HR Corner Redefine the value of remuneration by Charles Mak Company remuneration packages should be tailored to reward individual performance Basic remuneration and annual bonuses have long been the main tools used by HR professionals in their efforts to recruit and retain talented staff. However, following the successful practice of their parent group, Dah Sing Bank Limited has implemented an approach to compensation, known as a "People Compass", which rewards staff performance with something more than cash. Under the scheme a performance-driven culture has been created which includes a total reward strategy. "In terms of remuneration, we position ourselves at the median quartile towards the upper, taking into account everything including salary, bonus, benefits, promotion opportunities and special rewards for staff who have helped us accomplish our vision and mission," explains Evan Chan, general manager and head of human resources for Dah Sing Bank. He adds that people used to focus on the size of the monthly pay cheque, but that the trend is now for companies to base total compensation on actual performance. In doing this, the bank has tried to make the concept easy for staff to understand and accept. "We are following the market by making available core benefits like pensions, medical and housing loan schemes," Mr Chan says. "There can also be cash incentives which are linked to specific performance targets." At Dah Sing, the starting point is to assign all jobs to a salary range within which there is room for flexibility, depending on experience and contribution. To ensure overall market competitiveness, these bands are reviewed annually and adjusted, if necessary, at the start of each fiscal year. In recent times, greater emphasis has been placed on the variable element and correspondingly less on the fixed salary. Managers must monitor their budgets and consider staff performance and internal equity issues Variable bonuses "Conceptually, we have found that increasing base pay at a standard rate is not appropriate, since it doesn't reflect individual performance or guarantee future results," Mr Chan notes. "If someone has done well, we can reward them by making use of the variable bonus." He adds that, even though there may be more than ten grades of staff within the bank, pay is for performance, not seniority. A key determining factor is the annual appraisal which focuses on both accomplishments and attitudes to work. "For example, a salesperson might have exceeded his or her target figures, but feedback about compliance and service levels will also be assessed," he says. Mr Chan predicts that the banking industry will turn increasingly towards variable incentive schemes. "Traditional annual bonuses don't motivate staff as much as they used to," he says. "Quarterly bonuses are more common nowadays, and companies prefer to look more closely at the importance of different job functions, rather than offering a universal scheme for all staff." Direct impact Remuneration policies still have a direct impact on the bank's recruitment and retention. When hiring, they refer to a candidate's present salary and general market rates, in order to make a competitive offer. "The proposed salary must be attractive enough to facilitate successful recruitment, but we must also bear in mind our established internal levels," Mr Chan says. To ensure staff retention, competitive bonuses must be offered, especially for staff in private banking and treasury. "To retain high-calibre employees in revenue generating roles, we offer what they deserve, but make sure it is tied to performance," he says. When implementing or transforming a remuneration scheme, Mr Chan stresses that it is essential to be transparent. For this, Dah Sing has a management process which requires division heads and line managers to be responsible for following clear procedures prior to finalising pay increases and variable bonuses. "Managers must monitor their budgets and consider staff performance and internal equity issues," he says. To enhance efficiency and fairness, the human resources division has set up templates so that elements in a compensation package can be easily calculated and adjusted. An internal guide has also been distributed to increase transparency and understanding of the applicable rules. One aim is to make it clear that rewards under the scheme are not simply monetary. Excellence is also recognised in opportunities for promotion, which are not limited to any fixed time of the year. "As an employer, we want to provide challenges and the chance for personal growth, which is something we can do more easily than larger institutions," Mr Chan says. "Our staff have greater business exposure and more opportunities for growth and career development, which makes their jobs truly rewarding and exciting. It is up to them to make the most of what we offer." Salient points System implemented which links remuneration more closely to performance and makes greater use of a variable bonus element Emphasis on increasing staff motivation and recognising market pay trends Annual performance appraisals focus on accomplishments and work attitude to determine bonuses HR department works closely with line managers to ensure the remuneration policy is transparent Staff are encouraged to regard reward packages as including the opportunity for promotion and personal development Taken from Career Times 19 August 2005, p. A16 Your comments are welcome at [email protected]