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Reward and Remuneration
Prodi Administrasi dan BisnisFakultas Komunikasi dan Bisnis
Telkom University30 Maret 2020
Ir. Priyantono Rudito, M.Bus, Ph.D
KULIAH UMUMMatkul Kinerja Karyawan & Remunerasi
DesigningReward and
Remuneration System
Business strategy as starting point to design reward system1. Business strategy is the broad framework of principles and approaches that guide the
day to day decisions affecting the business.
2. Business strategy ensure that the business supports the organization’s mission andobjectives
3. Common primary focus of business strategy:
a. Operational excellence (Cost Leadership): typically strives to minimize waste andreward efficiency.
b. Product/ service leadership (Differentiation): typically focus on innovation, productdevelopment, and market exploitation.
c. Customer intimacy (Focused on selected market): typically encourages deep andlasting relationships with customers, focus more on customer loyalty.
Business strategy
Business Objectives
Drives
Strategy Formulation (SF)
STRATEGY FORMULATION
BUSINESS/ DIVISION STRATEGY
FUNCTIONAL STRATEGY
CORPORATE STRATEGY
DIRECTIONAL STRATEGY
PORTFOLIOSTRATEGY
PARENTING FITTED
STRATEGY
GROWTH
STABILITY
RETRENCHMENT
BCG
GE MATRIX
CONCENTRATION
DIVERSIFICATION
HORISONTAL
VERTICAL
RELATED
UNRELATED(CONGLOMERATION)
COMPARATIVE STRATEGY
COMPETITIVESTRATEGY
COOPERATIVESTRATEGY
GENERIC STRATEGY
COMPETITIVE TACTICS
Cost Leadership
Differentiation
F o c u s
S p e e d
MARKETING STRATEGY OPERATIONAL
STRATEGY
HUMAN RESOURCESTRATEGY
FINANCIALSTRATEGY
INNOVATION
TIMES
Stakeholder & Shareholder Value
Business Value
Customer Value
Focus
Focus
Focus
Reward Strategy1. Armstrong & Murlis (Reward Management, 5th edition, 2007) note the importance of
direction as an element in a reward strategy:
“Reward strategy determines the direction in which reward management innovationsand developments should go to support the business strategy, how they should beintegrated, the priority that should be given to initiatives and the pace at which theyshould be implemented.”
2. Reward strategy should align with business strategy to ensure that it can drive employee behaviour that will deliver our organization’s strategic objectives
3. Reward strategy will define longer term intention for:
a. Pay structuresb. Employee benefitsc. Allowanced. Variable Paye. Pay level target, etc
4. The Purpose of reward strategy:
a. Integrated with HR strategyb. As an enabler to business objectives achievementc. Realizing the values of organizationd. Helping to attract skill that required by business needs
1. Remuneration is developed based on company vision, mission,
and objectives.
2. Remuneration given to employee is to reward employee
performance and contribution
3. The fundamental for remuneration system are fairness,
properness, and consistent based on their contribution
4. The purposes of remuneration policy are:
a. To improve corporate performance
b. To attract new talent
c. To motivate employees
d. To retain talents
e. To recognize and appreciate employee’s contribution
f. To maintain corporate competitiveness in workforce market
Using total reward system as framework in designing reward strategy• Total Rewards includes all the tools available to the employer that may used to attract,
motivate, and retain employees
Business Performance and
Result
Employee:• Satisfaction• Task Behaviour• Engagement
AttractRetainMotivate
Compensation BenefitWork-life
effectiveness
RecognitionPerformance
MgtTalent
Development
*) Total reward framework by Willis Towers Watson
HR and Remuneration SystemIn the context of developing and implementing a remuneration strategy, the HR team are expected to perform the following roles and responsibilities:
• Develop a remuneration strategy and supporting policies that are aligned to the organisation’s strategic objectives, supports the organisation’s values by driving the right behaviours and improve productivity
• Implement the remuneration strategy by promoting and increasing awareness of the remuneration strategy across the business
• Benchmark the remuneration strategy against market peers to ensure that it remains fit for purpose and is fair, transparent and equitable for employees and the employer
• Deal with employee concerns around remuneration in a professional and confidential manner
• Provide relevant reporting to the organisation’s senior management, Remuneration Committee and Board.
https://expert360.com/blog/how-to-develop-and-implement-remuneration-strategy/
Remuneration Committee
A Remuneration Committee provides governance across the organisation’sremuneration strategy and other arrangements. It does this by assisting and advising the Board on matters relating to remuneration strategy including compensation, bonuses, incentives and the Chief Executive Officer’s remuneration.
The Remuneration Committee’s key tasks include:
• Providing oversight over the organisation’s remuneration arrangements including the review and approval of key policies and procedures
• Ensuring that the organisation’s remuneration policies, practices and key performance indicators are well aligned to its strategic objectives and organisational values
• Ensuring that employee remuneration is aligned to market rates and where deviations are identified that they are fully explained.
Generic Strategic Remuneration Framework
Planning the total reward approach
/ Compensation
Source: Amstrong’s Handbook of Human Resources Management Practice, 2014
outline
❑ Framework
❑ Total Reward Approach
❑ Design Compensation Structure
❑ Design Performance Based Pay
❑ Case Study: Implementation of Reward System in TELKOM
Framework: Reward inter-relationship
Business
Strategy
Reward
StrategyBase Pay
Allowances
Variable Pay
Employee
Benefits
Non-Financial
Reward
Job Evaluation
Grade & Pay
Structures
Market Analysis
Total
RemunerationTotal Reward
Compensation can be divided into two primary elements
Compensation
Fixed
Variable
Fixed pay rewards are based on an employee’s value• Market based – value relative to the labor market• Performance based – reward individual for sustained performance
over time• Skill based – reward individual for their acquisition of new skill or
competence• Position based – reward individual for their roles and
responsibilities
Variable pay rewards for accomplishments and results• Organizational, group, or individual results• Performance based compensations – serves as pay differentiator
between those who achieve result and those who do not• Flexible and Adaptable
Source: worldatwork
Designing compensation structure … (1)
• Compensation Structure is a set of level of pay for group of jobs, that reference to:
• Internal equity:
Equality between a position to other position within organization, established by Job Evaluation process.
• External equity:
Equality between a position in organization to other position in market, established by market survey
• Type of compensation structure:
• Graded
• Broadband
• Or Job Family
0
100
200
300
400
500
600
700
800
0 10 20 30 40 50 60 70 80
Job Value
Sala
ry
Grade
Broadband
Designing compensation structure … (2)Compensation
structure
Job based
Person based
Skill Competency
Job AnalysisJob Description
Job Evaluation
Factor degrees & weighting
Job Based Structure
Skill Analysis Core Competencies
Set of Competencies
Behavioural descriptors
Person basedStructure
Skill Blocks
CertificationProcess
Person basedStructure
Source: the McGraw-Hill CompaniesCommon Practices
Purpose
Collect, summarizework information
Determinewhat to value
Assesvalue
Translate intoStructure
Designing compensation structure … (3)
Job 1
Job 3
Job 7
Job 9
Job 1
Job 2
Job 3
Job 4
Job 5
Job 6
Job 7
Job 8
Job 9
Job 10
Job Value Hierarchy based on
Job Evaluation
Benchmark Job for evaluation
Job 1
Job 2
Job 3
Job 4
Job 5
Job 6
Job 7
Job 8
Job 9
Job 10
Broadband Salary Structure
Mid Point
Max
Min
Level 3
Level 2
Level 1
Position level
Pay bandLevel 3
Pay bandLevel 2
Pay bandLevel 1
Refers to Market Price
By conducting Market Survey
outline
❑ Framework
❑ Total Reward Approach
❑ Design Compensation Structure
❑ Design Performance Based Pay
❑ Case Study: Implementation of Reward System in TELKOM
outline
❑ Framework
❑ Total Reward Approach
❑ Design Compensation Structure
❑ Design Performance Based Pay
❑ Case Study: Implementation of Reward System in TELKOM
Telkom reward Philosophy
❑ Market Based
❑ Hierarchical position
❑ Internal Equity
❑ Manageable & Controllable
THERE IS NO BEST REWARD PRACTICES, THE BEST
PRACTICES ARE WHAT BEST FIT TO YOUR STRATEGY &
CULTURE
Remuneration model: 3P
• Menghargai kompetensi Individu dan masa kerja. Penyesuaian dilakukan berdasarkan hasil penilaian kompetensi dan posisicomparatio
Pay for Person
• Menghargai tingkat kebijakan, kepakaran dan akuntabilitas yang dipersyaratkan untuk suatu posisi. Pay for Position
• Menghargai kemampuan karyawan memenuhi target yang ditetapkan dalam suatu periode tertentu, yang diukur berdasarkan realisasi dari target yang telah ditetapkan.
Pay for Performance
Broadband remuneration structure
BP VI
BP V
BP IV
BP III
BP II
BP I
min Mid Point max
Salary
Pay Band BP I
Remuneration Structures
Comp 2
Comp 3
Comp 5
1. Base Salary
2. Insentif Premium
3. Insentif Jabatan
4. Bantuan Kemahalan (kota)6. THR
8. Jasprod
9. MTI
1. Bantuan uang duka
2. Penghargaan
3. Dsb.
Personnel
Cost
Comp 1
Comp 5 Comp 3 Comp 2
Ann
ual T
otal
Rem
Annual Total Cash
Annual Gua-
ranteed Cash
Annual Base
Salary
Allowance
Variable Pay
Non Cash
Benefit
Others
1. Manfaat Pensiun
2. Askes Pensiun
3. Obat Karyawan
4. BPJS
5. GCU
6. Jamsostek
7. PPh21
8. Kecelakaan diri
9. Dsb.
10. Incentive Sales
5. Housing Allowance
Thank You