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2. PrefaceDear All,It was a pleasure interacting with everyone yesterday. Please find in the followingslides the discussion point of yesterday. Some of the points in the slide I couldnt takeup because of paucity of time. There are other sub-topics related to comp whichcouldnt be included this time.Please feel free to reach out to me for any aspect that youd like to discuss related tocomp, organization design, employee engagement, etc. My contact details (personaland professional) are shared on the cover slide and my profile on the following slide.Additionally am attaching the in the annexure slides which introduce Mercer and itsservice offerings. You may find something of interest to your organization there.Again thank you for the opportunity and for being a wonderful Audience- GirishMERCER 1 3. About Girish Present Responsibilities Girish Kohli is a consultant at Mercers Gurgaon office and part of the Human CapitalAdvisory Services (HCAS) business. His role encompasses project delivery and businessdevelopment across industry segments Experience DetailsWithin Mercer, Girishs latest project has been with an Indian automobile major where theyhave helped the client redefine their compensation philosophy, restructure compensation andredesign the annual variable pay program as part of its initiatives to retain its preferredemployer branding.He has been part of and led a number of organization structure redesign initiatives for firms inKey Work Areas: the FMCG and Automobile sector. OrganizationHe has also worked on an assignment with a German luxury automobile company whereinDesignthe team evaluated the roles within the organization based on the role profiles developed by Total Rewards them and used the evaluations as an input for compensation benchmarking and relatedDesignadvisory. PMS DesignHe has worked on various projects on HR diagnostics like Employee Engagement surveys,HR Audit and HR process redesign. He has also worked on role clarification and position Employeeevaluation, organization design and long term incentive design.EngagementGirishs experience on these projects have been spread over diverse industries like Auto, HR ProcessFMCG, NGOs and Financial, Logistics, and others.DesignHe has worked with clients like Hero MotoCorp, BMW India, Hindustan Coco Cola Bottling, Job EvaluationTata Motors, SOS Childrens Villages, ONGC, New Holland Tractors, GRFL and others. Academic Qualifications Girish has an MBA in Marketing and Human Resources from NMIMS, Mumbai. He also holdsa B.E. in Computer Engineering from the Army Institute of Technology, Pune.MERCER2 4. Total Rewards Redesign Large Multi-location Manufacturing Co.A large manufacturing co. that prided itself about being employee centred saw extremely low scores on its employee engagement scores on the areaof compensation Partnered with organization to redesign its rewards framework Compensation Philosophy Compensation Structure Simplification- Benefits Design Pay Range Design Transition of Salaries to New Pay Ranges Redesign of Comp Processes- Governance- Empowerment of Line ManagersMERCER3 5. Contents Total Rewards Whats Total Rewards Building a Compensation Philosophy Implementing the Philosophy Some challenges/ opportunities for Tracking Success of your Rewardsorganizations Design Internal Parity Location Differences Employee Wellness Rising Medical CostsMERCER 4 6. What constitutes Total RewardsWhat would I like to earn from my workSalaryBenefits CareersWork/LifeBasicRetirementQuality of role Quality of role Time off Time offAllowances (HRA, CDA Medical Job Stability Job Stability Workplace facilities Workplace facilities etc)Learning and skills Workplace flexibility Life and accident Learning and skills Workplace flexibilityPerformance Payinsurance Development Development Status and recognition Status and recognition Car Career growth Career growth Housing Employer Brand Employer BrandMy value today My lifestyle, financial My future value My quality of life security and protection What employees across companies have told usMERCER5 7. Building a Compensation PhilosophyOne PopulationSeparate Groups SegmentationBusiness Peers Talent Competitors Market DefinitionFirst Quartile Fourth Quartile Market Competitiveness One vehicle Multiple Vehicles Reward Elements and RolesFixedVariable Compensation Mix HomogenousDifferentiated Internal EquityMERCER 6 8. Articulating a Reward Philosophy for TMLTo be effective, a reward philosophy must include these elementsTotal Rewards Philosophy must define the role of monetary rewards, career opportunities, employee welfare in the overall compensation philosophy1. Workforce segmentation One size does not fit all. Rewards need to be targeted and managed based on different workforce segments in order to optimize spending.2. Market definition Selecting a comparator group(s) that represents companies from which TML sources talent or to which the company may lose talent assures that the target set is relevant.3. Market Competitiveness An assessment of how competitive TML needs to be considering intensity of competition, growth plans, availability of talent, hiring and attrition costs.4. Reward Elements and Roles Different elements of total rewards can be used to play various roles, such as hygiene factor, attracter, retainer, performance driver and should be designed accordingly.5. Compensation Mix and Differentiation Ensure that the mix of compensation - fixed, short-term incentive, long-term incentive is reasonable and consistent with market practice6. Internal Equity How much differentiation are we comfortable with?MERCER7 9. Sample Total Rewards Philosophy Company ABC ABCs total reward philosophy is simple: our employees deserve to becompensated fairly and competitively in return for their contribution to ABCssuccess. The company benchmarks its competitive position in the relevant labor marketsin establishing competitive pay and benefits programs. ABC strives to be an employer of choice around the world. Wherever practical, ABCbelieves in emphasizing a strong pay for performance perspective in eachemployees total rewards package through merit based pay increases and variablebonus programs based upon company, business unit and individualperformance. In many ABC locations around the globe, considerable workplace flexibility hasbeen employed on a local level to provide employees and management with theability to adapt company-wide programs to fit local environments. For instance, our ABC Hours program provides for compressed work schedules at the beginning of the work week that allow for half work days on Fridays and alternative work schedules to accommodate family commitments. ABCs unit in Renton, WA, U.S. offers an on-site child care facility. Other locations, including both Rhode Island locations, offer on-site exercise facilities.Source: Data shared in public domainMERCER 8 10. Implementing the Philosophy - Salary Basis of salary Define Job equivalence - Develop work levels Develop pay bands Develop compensation process and guidelines Track ParityMERCER 9 11. Implementing The PhilosophySalary 12. Basis for salary: 3 P ModelPerson premium, typically based on Competency assessment Skill/ qualification/ credentials Market worth (e.g. Demand-supply)PAY FOR PERSONMixed on the basisPosition Pay typicallyof multiple factors like TOTALbased on PAY FOR COMPENSATION Nature of industry/sector POSITION OF AN EMPLOYEE Position evaluation Work profile Market pay level for position Organizational philosophyPAY FORPERFORMANCEPerformance award, typically basedon Individual performance Organization performanceMERCER 11 13. Defining Job Equivalence Define Work Levels Prior to the Position Evaluation Post the Position Evaluation exercise exercise L L L-1Band 1 L-2 L-1 L-1 L-1 L-1 L-1 L-1 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-2 L-2Band 2 L-2 L-2 L-1 L-3 L-3 L-3 L-2 L-2 L-2 Band 3it L-2 L-3 hib x EMERCER 12 14. Developing Pay Bands Key Design Parameters Number of StructuresRange Spread Number of Ranges Range Spread Mid Point Progression4 Parameters Impact Range Overlap (extent 3of overlap betweenMid Point Progression values across ranges) Headspace (number of 2years it will take anemployee to reach fromrange min to max)Range1 Number of rangesMERCER 13 15. Developing compensation process and guidelines Qualified with significant experiencePay Ranges assist in monitoring and Premium Exceeding expected contribution comparing employee compensation Hiring zone for hot skillsand help guide the decision makingin the following processes: Market Pay Qualified with a fair bit of experience Fully contributing to the role Recruitment Hiring zone for specialized skills Developing Increment Qualified but relatively inexperienced Not yet fully contributing to the role Hiring zone for regular new hires PromotionThree Zones in a Pay RangeMERCER14 16. Employees Pay PremiumTracking Parity (Compa-Ratio 1.15) Market Pay Developing Compa Compa Compa Compa Compa Performance Rating 121% Does Not Meet Expectations 0% 0%0% 0%0% Inconsistently meets Expectations12% 10%8% 6%4% Consistently Meets Expectations19% 17% 15% 13% 11% Often Exceeds Expectations 21% 19% 17% 15% 13% Consistently Exceeds Expectations23% 21% 19% 17% 15%MERCER 15 17. Implementing The PhilosophyCareers 18. Why are Career Frameworks Important? Employees value and look for career advancement over andabove base pay* PAY CAREER Pay and benefits are replicable; Career and Work-Life policiesprovide competitive advantage In uncertain times companies need to look at more cost effective BENEFITS WORK-LIFEand sustainable ways to build the employee value proposition Given the employability gap, career frameworks would facilitateidentifying, developing and deploying in-house talent to bridgecapability gapsMERCER17 Source: Mercers Whats Working research 19. Mercers Point of ViewWhat are Career Frameworks? Role family career progressioniv t ratIllus eCareer FrameworksEmployees OrganizationUnderstand Capabilities Transparency opportunities visibility ControlCareer directionBest talent VelocityRight speed Fill talent pipelineMERCER18 20. Implementing The PhilosophyBenefits & Work-Life Balance 21. Benefits Work Life BalanceFocus: Medical costs, Employee Wellness, Employee Productivity Across the Asia Pacific Region, 35% of the 899 companies thatparticipated in a the Mercer Marsh Benefits survey spent over 6% of theirannual payroll on health benefits in 2011, with 10% of those spending inexcess of 15% According to the American Journal of Health Promotions in-depth analysis,employers with work site health promotion programs see on average: a 27% reduction in sick leave absenteeism 26% reduction in health costs, and 32% decrease in workers compensation and disability claims. But the most important finding has to do with all-around wellness ROI. Forevery dollar invested in wellness, employers saw an average savings of$5.81 due to improved employee health and reduced medical claims. Source: http://www.hrmorning.com/massive-study-shows-true-wellness-roi/?goback=.gde_113026_member_191470058MERCER 20 http://www.mercer.com/press-releases/wellness-programs-combat-rising-healthcare-costs 22. Tracking Success of Your Rewards Design 23. Tracking the Success of your Rewards Program SAY DO What employees and employersHow employees and employers say as measured through actually behave as measured through Management interviewsIndividual employee records of Recruiter interviews performance, retention, etc. Employee surveys Organization performance Focus groups Exit interview feedback Company policiesComplete, verifiableunderstanding of the interplaybetween perceptions, behavior andretentionMERCER 22 24. About Us 25. Marsh & McLennan Companies Who We Are One of worlds elite business enterprises thepreeminent provider of professional services Who We Are Risk and Insurance Services One of worlds elite business enterprises billion in revenue the $10.6 Marsh preeminent provider of professional services Guy Carpenter 140 year history Clients in more thanConsulting Services 100 countries Mercer Oliver Wyman 51,000+ colleaguesMERCER24 26. Marsh & McLennan Companies What We Do Provide advice and solutions in the areas of risk, strategyand human capitalMarshMercer Services 87% of Fortune Global 500 #1 health & benefits consultant/broker Manage 3+ lines of coverage for 92% of #1 investment consultantFortune 100 Leader in retirement, risk & finance consultingGuy CarpenterOliver Wyman #2 global reinsurance intermediary #1 financial services strategy consultant Fastest growing global reinsurance Fastest growing strategy consultantintermediaryMERCER 25 27. Mercer Who We Are The global leader in human resource consulting,outsourcing and investment services Who We Are $3.5 billion in revenue The global leader in human resource consulting, 65-year historyoutsourcing and investment services 8 lines of business 27,000+ clients Offices in over 40 countries 20,000+ colleaguesMERCER26 28. Mercer What We DoHelp clients optimise the value of their human and financial resources What We Do Mercers ServicesMercers Clients Help clients optimize the value of their US 80% of the 500 largestConsult human and financialpublic companies resources 70% of FTSE 100 companies Invest Design 70% of CAC 40 companies 65% of Nikkei 225 companies 80% of clients
