HRC-COMP Annual Report

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Human Resource Compensation Department (HR-COMP

Annual Report Human Resource Compensation Department

File Reference:___________

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1 HR-COMP - Annual Report

TABLE OF CONTENTS

INTRODUCTION

PART-I

Analytics

Analysis of Group-Vise Compensation Data Analysis of Variance b/w Personal and Job Grade Analysis of Pay for Performance Analysis of Pay Compression Issues Analysis of Salary Stagnation Analysis of Employee Turnover due to compensation

PART-II

Way Forward

Enhancement of Performance Management System Design, development and Implementation of Job Family System Improve capability and Information for HR-COMP Analytics Improvement of Job Descriptions

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Introduction

The HR-COMP annual report is intended to provide a snapshot of HR-COMP Department’s

performance, analysis of ABC’s current compensation practices, highlight potential issues with

employees’ compensation and an overview of future HR-COMP initiatives to improve HR-COMP

processes, systems and resources. The report is divided into two main portions; which are

explained as below.

Part – I: This section contains key statistics which portray overall picture of our current pay practices

and highlighting certain irregularities or anomalies that need to be addressed/discussed with

concerned stakeholders to avoid potential loss of manpower or causes of demotivation.

Part – II: The second part of the report includes the “way forward” for HR-COMP Department and specify initiatives and future plans to improve upon its current practices.

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A. Routine Operations

1. ANALYSIS OF DIVISION-VISE COMPENSATION DATA

Population Distribution As Per Salary Range

Group Below Min

Q1 Q2 Q3 Q4 Max Above Max

EMT 0% 8% 52% 28% 12% 0% 0%

DIVISION-A 1% 13% 43% 27% 15% 1% 0%

DIVISION-CS 0% 4% 35% 38% 8% 15% 0%

DIVISION-D 2% 11% 38% 36% 10% 3% 0%

DIVISION-O 9% 14% 31% 33% 12% 1% 0%

DIVISION-P 2% 13% 32% 38% 13% 2% 0%

DIVISION-SU 3% 12% 25% 43% 17% 0% 0%

DIVISION-T 5% 17% 37% 28% 12% 1% 0%

Highlights:

Below are some of the highlights/concerned areas;

6% of total employees are being paid less than the minimum level of their assigned

salary range. This practice seems to be happening with employees employed in

DIVISION-O and DIVISION-T groups where 9% and 5% of total group employees are

getting affected by this practice.

Number of employees whose salaries have gone beyond the maximum limit of

salary range are not that high at company level, however, this practice seems to

have taken place in DIVISION-CS group for quite a number of cases as depicted by

the table above.

6%

13%

34% 33%

13%

1% 0% 0%

5%

10%

15%

20%

25%

30%

35%

40%

BelowMin

Q1 Q2 Q3 Q4 Max AboveMax

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2. ANALYSIS OF VARIANCE BETWEEN PERSONAL AND JOB GRADE

Introduction

At ABC, newly hired employees are assigned personal grades which is either equal to or less

than the job grade depending upon the job evaluation status of the job grade. However, it is

not a good practice to keep employees’ personal grade lower than their job grades if the job

evaluation status is approved and employees have spent more than 1 year in his/her job.

Simultaneously, it is against the corporate policy to assign a higher personal grade than the

job grade, unless it is approved by CEO or it happens because of internal

movement/transfer.

Analysis

In order to ensure that employees are treated fairly and in compliance with the corporate

policy we looked into our employee record to identify such cases where an employee has

spent at least 1 year in company and his/her personal grade is lower than their job grade.

The stats are given as follows:

Group PG<JG PG=JG PG>JG Total

DIVISION-O 80 1423 16 1519

DIVISION-D 47 330 4 381

DIVISION-A 41 380 26 447

DIVISION-T 39 358 19 416

DIVISION-P 18 134 5 157

EMT 15 102 6 123

DIVISION-SU 8 228 6 242

DIVISION-CS 3 27 2 32

Total 251 2982 84 3317

Condition 1: PG<JG Condition 2: Time Spent in Grade >1 year

Group AP RK Total DIVISION-O 31 21 52

DIVISION-D 13 16 29

DIVISION-T 15 11 26

DIVISION-A 17 0 17

DIVISION-P 4 6 10

EMT 5 4 9

DIVISION-SU 5 1 6

DIVISION-CS 3 0 3

Total 93 59 152

Note: These stats don’t include developees who are under development program.

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As of Dec 2014, there are a total 152 employees (with more than 1 year in the same

grade) whose personal grades are lower than their job grades.

Out of this total, 93 employees are occupying a job with approved job grade and

they have spent at least 1 year in their personal grade.

The remaining 59 employees are occupying the jobs which are currently ranked and

under job evaluation study/approval process.

Recommendations

Employees with lesser grade than the job grade should be gradually moved into their

respective job grades. If the job grade is ranked then it should be evaluated on priority

basis to ensure that employees are not suffering from late approvals of job grades.

Detail of employees with higher personal grades than their job grade should be looked

into in order to find out the reasons behind this anomaly and to ensure compliance with

corporate policy.

3. ANALYSIS OF PAY FOR PERFORMANCE

Introduction

It is ABC’s policy to reward and appreciate high performing employees based on their

performance appraisal ratings. Hence, it is pertinent to ensure that there is a strong

correlation between pay and performance.

Due to several intentional and un-intentional reasons there is always a chance where

performance, pay and tenure may not be in line with each other. To identify such cases and

to gauge the effective implementation of “Pay for Performance” policy a matrix is drawn

between performance appraisal ratings and employees’ position within a salary range, with

the help of this matrix we identified under-paid and over paid employees by applying

following criteria;

Under-Paid Employee: Employees whose basic salary is less than the minimum level of salary range

with respect to their corresponding job , OR; Those employees who have attain an avg. performance rating of 4 in the last

three years and their salary is less than Q2, OR; Those employees who have attain an avg. performance rating of 5 in the last

three years and their salary is less than Q3

Over-Paid Employee: Employees whose basic salary is more than the maximum level of salary

range with respect to their corresponding job , OR; Those employees who have attain an avg. performance rating of 2 in the last

three years and their salary is more than Q2, OR; Those employees who have attain an avg. performance rating of 3 in the last

three years and their salary is more than Q3, OR; Those employees who have attain an avg. performance rating of 4 in the last

three years and their salary is more than Q4.

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Analysis

Avg. Perf.

Rating Tenure

Below Min


Grand Total

5

15+'

1 1 6 12 2

22

8-15'

4 6 3

13

5-8'

1 1

2

3-5'

1 3 5 1

10

1-3'

3

3

5 Total

2 9 20 16 3

50

4

15+' 17 84 133 74 13 321

8-15' 2 12 59 90 37 6 206

5-8' 5 20 46 59 7 4 141

3-5' 19 33 56 9 117

1-3' 5 11 31 13 60

0-1' 1 1

4 Total 12 79 254 351 127 23

846

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15+' 30 54 106 165 127 5 487

8-15' 20 40 108 161 59 3 1 392

5-8' 39 41 95 120 21 2 318

3-5' 28 46 54 86 13 227

1-3' 30 65 108 16 6 1 226

0-1' 2 2

3 Total 147 246 473 548 226 10 2 1652

2

15+'

2

2

8-15'

1 1

2

5-8'

1

1

1-3'

1

1

2 Total

1 1 3 1

6

Grand Total 159 328 737 922 370 36 2 2554

Note: These stats do not include developees and employees whose personal grade is either

lower or greater than their job grade.

At present, there are 159 employees who have same personal and job grades but their

salaries are not within the corresponding salary range. 3 out of 159 employees are on

direct hire contract whereas the remaining employees are on agency contract.

Salaries of 2 employees are beyond the maximum level of salary range of their

corresponding job grades.

Recommendations

Salaries of employees with performing ratings of 4 or 5, should be brought at least up to

Q2 level of salary. Such employees should be considered for much higher pay raise than

the rest of the group while recommending the salary increments.

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Employees, marked in red background, are over-paid keeping in view their performance.

Hence, pays of such employees should not be allowed to inflate further as it would

negate the philosophy of pay for performance.

4. ANALYSIS OF PAY COMPRESSION ISSUES

Introduction

Pay Compression happens when salaries of existing employees tend to get much lower than

the salaries of newly hired employees on a same job.

Analysis

In order to identify potential cases of “Pay Compression”, data is plotted against the

“Time spent in the same grade” and “Level of Salary”.

PG Time In Grade

Below Min


Grand Total

6

9-12'

1

1

6-9' 75 37

112

3-6' 30 9

39

0-3' 34 1

35

6 Total 139 48

187

7

12+'

1 1

2

6-9'

4 6 3

13

3-6'

3 2

5

0-3'

3 2

5

7 Total

10 10 3 1 1

25

8

12+'

1

1

9-12'

3 5

8

6-9'

1 1 3 5

10

3-6'

10 5 11 1

27

0-3' 2 15 14

31

8 Total 2 26 20 18 11

77

9

12+'

2

2

6-9'

4 6 65 66

141

3-6'

25 59 87 8 2

181

0-3' 14 65 158 21 2

1 261

9 Total 14 94 223 173 78 2 1 585

10

12+'

1

1

9-12'

1

1

6-9'

1 8 6

15

3-6'

3 4 30 9

46

0-3' 3 25 61 33

122

10 Total 3 28 66 71 17

185

11 12+'

2 2

4

9-12'

2

2

8


6-9'

2 7 6

15

3-6'

8 15 21 2

46

0-3' 10 59 107 26

202

11 Total 10 67 124 58 10

269

12

12+'

3 4

7

9-12'

3 3

6

6-9'

2 12 7

21

3-6'

5 10 16 7

38

0-3' 3 35 71 16 4

129

12 Total 3 40 83 50 25

201

13

12+'

4 5

9

9-12'

5 1

6

6-9'

1 2 11 9 1

24

3-6'

4 29 79 25

137

0-3' 1 49 117 109 5

281

13 Total 1 54 148 208 45 1

457

14

12+'

5 2

7

9-12'

2 7 2

11

6-9'

4 11 12 1

28

3-6'

1 16 66 25 1 1 110

0-3'

17 153 106 8

284

14 Total

18 173 185 57 6 1 440

15

12+'

5 4

9

9-12'

3 11 1

15

6-9'

4 20 26 7

57

3-6'

9 41 25 3

78

0-3'

4 125 68 14

211

15 Total

4 138 132 81 15

370

16

12+'

2 1

3

9-12'

2

2

6-9'

2 4 3 1

10

3-6'

1 7 5 1

14

0-3'

7 24 8

39

16 Total

10 35 18 5

68

17

12+'

1

1

9-12'

1 1

2

6-9'

3 2

5

3-6'

2 10 4 2

18

0-3'

21 26 8

55

17 Total

23 36 17 5

81

18 3-6'

3 1

4

0-3'

2 4 1

7

18 Total

2 4 4 1

11

19

6-9'

1

1

3-6'

4

4

0-3'

1 3 5

9

19 Total

1 3 10

14

20 0-3'

1 2

3

9


20 Total

1 2

3

Grand Total 172 389 1021 977 376 36 2 2973

Recommendations

Where shorter-service employees appear deeper in the range (e.g., the third or fourth

quartiles) and longer-service employees appear at the beginning of the range (e.g., the

first and second quartiles), it is a sign for potential pay compression issues.

Although quite a few cases are highlighted here for possible pay compression but a

closer and in-depth examination is required to validate these statistics because there are

quite a few variables that needs to be considered before passing the final judgment.

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Part II - Way Forward

1. ENHANCEMENT OF PERFORMANCE MANAGEMENT SYSTEM

Background In view of various discussions and recent assessment of Performance Management System, it has been decided that the current PMS needs to be enhanced so that it can support employee training & development processes. For this purpose, will gather feedback from all the stakeholders and share its recommendations to determine scope of work for the enhancement of PMS. Afterwards, HR-COMP will also facilitate the implementation plan by acting as focal point between MD, HRMS and Line Managers.

Advantage/Benefits:

By linking the training & development requirements, the line managers and MD department will be able to correctly identify the training needs of employees, departments and groups on timely basis.

The enhancement will also support the Professional Ladder verification process.

Project Objective: Enhancement of HRMS to support T&D activities

Project Milestones/Deliverables:

Workshop with stakeholders

Implementation of approved design in HRMS

Training of Line Managers

Expected Date of Completion: XXX

Time Duration: XX

2. DESIGN, DEVELOPMENT AND IMPLEMENTATION OF JOB FAMILY SYSTEM

Background

Job family systems are primarily used by large organizations to classify similar nature jobs into various groups with the objective to streamline various processes. At ABC, we have long been facing issues of inconsistent application of job titles, lack of harmony in competency development & assessments for same jobs, benchmarking jobs based on job titles only, illogical assignment of duties, in-accurate classification of jobs and lack of consistency in evaluating jobs which created a lot of challenges for HR. Therefore, to overcome these issues HR-COMP is proposing development of job family system.

Advantage/Benefits: Provide a consistent approach to determine job titles as per the levels and grades of jobs

through job slotting.

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More accurate internal and external benchmarking to acquire grading and compensation data.

Establish clearly defined career paths and more consistent pay structures across the organization.

The enhancement will also support the Professional Ladder verification process.

Project Objective: Correct classification of jobs to improve efficiency of HR-COMP functions


Meeting with various departments/divisions to gather feedback and buy-in.

Fully developed Job Family Manual

Implementation of job family system in HRMS and HR-COMP records.

Expected Date of Completion: XXXX

Time Duration: XX

3. IMPROVEMENT OF JOB DESCRIPTIONS

Background

In ABC, job descriptions are prepared by line departments before these are submitted to HR-COMP for final evaluations. Time and time again HR-COMP has experienced recurring challenge of verification of information presented in the job descriptions due to incompleteness, inaccuracy and/or ambiguity. Therefore, it has been decided to revamp the approval & quality assurance procedures along with forms and storage mechanism.

Advantage/Benefits: The project will ensure consistency, accuracy and completeness of information in job descriptions. Project Objective: Improve quality and accuracy of job descriptions


Design and implementation of “Job Analysis Questionnaire (JAQ)”

Formulization of Job Design agreement procedure among MD, OD and HR-COMP.


Time Duration: XX

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4. IMPROVE CAPABILITY AND INFORMATION FOR HR-COMP ANALYTICS

Analytical Background

In past, HR-COMP department has been focusing mainly on administrating immediate and operational matters due to either lack of resources or trained personnel. After thorough assessment of the shortcomings of the existing systems/processes and the future challenges, the department has realized the need to put more focus towards analytical aspect of the function. To support the new approach of proactively identifying the challenges beforehand and concentrating more efforts towards developmental work, there is a need to invest more time and effort on “Compensation Analytics”. Compensation analytics involve extraction, consolidation and assessment of compensation data, both inside and outside the organization, to correctly identify trends and gaps in pay practices which could create challenges for the organization in attracting, retaining and motivating its workforce. To adopt this new approach there is a need to further improve capability of UAE Nationals working in HR-COMP Department, and ensure that required information is complete, accurate and reliable.

strength Types of analytics used today within the compensation function … per Advantage/Benefits:

The new approach will allow HR-COMP to adopt a more proactive and efficient approach to deal with current and future challenges. Project Objective: Enhance capability of UAE Nationals and Improve quality of information


Identify missing and inaccurate information in HRMS.

Enrolment in professional training courses

Develop/Enhance HR-COMP Analytical report on regular basis.


Time Duration: XX

Ongoing reporting

Internal benchmarks

External benchmar

ks

Projections

Simulations & Predictive Modeling

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Documents

HRC-COMP Annual Report