how to design a compensation STRUCTURE
By Mansour Albakr, PHRi, SHRM-CP
01 February 2013
01 February 2013
Effective compensation management is necessary in all businesses, as it represents an investment in human resources the most valuable asset in the organization. Compensation in some cases represents a major portion of the total operating budget. However, proper compensation management can provide an excellent tool to leverage the desired behaviors required to support & align organizational goals with employee goals.
A clear linkage with the overall business strategy, including manpower plans, recruiting & retaining the right talent levels, motivates high performers, incentive based schemes, etc.
Nitaqat is a based nationalization policy with the aim to increase the share of private sector jobs held by nationals. The minimum wage for a Saudi national should not be less than SR. 3,000 to be counted as a full Saudi worker under the Nitaqat system.
This is only possible if there is a proper linkage between job analysis and job evaluation. Job size must be equitably in relation to other similar jobs within the organization.
Proper external market alignment through an effective benchmark and positioning against reliable external market pay & benefits data.
Developing Compensation Structure
Structuring and assigning a compensation range/band against each relative job grade/job size. This is established by the desired “market position” and is tabulated using a percentage (%). Structuring an effective “right package” link between remuneration and job performance is very critical.
Communication & Implementation
Keep your communication simple for your people to receive the right message. Apply a compa-ratio to migrate into the new compensation structure.