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