the design and implementation of robust systems for pay that aim to reduce

costs and achieve better returns from firms’ investment in people.

Some employees rightly command salaries above the norm. Excellent

contributions to the business deserve exceptional pay. A sophisticated reward

strategy accommodates such circumstances while retaining its purpose of

achieving value for money.

Margins not volumes should be the focus of directors and managers. This

underpins our work on reward. All initiatives on pay and employment benefits

should target costs.

We support managers:

� to continuously strive for cost reduction

� to institutionalise a philosophy of improved productivity

� to recover the costs of pay increases as a matter of routine

� to measure progress continuously and openly

� to ensure margins are improved through more cost-effective

utilisation of people.

As a minimum, holding costs is an imperative in any change to systems for

reward. In our experience, pay systems should be simple and easily

understood, provide clear targets and encourage ingenuity and enterprise. We

have found that success results from:

� concentrating on a small number of improvement goals

� stretching targets

� powerful incentives for excellent performance.

Reward strategy

Reward strategy is not a huge, complex, masterplan for the next ten years. It

is regular checking that reward practices are connected to what the

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organisation is trying to achieve. Few clients actually articulate this as

‘reward strategy’.

The following is a quote from CIPD:

‘HR people often focus on best practice, relying on benchmarking, in the

absence of any (genuine) strategic direction. But it is not enough to do what

many other successful organisations are doing. Each organisation must

develop a reward strategy that is right for them.’

The reward strategy is the way the organisation operates a pay and benefits

system that gets employees to pursue the organisation’s objectives. For

example, commission schemes apply to sales staff because it is believed this

will make them sell.

Theoretically, the reward strategy:

� is derived from and supports the business strategy

� generates improvements in business performance by directing

employees’ effort towards organisational goals

� brings about and reinforces cultural and behavioural change

� is integrated with the rest of HR policy and practice

� keeps pay and other employment costs under control.

While it is rare to find this happening, we should encourage clients to think

about the subject and advise them to:

� understand the long-term goals, performance objectives and measures

of the organisation

� consider what the organisation needs to be good at to succeed

� consider what behaviour they want to encourage to achieve this, and

how ‘reward’ can help. If they want to encourage team working, do

not reward individual contribution exclusively

� decide how the success of the reward strategy is measured - better

performance; better recruitment; better retention; better employee

development, for example

� understand what the business strategy is so that the reward strategy

can have a connection to it

� avoid complexity

� take time over changing reward systems. A rush to complete (by the

pay review date, say) will probably make matters worse as a result of

poor communications or pay modelling, for example

� concentrate on improving the performance of the middle 80% of

employees, not the worst and best 10%

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� get buy-in of directors and senior managers

� be realistic about the ability of line managers to deliver on

performance management (appraisal and pay decisions). If they are

not trained, or the system is over-complicated, it will fail.

Developing a reward strategy

The flow- chart below shows a process for developing a reward strategy. It is

rather elaborate, but is useful for reference as it includes all the key issues.

Purpose

Phase 1

Diagnosis of current situation, setting the future direction and principles,

development of the future reward architecture

Outputs

� Full understanding of current situation

� Identification of key reward issues

� Future reward strategy definition and components

� Defined ‘employment’ deal

� Prioritisation of schemes and changes

� Formalising and communicating the plan

� Buy-in and support of relevant interest groups

Typical

stages

� Planning

� Formation of project teams

� Interviews and group discussions

� Market analysis

� Internal data review

� Workshops

Purpose Phase 2

Detailed design of the components of the future reward strategy

Outputs

� Detailed scheme designs

� pay structures and levels

� base pay reviews

� incentive and bonus plans

� share schemes

� benefits

� Schemes initially modelled and tested

� Preparation plan

� Senior management approval

Typical stages

� Design team meetings

� Drafting of scheme designs

� Testing of new schemes on sample of jobs

� Further consultation

� Staff updates and briefings

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Purpose Phase 3

Preparation and testing, building the capability to deliver

Outputs

� Agreed finalised changes / schemes

� Fully tested and costed reward schemes

� Trained managers and staff with a clear understanding of the

strategy and changes

� Defined implementation and operating responsibilities

� Phased implementation plan

� Branded reward strategy with clear themes and components

Typical stages

� Further testing of designs, for example, pilots

� Analysis of transition from status quo

� Detailed modelling and costing

� Development and delivery of communications and training support

� Trade union negotiation

� Design of operating, administrative and control procedures

Purpose Phase 4

Implementation and on-going review and adjustment

Outputs

� Detailed communication plan

� Effectively implemented reward schemes

� Effectively implemented reward processes

� Operation of review mechanisms and modifications as required

� Further development of managerial skills and staff understanding

Typical stages

� Full and possibly phased implementation

� Regular audits of effectiveness

� Design of any modifications to schemes

Source: Brown D, (2001) Reward Strategies. CIPD

Total reward

Most commentators these days regard ‘reward’ as more than just pay - it is all

the other benefits that an employee gets from employment, and is sometimes

referred to as ‘total reward’. The table shows the different components

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5

Pay

� Base pay

� Bonuses

� Long-term incentives

� Shares

� Profit sharing

Benefits

� Pensions

� Holidays

� Perks

� Flexibility

Learning and development

� Training

� On-the-job learning

� Performance management

� Career development

� Succession planning

Work environment

� Organisation culture

� Leadership

� Communications

� Involvement

� Work-life balance

� Non-financial recognition

Although we are capable of delivering work on all these, when people talk

about reward, they almost certainly mean pay.

Appendix 2 is a quote from E-Reward about the process a client should go

through before selecting a consultant. Appendix 3 is Collinson Grant's

approach in summary.

Some definitions

Broadbands/broadbanding

Broadbands are a design of pay structure that (usually) has fewer grades than

traditional structures, has wider salary bands/ranges, a large overlap between

bands, and does not use midpoints to determine the ‘fully acceptable’ salary.

Within a broadband pay range, pay zones may be established that determine

the minimum and maximum salary. The maximum can only be exceeded if the

employee is given new responsibilities or acquires specified skills, for example.

This builds in a ‘bar’ to the pay range.

Broadbands can be useful in situations where there is little scope for

promotion, but increased expertise is valued. ‘Techies’ in IT, for example, are

often poor supervisors: broadbands provide pay progression without the need

for promotion to a supervisory job.

However, broadbands make pay management more difficult and tend to lead

to pay inflation. With less visible mechanisms to restrict pay advancement

than traditional systems, it can be difficult to communicate and justify pay

decisions.

Benchmark jobs

Benchmark jobs are a collection of jobs that produce a representative sample

of jobs for evaluation. They should:

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6

� cover the range of work and include jobs with a large number of job

holders

� include standard jobs that exist externally, to assist pay comparison

� be stable jobs that are well-established and understood

� exclude one-off jobs.

They represent the backbone of a job evaluated pay structure.

Benchmarking salaries

Assessing a client’s salaries against the market. Usually, this is done by

referring to published salary surveys (Inbucon/IDS/Reward).

A more reliable way is to survey particular employers in the area or sector, by

asking them to send information about pay and benefits in return for a copy of

our report. (Appendix 1 sets out an approach).

Competence based pay

Pay increases according to the employee’s acquisition of additional skills or

competence. Typical ‘levels’ of competence are:

� entry level

� developing level

� fully competent

� advanced.

Advantages

� Can reinforce culture of employees being responsible for own

development.

� Encourages acquisition of new skills.

� Focuses on skills the organisation wants to encourage.

Disadvantages

� The pay increase arising from the increased competence needs to be

sufficient to make it worthwhile.

� The employer may not want everybody in a particular job/role to have

all the competencies.

� There is a high management /administration requirement.

It may be applicable to some categories of employee, but not all.

Competence acquisition may be better linked to performance development, but

not pay.

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Contribution pay

Contribution pay takes Performance Related Pay a step further, by combining

performance and competence to measure and reward not only performance but

also the increasing skills and capabilities of the employee.

Flexible benefits

Flexible benefits (flex) allow employees to choose the benefit, or level of

benefit, that suits them. It allows, within certain constraints, the employee to

decide the mix of cash and benefits.

Advantages

� Reinforces value/cost of benefits to employees.

� Reduces status barriers.

� May appeal to diverse workforce.

� Empowers/engages employees to make choices rather than rely on

employers’ decision about benefits.

� Costs can be reduced through reduced national insurance.

� Recruitment (and retention) may be improved by more attractive

employment offer.

� May assist harmonisation of employment terms: all the same and all

different.

Flex schemes normally involve the concept of salary sacrifice. The employee

gives up an amount of salary in return for non-cash benefits. Usually, the

employee has the opportunity to change the package annually.

There are two approaches:

� A value is attributed to each benefit that may be flexed. Employees

can spend the cash or points on the benefits available, or take more in

cash,

or

� A fund, or allowance, is provided, to be spent on benefits, typically a

percentage of salary, or a fixed amount by grade.

Gainsharing

Bonus based on self-funding pay-outs. Employees share in the financial

success of over-achievement once pre-agreed targets have been reached.

Grade drift

Grade drift occurs when, over time, jobs are placed in a higher grade than

they started in, usually because it has been argued the job has become more

difficult/responsible.

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Incentives

Usually, a generic term for a payment that recognises a particular level of

measured contribution.

Job families

Job families are an approach to relating different roles across an organisation

in an integrated way. Job families might be: accounts/production/sales/IT, for

example.

Job families cluster jobs of a similar type and market base rate together.

Within the job family there is a hierarchy of roles: Analyst level 1/Analyst

level 2, and so on, say.

In the diagram, three different pay ranges can be applied to jobs in the same

grade. For example:

� B1 are customer service

� B2 are Finance

� B3 are IT.

Advantages

� Reflect different pay markets for jobs of similar size.

� Reflect different career structures of different functions.

10,000

6,000

15,000

8,000

20,000

13,000

16,000

9,000

21,000

13,000

26,000

18,000

An example of market zoning at an insurance company

1 2 3

1 2 3

£

A B

10,000

6,000

15,000

8,000

20,000

13,000

16,000

9,000

21,000

13,000

26,000

18,000

10,000

6,000

15,000

8,000

20,000

13,000

16,000

9,000

21,000

13,000

26,000

18,000

An example of market zoning at an insurance company

1 2 3

1 2 3

£

A B

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� Useful in organisations with a high number of knowledge workers.

� Can accommodate a wide variety of functions and jobs.

Disadvantages

� Can be complex to administer and communicate.

� Relies on getting reliable pay data.

� Can create barriers to lateral moves in the business.

Job grading

Advantages

� Clarity.

� Internal equity.

� Control over pay levels.

� Rational.

� If based on analytical job evaluation, defensible in equal pay claims.

Disadvantages

� Inflexible.

� Does not respond to skill shortages.

� Grade drift is inevitable.

Money

40 --

35 --

30 --

25 --

20 --

15 --

10 --

5 --

0

100 200 300 400 500 600 700

Pay range

80 to 120%

Grade width 18%

Job size

Midpoints

Classic pay grading structure

Money

40 --

35 --

30 --

25 --

20 --

15 --

10 --

5 --

0

100 200 300 400 500 600 700

Pay range

80 to 120%

Grade width 18%

Job size

Midpoints

Classic pay grading structure

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Pay/salary range

The distance between the minimum and maximum salary for a job or job

grade.

Pay spine

Historically, the basis for most public sector pay structures. A pay spine is a

series of often many incremental steps extending from the lowest to the

highest paid jobs in the structure that may cover the whole organisation. Pay

scales are superimposed on the spine to determine the minimum and maximum

for the job, with usually automatic increments annually applied until the

employee reaches the top of the range for the job/grade.

Pay market

The salaries paid by employers for a particular job.

What market comparator is best? Is it the local market for factory workers,

say, but the national market for managers?

Performance-related pay (PRP)

Judgements are made about an individual’s performance, usually by the

manager, but sometimes with contributions from peers and subordinates.

Based on this performance, the employee is given a pay increase.

Advantages

� Emphasises that performance in line with company objectives is

important to the organisation.

� Allows employees to feel the link between their performance and their

pay.

� Can act as a channel of communication of company objectives.

Pay and grading structures

Butt jointed grades

Overlapping grades

Spine points


Butt jointed grades

Overlapping grades

Spine points


Butt jointed grades

Overlapping grades

Spine points

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Disadvantages

� Difficult to set and measure employees’ objectives.

� Inconsistency of managers’ assessments of performance creates

dissatisfaction/scheme disrepute.

� Tendency to regard all employees as at least ‘satisfactory’.

� Deming (ancient guru) thought this encouraged short-term

performance, prevented long term planning, built fear, prevented

teamwork, fostered rivalry and made people bitter.

Role

Often used interchangeably with ‘job’. So are job description and role

description/definition.

‘A role may be a set of discrete jobs that are described with some generic

responsibilities but with clearly defined skill sets. For example, a role may be

a musician but a job, amongst several within a role, would be second violinist’.

Share schemes

See Appendix 4.

Team-based pay

A bonus is paid according to the performance of a group of employees, rather

than being based on individual performance. The same cash, or percentage of

salary, is paid to each person in the group.

Advantages

� Whole team shares in success.

� Supports teamwork.

� Emphasises collaboration.

� Rewards supportive behaviour.

Disadvantages

� Requires clear, stable work groups.

� Less effective members get equal benefit.

� Peer pressure can be oppressive.

� High performers may be frustrated.

Variable pay

Pay that is ‘at risk’, such as bonuses and incentives

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Paying an amount of pay in addition to or instead of base pay as part of an

employee’s total remuneration which varies according to criteria, such as:

� commission or other sales incentives

� performance bonus

� company-wide bonus

� profit sharing

� gainsharing.

Job evaluation

The objective of job evaluation is to establish a transparent grading framework

with a clear route for pay progression. It:

� measures the job not the person doing it

� does not measure the volume of work

� does not measure individuals’ performance.

Why introduce it?

� To ensure that jobs are graded fairly and to achieve equal pay for

work of equal value.

� To underpin new pay and grading structures and assure internal

equity in the system.

� To assist harmonisation of terms and conditions following merger or

acquisition.

� To clarify job profiles and ensure relevant comparisons when

benchmarking externally.

Analytical schemes break down a job its key constituent parts, such as skill,

experience, effort (factors). Each factor is given a weight depending on its

importance. They offer rigour, consistency and objectivity. They are not

scientific, requiring judgements to be made in deciding which level of

education is required, for example.

Non-analytical job evaluation, each job is examined in its entirety. It is

quicker than analytical schemes, but we would only recommend it as

management tool. It would be unlikely to be acceptable to employees and is

not acceptable in assessing equal pay for work of equal value.

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Job evaluation project - roles and responsibilities

Group Responsibility

Steering group Manages high level policy and direction of the project. Does not second-guess the

actual results of the exercise. Led by a senior manager who is responsible for the

project at the highest level

Project manager Responsible for the day-to-day conduct and implementation of the project

Working group The forum that makes decisions about the various stages of the project. May include

employee representatives. If large, may need to delegate tasks to project teams

Project teams Deliver elements of the project

Job holders/line managers Provide information about the job to enable job descriptions to be prepared and

agreed. May give ‘evidence’ to job evaluation panel

Job evaluation panel The body that evaluates the jobs. May be the Working Group

Appeal body The body that hears appeals against an evaluation. It should be separate from the

job evaluation panel

Collinson Grant Offer technical advice on methodology and process/assist with job descriptions/chair

or adviser to job evaluation panel

Project process

� Planning.

� Communication.

� Selection of factors to value jobs (or use existing/proprietary scheme).

� Initial design of factor levels and points values/weights.

� Selection of benchmark jobs.

� Job description design.

� Job information collection.

� Test scheme (using benchmark jobs?).

� Amend/refine scheme if necessary.

� Train evaluators.

� Evaluate benchmark jobs.

� Evaluate remaining jobs.

� Confirm evaluations.

� Publish evaluations (with/without points?).

� Hear appeals.

� Develop pay structure.

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Points rating job evaluation

This method breaks a job down into several factors that are scored against a

numerical scale. The sum of the factor scores gives the total job size.

It is the most common form of job evaluation. It:

� is analytical

� can be specific to the organisation

� examines each job in the same way

� provides relative scale

� is not ‘scientific’.

Example

Factor

Levels

1 2 3 4 5 6 Weight

%

1 Knowledge and skills 50 100 150 200 250 300 26.8

2 Responsibility 50 100 150 200 250 300 26.8

3 Decision making 40 80 120 140 180 220 19.6

4 Complexity 25 50 75 100 125 150 13.4

5 Contacts 25 50 75 100 125 150 13.4

Design

Factors should:

� cover all the significant features of the job population

� avoid double counting, omission or combining features

� be a manageable number

� not be sex-biased (giving a lot of points to ‘heavy lifting’, for

example).

According to E-Reward, the most commonly used factor groupings are:

� knowledge, skills, expertise and experience

� communication, contacts and interpersonal skills

� decision-making, problem solving and complexity

� impact and accountability

� people management, leadership and team working

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� various types of responsibility, demands and attributes

� environment and work demands

� freedom to act/discretion

� responsibility for financial and other resources

� innovation and thinking

� planning.

Whilst visually appealing, forcing the same number of levels for each factor is

not recommended. Some factors have a greater range to be measured.

Collinson Grant job evaluation scheme

It is an analytical scheme for evaluating all administrative and managerial

jobs. It is not suitable for manual jobs. It is at Appendix 5.

Hybrid job evaluated/competency schemes

� Fewer, broader role profiles.

� Simpler evaluation schemes.

� Broader pay bands.

� Looser performance management schemes, with equal emphasis on

the reward and development aspects.

� Pay progression based on personal contribution - that is, a

combination of competence displayed and results achieved.

� Flexible working hours and arrangements.

� Personal choice of benefits.

Collinson Grant

Reward

Appendix 1

Base salary comparison analysis Our client employed a group of specialist technicians. It wanted to know where its pay stood in relation to

the market and compared to their skills and competencies. The company had job descriptions and

information on those employers that competed with them for technical employees.

We:

� reviewed the job descriptions and organisational charts to understand the responsibilities of each job

and its position in the organisation

� identified those jobs that could be market-priced using available market surveys and which jobs

would require a specialised survey

� designed a specialised survey to obtain information for industry-specific jobs

� invited appropriate organisations to participate in the survey and offered complimentary copies of

the results for participating

� market-priced as many jobs as possible and slotted the remaining few jobs into market based salary

guidelines

� plotted the salaries paid by the client against the salary guidelines

� asked managers to determine the skill and competency level for each employee

� plotted the skill and competency levels against the salary guidelines

� where skill and competency levels did not match the salary position in the guidelines, made

individual salary adjustment plans to move employees to the appropriate position

� developed communication tools for managers’ use when introducing the plans to employees.

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Appendix 2

What is the best way to select and use reward consu ltants? � Ensure that there is a business case for using consultants

� Specify the objectives and ‘deliverables’ of the assignment in a way that clearly indicates that the

desired results are worthwhile and achievable and will meet the business need

� Source and select the consultants with great care. Always consider alternatives even if you already

have someone in mind. Approach reputable firms and individuals

� Obtain a proposal from the consultant that sets out:

� Their understanding of the assignment

� Their experience of similar projects

� How they would tackle it

� Who would do it, with details of relevant experience

� How long the project would take

� How much it would cost

� Check the proposal and compare it with others against the following criteria:

� Understanding of the aim of the project

� Grasp of the issues

� Relevance and realism of their proposals

� The thoroughness with which the proposal has been researched and prepared

� The reputation and relevance of the experience of the firm

� The strength of the team in terms of qualifications and relevant experience

� The ability of the consultants involved to fit the culture and management style of the

organisation: do we think we can work well with them? Will they work well with us?

� The timescale - will they deliver the programme when required?

� The costs - a consideration but not the only one

� Always meet and approve the actual consultants who will carry out the job

� Plan the project meticulously with the consultants. Agree terms of reference, deadlines,

deliverables, methods of monitoring and reviewing projects and reporting arrangements

� Manage the project. You are purchasing someone else’s services: it is up to you to ensure they

deliver

� The best consultancy projects are those in which the client and the consultant work in partnership

� Remember that all consultancy projects involve change. Take particular care over the

implementation, involvement and communication processes during and after the assignment.

Source: E-Reward

Collinson Grant

Reward

Appendix 3

Collinson Grant's approach – in summary

How we can help you with reward?

We do a lot of work on reward

We expect there to be clearly defined benefits from it, otherwise it’s not worth doing

Pay/incentives/benefits/ performance development

We have about ten consultants who work on it

We’ve just finished a very interesting job reviving an ageing pay structure in [sector of your choice]

We usually find the unions are supportive if they understand what you’re trying to achieve [optional]

Fundamentally it is about pay

Developed pay structures of all sorts in virtually every sector

We find Reward is subject to fashion: single-status/broad-banding/competencies/job families - but simple

grade structures are usually the basis

We do a lot of job evaluation work

Collinson Grant job evaluation scheme used in dozens of clients

Develop tailor-made schemes where appropriate

We find clients often identify a particular problem and think a quick fix will solve it

Need to look at the broader, strategic, picture - what you want to achieve with pay and benefits

It is not sensible to look at pay and reward in a vacuum

We have never believed there is a ‘one size fits all’ answer to reward issues

We try to ensure improved productivity is the result: not necessarily job reductions, but better training,

improved performance and reduced staff turnover also contribute

Collinson Grant

Reward

Appendix 4 Page 1 of 2

Share schemes

This section is to set the principal types of share scheme. A variety of rules apply to them. The principal

types of share plan are:

Inland Revenue approved plans

� Company share option plan (CSOP).

� Share incentive plan (SIP).

� Sharesave plan (SAYE).

� Enterprise management incentive (EMI).

Non-Inland Revenue approved schemes

� Discretionary share option plan (DSOP).

� Performance share plan.

� Phantom share plans/cash settled stock appreciation rights (SARS).

� Equity settled SARS.

� Deferred bonuses.

Inland Revenue approval is obtained from its Employee Shares and Securities Unit.

Company share option plan

� The employer can select the recipients.

� The employer can attach pre-determined performance conditions to the option award.

� The value of each employee’s shares under option must not exceed £30,000, but this does not

include options that have already been exercised.

� No income tax or national insurance liability arises at grant of option or on exercise unless it is

within three years of grant.

Share incentive plan

� Provides employees with the opportunity to buy shares out of gross income and to receive awards of

shares on a tax-free basis.

� Employers can choose which aspects of the plan to operate, but the plan must operate on an all-

employee basis.

� Maximum tax benefits arise if the shares are held in the SIP for five years from the award.

� Four types of share:

� Free shares - employees can be allocated shares at no charge

� Partnership shares - employees can purchase shares from gross income

� Matching shares - employers give shares to match each Partnership share

� Dividend shares - employees can use dividend payments to purchase additional equity.

Sharesave plans (Save as you earn)

� Objective is to encourage wider share ownership in a tax-efficient manner.

� All employees are offered share options on ‘similar terms’.

� Stipulated exercise price can be at a discount of up to 20% of the market value at the time of grant.

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Reward


� Employees fund the exercise price by entering into a savings contract. Employees can save between

£5 and £250 per month and the interest accumulated is a tax-free bonus.

Enterprise management incentives

� Offer more flexibility than CSOPs.

� Share options are granted to employees on a discretionary basis.

� Exercise of options can be made conditional upon the fulfilment of pre-determined performance

targets.

� An employee may hold EMI options worth up to £100,000.

� EMI only available to companies of no more than £30 million gross assets and many sectors are

excluded from participation.

Discretionary share option plans

� Not Inland Revenue approved and so does not enjoy favourable tax treatment.

� Probably the most common form of non-approved plan.

� Share option awards made to selected employees on a discretionary basis.

� Company is able to determine the option exercise price.

� Exercise of options can be made subject to the achievement of pre-determined performance

conditions.

Performance share plans

� Also known as long-term incentive or restricted share plans

� Number of shares awarded to participants is usually dependent on company performance.

� Participants typically given right to receive shares at nil or nominal cost.

� A typical PSP would measure performance over three to five years.

Phantom plans/Cash settled share appreciation right s (SARS)

� Discretionary schemes that pay a cash award related to the increase in share price.

� Used where conventional share options may not be appropriate, such as for overseas executives.

� A notional option award is granted to selected employees.

Equity settled SARS

� Allow the exercise of an option to be satisfied by delivering shares with a market value equivalent to

the gain on the exercised option.

� An option award is granted to selected employees.

� The award gives the employee the right to exercise the options granted, after a vesting period.

Deferred bonuses

� The participants are paid part or all of bonus in shares to be held for a significant period.

� Often the award of further shares is made at the end of the holding period, subject to performance

conditions.

Collinson Grant

Reward


Job evaluation scheme

K n o w l e d g e

Experience

1

Short work

experience

2

Over 6 months’ work

experience, plus

understanding of

related activities

3

Over 12 months’

experience of

commercial,

administrative or

technical tasks, plus

broad knowledge of

related activities

4

Considerable

experience of

commercial,

administrative or

technical tasks

5

Extensive experience

of a specialist

function or of several

functions generally

related in nature and

objectives

6

Broad experience of

business practice or

of several functions

diverse in nature and

objectives

7

Extensive

experience of the

widest spectrum of

business activity

Communication skills i ii iii i ii iii i ii iii i ii iii i ii iii i ii iii i ii iii

E

d

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c

a

t

i

o

n

A Secondary education and general work training 29 32 35 38 41 44 47 51 55 59 63 68 73 78 85 92 99 107 118 123 134

32 35 38 41 44 47 51 55 59 63 68 73 78 85 92 99 107 118 123 134 145

35 38 41 44 47 51 55 59 63 68 73 78 85 92 99 107 118 123 134 145 154

B Probably to GCSE level and training in basic

procedures or equipment such as a PC

38 41 44 47 51 55 59 63 68 73 78 85 92 99 107 118 123 134 145 154 167

41 44 47 51 55 59 63 68 73 78 85 92 99 107 118 123 134 145 154 167 180

44 47 51 55 59 63 68 73 78 85 92 99 107 118 123 134 145 154 167 180 193

C Knowledge normally gained through further education

or apprenticeship

47 51 55 59 63 68 73 78 85 92 99 107 118 123 134 145 154 167 180 193 209

51 55 59 63 68 73 78 85 92 99 107 118 123 134 145 154 167 180 193 209 225

55 59 63 68 73 78 85 92 99 107 118 123 134 145 154 167 180 193 209 225 241

D Knowledge of commercial, administrative or technical

subjects. May require a part-professional

qualification

59 63 68 73 78 85 92 99 107 118 123 134 145 154 167 180 193 209 225 241 261

63 68 73 78 85 92 99 107 118 123 134 145 154 167 180 193 209 225 241 261 281

68 73 78 85 92 99 107 118 123 134 145 154 167 180 193 209 225 241 261 281 301

E Professional or technical proficiency normally gained

through study for a professional qualification

73 78 85 92 99 107 118 123 134 145 154 167 180 193 209 225 241 261 281 301 326

78 85 92 99 107 118 123 134 145 154 167 180 193 209 225 241 261 281 301 326 351

85 92 99 107 118 123 134 145 154 167 180 193 209 225 241 261 281 301 326 351 376

F Proficiency in an advanced or highly-specialised field 92 99 107 118 123 134 145 154 167 180 193 209 225 241 261 281 301 326 351 376 407

99 107 118 123 134 145 154 167 180 193 209 225 241 261 281 301 326 351 376 407 438

107 118 123 134 145 154 167 180 193 209 225 241 261 281 301 326 351 376 407 438 469

G Requires mastery of principles, practices and theories, or

expertise in several specialised fields, probably gained

through special development

118 123 134 145 154 167 180 193 209 225 241 261 281 301 326 351 376 407 438 469 509

123 134 145 154 167 180 193 209 225 241 261 281 301 326 351 376 407 438 469 509 549

134 145 154 167 180 193 209 225 241 261 281 301 326 351 376 407 438 469 509 549 589

Communications skills: the extent to which achievement of objectives is dependent upon ‘influencing’ others, within or outside the company, over whom the job-holder has no direct authority

i Ordinary courtesy and effectiveness in dealing with others ii Important, but not essential, to the achievement of objectives iii Critical to the achievement of objectives

Collinson Grant

Reward


W o r k o f O t h e r s

Scope

1

1 or 2 people

2

Up to 10 people

3

Up to 25 people

4

Up to 100 people

5

Up to 250 people

6

Over 250 people

D

e

g

r

e

e

A Part-time, immediate supervision while doing the same

work as the supervised for most of the time

4 7 10 14 18 24

5 8 11 15 20 26

6 9 12 16 22 28

B Immediate supervision where most of the time is spent

assigning, reviewing, checking work and eliminating

ordinary difficulties

7 10 14 18 24 30

8 11 15 20 26 33

9 12 16 22 28 36

C Supervision of a group of employees, without

accountability for results

10 14 18 24 30 38

11 15 20 26 33 41

12 16 22 28 36 44

D Management of a group of employees, with accountability

for results

14 18 24 30 38 47

15 20 26 33 41 51

16 22 28 36 44 55

E Direction and co-ordination of several departments or

functions through subordinate supervision

18 24 30 38 47 59

20 26 33 41 51 64

22 28 36 44 55 69

F Integration of several functions through managers who, in

turn, are responsible for individual departments

24 30 38 47 59 74

26 33 41 51 64 80

28 36 44 55 69 86

Collinson Grant

Reward


C o m pl e x i t y

Guidance received

1

Immediate

supervision with

short work

assignments

2

General supervision

where standard

practice enables

job-holder to

proceed alone on

routine work

3

A definite objective

is set and job-holder

plans and arranges

own work

4

General direction

only, where job-

holder works from

policies and general

objectives

5

Job-holder plays a

major part in

setting own

objectives, methods

and standards of

performance

6

Under board

control and

direction

N

a

t

u

r

O

f

D

u

t

i

e

s

A Use of a few well-defined procedures and limited

judgement, since the work involves little choice of method

7 16 25 37 52 70

10 19 29 42 58 78

13 22 33 47 64 86

B Duties demand following a range of clearly defined

procedures and taking minor decisions under standard

practice or instruction

16 25 37 52 70 94

19 29 42 58 78 104

22 33 47 64 86 114

C Duties demand following diversified procedures and

taking decisions in accordance with standard practice or

instruction

25 37 52 70 94 124

29 42 58 78 104 136

33 47 64 86 114 148

D Substantially diversified procedures and precedents

require job-holder to devise new methods and modify

established practices

37 52 70 94 124 160

42 58 78 104 136 175

47 64 86 114 148 190

E Working with defined policies and principles, making

decisions based on conclusions for which there are few

precedents

52 70 94 124 160 205

58 78 104 136 175 223

64 86 114 148 190 241

F Working within broad policies and principles to

functional goals

70 94 124 160 205 259

78 104 136 175 223 280

86 114 148 190 241 301

Collinson Grant

Reward


A c c o u n t a b i l i t y

Results of errors

1

Minor confusion or

expense in

correction

2

Generally confined

to a single

department.

Correction may

involve re-working

by others

3

May have

appreciable effect

on departmental

performance

4

May mean

significant

expenditure or

losses

5

May involve major

expenditure and/or

losses

6

May be critical to

the company’s

success

E

r

r

o

r

s

A Easily and quickly detected 10 28 49 73 97 124

16 35 57 81 106 134

22 42 65 89 115 144

B Usually detected in succeeding operations 28 49 73 97 124 154

35 57 81 106 134 166

42 65 89 115 144 178

C Detected usually in reviews of progress 49 73 97 124 154 190

57 81 106 134 166 205

65 89 115 144 178 220

D Detected only in reviews of results 73 97 124 154 190 235

81 106 134 166 205 254

89 115 144 178 220 273

E Detected only after decisions have been implemented 97 124 154 190 235 294

106 134 166 205 254 317

115 144 178 220 273 340

F Rarely detected before consequences are irretrievable 124 154 190 235 294 366

134 166 205 254 317 396

144 178 220 273 340 426

33 St James’s Square London SW1Y 4JS United Kingdom Telephone +44 20 7661 9382 Facsimile +44 20 7661 9400

Ryecroft Aviary Road Worsley Manchester M28 2WF United Kingdom Telephone +44 161 703 5600 Facsimile +44 161 790 9177

Web www.collinsongrant.com

Business

Reward