How to develop a salary system

The following information is reproduced for reference

The design of salary should follow five basic principles: fairness principle, legal compliance principle, efficiency priority principle, incentive limit principle, and demand adaptation principle.

1. Principle of fairness

1. Internal fairness

(1) Employees work hard, contribute, and achieve results equal to the rewards they receive;

(2) Remuneration should be equal with internal personnel who perform the same job or have equivalent abilities.

2. External fairness

Employees will compare their remuneration with other people in the same industry in the region or with classmates and relatives, thus creating a sense of fairness. The company's salary must ensure external fairness, that is, it must be correspondingly competitive. When employee wages are higher than those of other companies in the same industry within a certain period of time, employees will feel satisfied. In this case, enterprises are conducive to attracting and retaining outstanding talents and gaining a strong competitive advantage in human resources.

2. Compliance with legal principles

3. Principle of efficiency priority

4. Principle of incentive limits

5. Principle of adaptation to needs

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Developing a sound and scientific salary system is an important decision in management. Therefore, a complete and formal procedure is needed to ensure its quality:

(1) Determine the principles and strategies of corporate remuneration

This is part of the corporate culture and will be the basis for future decisions. The premise of this link plays an important guiding role in the latter. On this basis, determine the company's relevant distribution policies and strategies, such as distribution principles, standards for widening gaps, and the proportions of various components of salary, etc.

(2) Position analysis

Position analysis is the basis for determining the salary system. Combined with the business objectives of the enterprise, the enterprise management should clarify department functions and position relationships, standardize the position system, and prepare an organizational structure system chart of the enterprise based on business analysis and personnel analysis. The Human Resources Department works with department heads to prepare job descriptions.

(3) Job evaluation

Job evaluation focuses on solving the problem of internal fairness of salary. It has two purposes: one is to compare the relative importance of various positions within the enterprise and derive the position grade sequence; the other is to conduct salary surveys and establish unified position evaluation standards to eliminate the differences between different companies due to different job titles or even position The difference in difficulty of positions caused by the same name but different actual job requirements and work content makes different positions comparable and lays the foundation for ensuring salary fairness. It is a natural outcome of job analysis and is based on the job description. There are many methods of job evaluation. The more complex and scientific one is the scoring comparison method. It must first determine the evaluation elements related to salary distribution and define different weighted scores for these elements. Internationally, the more popular models such as the HAY model and the CRG model adopt the method of quantitative assessment of the value of the position, and comprehensively evaluate the position from three major elements and several sub-factors.

Some job levels in large enterprises are as high as 17 or above, while small and medium-sized enterprises mostly use levels 11-15. There is an international trend of "reducing grades and increasing gaps", that is, the job grades within the enterprise are gradually decreasing, and the salary gaps are becoming wider, showing the characteristics of widening.

(4) Market salary survey

Market salary survey focuses on solving the problem of external fairness of salary. For salary surveys, it is best to choose companies that compete with you or similar companies in the same industry, focusing on employee turnover trends and recruitment sources. The data of the salary survey should include salary growth in the previous year, comparison of different salary structures, salary data for different positions and levels, bonuses and benefits, long-term incentives, and analysis of future salary trends, etc.

(5) Determine the salary level

Although it is theoretically feasible to determine the salary standards for different positions through salary structure design, in practice, if the company Each position in the company has a unique salary, which will cause difficulty and confusion in the payment and management of salary, and is not conducive to the management and motivation of employees.

Therefore, in fact, many types of salaries are always combined into several levels. For example, positions with a salary level of less than 200 points are the first level, those with a salary level of 200 to 400 points are the second level, and so on.

The number of pay grades should depend on the size of the company and the nature of the industry. There is no correct standard for the number. However, if there are too few levels, employees will find it difficult to be promoted and lack motivational effects. On the contrary, if the number is too large, it will increase the difficulty and cost of management.

In addition, a salary change range, or salary range, must be defined for each grade. The lower limit is the starting salary point of the grade and the upper limit is the maximum salary point. The salary range of each grade can be the same, but it is more common to expand cumulatively as the grade rises. There will be overlap between the salary ranges of adjacent grades. This is not only inevitable, but also necessary and beneficial. It can enable employees to obtain higher salaries within a certain grade, thereby stimulating their work enthusiasm. However, there should not be too much overlap, otherwise it may cause employees' salaries to decrease after promotion.

(6) Implementation and modification of salary

Once the salary system is established, it should be strictly implemented. On the premise of maintaining relative stability, corresponding adjustments should be made as the company's operating conditions and market salary levels change. From Maslow's hierarchy of needs theory, we know that physiological needs are the basis for a person's survival. Therefore, in the process of motivating employees, managers must provide employees with a salary system that satisfies them. This lays the foundation for the comprehensive use of various motivational methods.