Compensation Policy

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Strategic Compensation Management
Final Project Designing Compensation Policies of Dawn News
Group Members:
Khayam Zikria Chaudhary Adil Khizar Hayat Hassan Sohail Niaz Ahmed Muhammad Zubair

Contents
INTRODUCTION TO OUR MANAGER ............................................................................................................. 2 Components of Compensation ..................................................................................................................... 3 Factors Affecting Compensation from Employer’s Perspective ................................................................... 6 Employees Negotiating Compensation......................................................................................................... 7 Attrition and Compensation Management................................................................................................... 7 Structuring Salary .......................................................................................................................................... 8 Salary Administration Policies....................................................................................................................... 9 Use of Salary Bands ....................................................................................................................................... 9 Pay Policies and Practises for New Hires ...................................................................................................... 9 Salary Policies and Practices for Role Changes .......................................................................................... 10 Salary Policies and Practices for Employee Promotions: ........................................................................ 11

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Dawn’s History and Introduction: Dawn is Pakistan's oldest and most widely read English-language newspaper. One of the country's two largest English-language dailies, it is the flagship of the Dawn Group of Newspapers, published by Pakistan Herald Publications, which also owns the Herald, a magazine, the evening paper The Star and Spider, an information technology magazine. It was founded by Quaid-i-Azam Mohammad Ali Jinnah in Delhi, India and the first issue was printed at Latifi Press on 12 October 1942. The newspaper has offices in Karachi (Sindh), Lahore (Punjab), and the federal capital Islamabad, as well as representatives abroad. As of 2004, it has a weekday circulation of over 138,000. The CEO of Dawn group is Hameed Haroon, and the current editor of Dawn is Zaffar Abbas. Founded by Mohammad Ali Jinnah on October 26, 1941 as a mouthpiece for the Muslim League, Dawn was originally a weekly publication, published in New Delhi. Jinnah summed up the paper's purpose when he stated: "The Dawn will mirror faithfully the views of Hindustan's Muslims and the All Hindustan Muslim League in all its activities: economic, educational and social and more particularly political, throughout the country fearlessly and independently and while its policy will be, no doubt, mainly to advocate and champion the cause of the Muslims and the policy and programme of the All Hindustan Muslim League, it will not neglect the cause and welfare of the peoples of this sub-continent generally". Dawn became a daily newspaper in October 1942 under the leadership of its first editor, Pothan Joseph who later quit because of the paper's support for the Partition of India. In 1944 Altaf Husain took over as the editor and brought nationwide awareness of its daily circulation. After the creation of Pakistan, Hussain moved the newspaper to the then federal capital, Karachi. Under the instruction of the owner, Mr. Jinnah, it became the official organ of the Pakistan Muslim League in Delhi, and the sole voice of the Muslims in English language, reflecting and espousing the cause of the Muslims of India. Hussain, as the journal's editor, galvanised the Muslims of India by his editorials, which earned him wrath of the Congress Party as well as Lord Mountbatten, the last Viceroy and Governor General of the British Raj. In 1947, senior Dawn staff led by Altaf Husain set off for Karachi to launch a local edition starting August 15, 1947. Under Yusuf Haroon a close confidant of Mr. Mohammad Ali Jinnah was given the task to facilitate the publication. The offices of the newspaper were housed in the small premises on the commercially busy and a crowded narrow street then known as South Napier Road, in premises belonging to Haroon. He was at that time planning to bring out a newspaper called "The Herald" but agreed to publish DAWN at his facilities, at the bidding of Mr. Jinnah. The street where Dawn was first published is now known as Altaf Hussain Road. Dawn became a most outspoken publication under the editorship of Hussain, who fiercely opposed the tyranny and corrupt politicians and military dictators after the independence of
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Pakistan. In 1965, Hussain resigned as editor when he accepted the invitation of President General Ayub Khan to join his government as a cabinet minister.

Components of Compensation:
“If you pick the right people and give them the opportunity to spread their wings - and put compensation and rewards as a carrier behind it - you almost don’t have to manage them.” — Jack Welch Most of us would have heard the term “compensation” in the context of getting paid for the work that we do. The work can be as part of full time engagement or part time in nature. What is common to them is that the “reward” that we get for expending our energy not to mention the time is that we are compensated for it. From the perspective of the employers, the money that they pay to the employees in return for the work that they do is something that they need to plan for in an elaborate and systematic manner. Unless the employer and the employee are in broad agreement (We use the term broad agreement as in many cases, significant differences in perception about the employee’s worth exist between the two sides), the net result is dissatisfaction from the employee’s perspective and friction in the relationship. It can be said that compensation is the “glue” that binds the employee and the employer together and in the organized sector, this is further codified in the form of a contract or a mutually binding legal document that spells out exactly how much should be paid to the employee and the components of the compensation package. Since, this article is intended to be an introduction to compensation management, the art and science of arriving at the right compensation makes all the difference between a satisfied employee and a disgruntled employee. Though Maslow’s Need Hierarchy Theory talks about compensation being at the middle to lower rung of the pyramid and the other factors like job satisfaction and fulfilment being at the top, for a majority of employees, getting the right compensation is by itself a motivating factor. Hence, employers need to quantify the employee’s contribution in a proper manner if they are to get the best out of the employee. The provision of monetary value in exchange for work performed forms the basis of compensation and how this is managed using processes, procedures and systems form the basis of compensation management.

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Introduction to different aspects of compensation management like the components of compensation management, types of compensation, inclusion of variable pay, the use of Employee Stock Options etc. The aspect of how skewed compensation management leads to higher attrition is discussed as well. This aspect is important as studies have shown that a majority of the employees who quit companies give inadequate or skewed compensation as the reason for their exit. Hence, compensation management is something that companies must take seriously if they are to achieve a competitive advantage in the market for talent. Considering that the current trend in many sectors (particularly the knowledge intensive sectors like IT and Services) is to treat the employees as “creators and drivers of value” rather than one more factor of production, companies around the world are paying close attention to how much they pay, the kind of components that this pay includes and whether they are offering competitive compensation to attract the best talent. In concluding this article, it is pertinent to take a look at what Jack Welch had to say in this regard: As the quote (mentioned at the beginning of this article) says, if the right compensation along with the right kind of opportunities are made available to people by the firms in which they work, then work becomes a pleasure and the manager’s task made simpler leading to all round benefits for the employee as well as the employer. Hertzberg’s Hygiene theory refers to how certain factors are necessary to maintain “Hygiene” or ensure that the employees are not dissatisfied.   These factors alone do not contribute to “quantum” jumps in employee satisfaction. Rather, the absence of these factors makes employees dissatisfied. The point here is that if a fair and just compensation is provided, the employee has the “baseline” requirements met which ensures that he or she is now in a position to go for higher things like job satisfaction and fulfillment. However, if compensation is found to be lacking, the employee might very well be unhappy and dissatisfied with the company leading to attrition and other such negative outcomes. Hence, having the right compensation is the first step in getting the best of employees.





If we take a look at the components of a compensation system, we find that employers decide on what is the right compensation after taking into account the following points. 1. The Job Description of the employee that specifies how much should be paid and the parts of the compensation package. a. The Job Description is further made up of responsibilities, functions, duties, location of the job and the other factors like environment etc. b. These elements of the job description are taken individually to arrive at the basic compensation along with the other components like benefits, variable pay and bonus.

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It needs to be remembered that the HRA or the House Rental Allowance is determined by a mix of factors that includes the location of the employee and governmental policies along with the grade of the employee.  Hence, it is common to find a minimum level of HRA that is common to all the employees and which increases in proportion to the factors mentioned above. 2. The Job Evaluation that is a system for arriving at the net worth of employees based on comparison with appropriate compensation levels for comparable jobs across the industry as well as within the company. a. Factors like Experience, Qualifications, Expertise and Need of the company determine how much the employer is willing to pay for the employee. 3. It is often the case that employers compare the jobs across the industry and arrive at a particular compensation after taking into account the specific needs of their firm and in this respect salary surveys and research results done by market research firms as to how much different companies in the same industry are paying for similar roles. The components of compensation that have been discussed above are the base requirements for any HR Manager who is in charge of fixing the compensation for potential employees. To take the first component that is common to all packages at all levels (hence the term basic however, it is not the same for all levels).




Basic pay is the base on which the compensation package rests. This is the equivalent of the base of the pyramid and the other components are usually fixed as a percentage of the basic pay. It is common to find components like HRA (House Rental Allowance) and Additional Pay as a certain percentage (say 20% or 30%) of the Basic. There are many companies that have introduced the concept of Variable Pay where this particular component of the compensation is not fixed, but is a percentage of the Basic that is paid out according to the performance of the company, group and the individual. Hence, the term performance linked pay is also used for variable pay. If we take the three sub-components of the Variable Pay a. The company performance linked pay is as the term implies paid out as a percentage of the Basic that is tied to the performance of the company as a whole. So, if a company performs exceedingly well in the given quarter, then the employee might get a large percentage (say 100% or 150%) of the base of the component. If a company does do not well or does only moderately better, then the employee might get a lower percentage of the base (say 50% or 75%). b. The group performance linked pay is paid out in a similar manner but the point of reference in this case is the performance of the group or the division in which the employee works.
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c. Finally, the most important sub-component is the Individual Performance Linked Pay that is paid out according to the performance of the employee and hence is entirely tied to the way in which the employee performs as determined by the rating that he or she gets at the end of the performance cycle. The rationale for these components is that an employee would be better motivated to perform individually, contribute to the group to which he or she belongs and finally, perform well keeping in view the overall growth of the company. Hence, these sub components of compensation have been designed to spur the employee to excel not only in an individual capacity but as a team member and finally, a responsible employee of the company. The idea here is to discourage silo based performance and instead concentrate on all round performance.

From the perspective of the employer, the factors that affect compensation are:


The Overall Macroeconomic situation where in the state of the economy of the country in which the firm is situated plays a major role in determining the compensation to be paid. For instance, if an economy is booming or is in a high growth trajectory, chances are that the employers would pay the employees more and conversely, if the economy is in a downward trajectory, chances are that the employers would pay the employees less. We often hear about how because of the recession, salary hikes have been deferred or cut down. This is a direct result of the linkage between firm performance and the performance of the economy.


The Demand for a particular skill weighs heavily on the way in which the employer fixes the compensation for the employee. For instance, premium skills like Consulting and Accountancy are paid more as are the Technology Professionals who might be experts in their chosen field. As discussed in earlier articles, it is the expertise and the relative scarcity of such experts that determines how much the employer is willing to pay.  The Position of the company in the Business Cycle often determines how much the company is willing to offer to the employee. For instance, if a company is a start-up, chances are that the company would pay more because of the need to get the best possible talent into the company. Further, many start-ups give their employees ESOP’s or Employee Stock Option Plans wherein the employees can redeem their stocks after the lock-in period.  Finally, the urgency of the firm in filling up the position plays an important role in determining how much the employer is willing to pay the employee and in many cases, if the time to get on board the employee is less, staffing managers along with the line manager in charge of hiring the employee might decide to pay more because they want the employee to come on board as quickly as possible. These are some of the factors that determine the compensation to be paid to the employee from the perspective of the employer.
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How employees can negotiate compensation:
There are several parts to the employee’s strategy to negotiate with the employer. Some of them are:


Plan and Communicate: The most important part of the employee’s strategy must be to research the compensation trends in the market and then negotiate with the employer based on how much the other companies are willing to pay for a similar role combined with the fact that the company hiring him or her pays for the same role. Hence, it is advisable for the employee to keep in touch with compensation trends in the marketplace and also talk to other employees before he or she decides to communicate his or her expectations to the prospective employer. Timing makes the difference: In any negotiation process, time is the key element and hence timing the negotiation process is important. The best possible option for the employee would be to wait for the company to make an offer and then pitch in his or her expectations about the compensation. There is something called overkill which must be avoided and the employee must avoid going overboard. At the same time, the employee must also ensure that he or she does not start the negotiation process early on in order not to lose out on the offer. Hence the timing of the pitch makes all the difference. Consider the Alternatives: When you are deciding about prospective offers, ensure that you make the pitch for your expected compensation level after taking into account all the alternatives and not simply rush into something that does not value your experience and expertise adequately. At the same time, do not harangue the prospective employers though you might have several alternatives available to you. The point to be noted is that different companies react to compensation negotiations in different ways and hence you must play the field according to these points.





Many a time, prospective employees lost out on compensation either because they asked too high or asked too late. At the same time, they should also remember not to coerce the employers. The best possible strategy is where you are confident about yourself and your worth as measured by the employer must reflect your own sense of self-worth.

Attrition and Compensation Management

Many studies have found that there is a direct causal linkage between the levels of compensation that a firm pays and the rate of attrition that it has. Attrition can be voluntary and involuntary, where the former is the employee quitting the company out of his or her own volition and the latter is the company asking the employee to quit for a number of reasons ranging from non-performance to violation of rules and regulations. In this article, we consider the voluntary attrition and the linkage between inadequate compensation and attrition.

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Low compensation and Attrition The exit interviews conducted by the HR professionals to ascertain the reasons behind an employee’s exit usually reveal that low compensation is a major factor behind the employee’s decision to quit the company. Research into the phenomenon of attrition has found that many employees (particularly at the entry and the middle management levels) leave companies because they have been offered better compensation at another company. On the other hand, the senior management personnel quit to take up challenging roles that pay well as well as provide self actualizing drives to them. Hence, it can be construed that compensation is a major factor behind an employee’s desire to quit a particular company and join another company. Compensation as a Hygiene Factor Hertzberg’s theory of motivation lists hygiene factors as those conditions when absent cause an employee to be dissatisfied. The point about this theory is that factors like adequate compensation, a congenial working environment and additional benefits are necessary to motivate the employee and they ought to be present to keep the employee happy. The absence of such factors makes the employee lose focus and drive and hence the lack of “hygiene” makes it difficult for the employee to continue. How to Manage Compensation Expectations The appraisal time or the time of the year when employees are graded on their performance is usually the time when employees put forth their aspirations and expectations regarding the compensation and other aspects of their job. Hence, the line managers and the HR managers must make it a point to “manage” the expectations of the employees during this period. The attrition is usually the highest when employees are handed their raise letters that specify how much their compensation is increased. This is because the employees might expect more than what they have been awarded which leads to dissatisfaction. Though compensation in recent years has ceased to be the “be all” of employee satisfaction with the nature of work and the responsibilities that an employee has becoming more important in determining job satisfaction, it still is one of the most important factors behind an employee’s decision to quit a company. Hence, it is incumbent upon HR professionals and the senior management that they devise compensation plans keeping in mind the various factors that drive an employee’s psyche. Only when an employee is satisfied with his or her condition in a company can they perform at the desired levels.

Salary Structure
Dawn’s salary structure is a set of seven broad salary bands, each of which is assigned to a role classification level. The parameters (minimums and maximums) are established through market analysis. Salary bands have a three-fold purpose: 1. Define the pay opportunity for a given set of roles.
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2. Reflect sensitivity to competitive market pay rates. 3. Aid in the process of attracting and retaining talent through guidelines for pay action Dawn’s seven salary bands are broad, flexible and market-competitive. There is also considerable overlap between the bands. The salary band that applies to your position is the same level number as your role classification level. For instance, if your position is assigned to classification level 3, the salary band for level 3 is the overall salary band for your position. A number of different roles are assigned to each salary band.  A senior position may be in the same salary band as a more entry-level position.  A supervisor may be in the same salary band as an employee they supervise. Each role has a market range based on competitive market rates for jobs in other organizations. Market ranges for roles that are unique to Wellesley College are determined by comparing the market rates for similar roles within the College. These market ranges are used as guidelines for new hires, transfers, and promotions to provide a more precise pay opportunity and to enable manages to make responsible pay decisions. Performance in the role is the primary determinant for additional increases to an employee’s salary over time.

Salary Administration Policies
A set of guidelines has been created for managers and employees to use the salary structure effectively. Salary administration policies:  Ensure consistency and fairness of treatment around pay for all employees of Wellesley.  Reflect the open, straightforward character of the Valuing Work @ Dawn program.  Increase the accountability of managers for employee pay actions.  Guide the events of new hires, transfers, promotions, and classification review.  Ensure salary is linked with the role employee plays and their performance in that role.  Assure that performance is a factor in any salay increases.  Take into consideration internal equity.

Use of Salary Bands






No Dawn employee should be paid less than the minimum of the assigned salary band for his or her classification level, nor more than the maximum of the band. Employees near or at the maximum of the salary band assigned to their positions will be eligible for increases only to the maximum of the band. Increases beyond the maximum of the band will be distributed in lump sum payments based on performance. Market competitiveness will be checked on benchmark positions for which market information is available on an annual basis. Should the market indicate a need, the salary bands will be increased overall, thereby increasing the overall pay opportunity at Dawn. Band increases will not directly affect actual pay unless such movement renders a salary below the minimum of its assigned band. Salary bands will only be increased as often as the market demands it.
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Pay Policies and Practices for New Hires
When hiring an employee from outside Dawn, the following guidelines are recommended:  Employees new to Dawn would normally be hired within the salary band and market range assigned to the role.  Considerations in determining the hiring salary should include: the new employee’s experience level, market salary for the position, and existing internal salaries both within the hiring department and across the organization in similar positions.  Hiring salaries should be determined collaboratively by the hiring manager and Human Resources. No salary should be discussed with a candidate without prior approval by Human Resources.  The hiring manager should make the verbal offer to the job candidate while Human Resources composes a formal written offer.  Exceptions to these guidelines will be deferred to the appropriate senior staff member and determined in consultation with Human Resources.

Salary Policies and Practices for Role Changes including Transfers
Employee Role     Dawn encourages employees to take advantage of career advancement opportunities within the organization. Dawn employees are responsible for seeking out opportunities and discussing them with the appropriate manager and/or Human Resources representative. Employees are encouraged to consult with Human Resources to determine the impact of the transfer on the employee's salary. Human Resources is responsible for creating a safe, confidential environment where employees can explore options without concern about awkwardness with the current manager/department. Human Resources also plays an important monitoring/consulting role in transfer situations. Management Role     The manager of the transferred employee should support the employee by giving the employee time to transition to the new position. The former manager should support the employee’s decision to transfer. Managers should offer support to employees who have applied for another opportunity at the Dawn but were not selected for the position. Senior leadership is responsible for supporting the development of employees across the organization, and for setting this tone for managers under their direction. Pay Policies- Transfer or Reorganizations  When an employee transfers to another position within the organization, or within the current department, the employee's salary will be reviewed to ensure internal and external equity and that the employee's pay is commensurate with the level of responsibility for the new position.

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When an employee transfers to another position within theorganization, or within the current department, with an equivalent level of responsibility, generally, there will be no need to change the employee's salary in conjunction with the transfer.



When an employee transfers to another position within the organization, or within the current department, and that position has greater responsibility, the employee's salary will be reviewed and an increase may be considered.



When an employee transfers to another position within the Dawn news, or within the current department, and that position has significantly less responsibility, the employee's salary will be reviewed and a salary decrease may be considered.



When a transfer occurs, Human Resources in consultation with the manager will review the transitioning employee's salary on a case by case basis. In all cases, the employee's salary should be commensurate with the employee's role.



Should a role change due to a reorganization of the work within the department and the employee is offered a role at a lower salary, the employee will have the option of being laid off.

All salary changes must be approved by Human Resources.

Salary Policies and Practices for Employee Promotions
Promotions indicate a significant event and should be accompanied by a salary increase at the time of promotion.  When a promotion is to a position at a higher classification level (a level promotion*) consideration in determining the salary should include the employee’s experience level, market salary for the position, and relevant internal salaries. The guideline for suggested salary increase is 5-8%.  When the promotion reflects an advancement along an existing departmental hierarchy (a progressive promotion**), the guideline for suggested salary increase is 2-5%. Consideration should also be given for the employee’s experience, the market salary, and internal salaries.  Promotional increases should be treated separately, in chronology and amount, from merit increases.  The hiring manager is responsible for timely communication of the promotion or transfer within a department; the senior staff member is responsible for division/organization-wide communication, as appropriate.  Occasionally, an employee may be offered a promotion but because of the employee's experience, the market salary, and internal equity, a salary increase may not be warranted. * Level Promotion: A promotion which reflects movement from a role in a classification level to another role in a higher classification level, such as a movement from level 2 to level 3. **Progressive Promotion: A promotion, which reflects movement through a hierarchy in a single function, reflecting increased competency and contribution through experience. Example: Accounting Clerk I to Accounting Clerk II. Criteria for granting a progressive promotion include performance quality and expanded responsibility.

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