A Pay Model for SME Principals

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Developing a working pay strategy Pay and Benefits

In the next 10 minutes…:

In the next 10 minutes… The central question: how much do you pay someone? How does an SME principal determine pay? The three elements of pay: base, competence & incentives Example: A TimelessTime pay and benefits project General conclusions on pay models

How much to pay someone:

How much to pay someone Pay too little – intuitively, get monkeys Pay too much – reduce profits Sufficient for a man to keep his wife and two kids – to replace him in the labour pool Not a motivator – does not cause more output Negative hygiene factor – a de-motivator

The Labour Market: law of demand :

The Labour Market: law of demand Demand £10k £20k £30k £40k 4 3 2 1 Supply Point of Equilibrium Quantity Demanded Pay Greater competence adds greater value

An SME Pay Model:

An SME Pay Model Competence pay 100% Modelling Report writing Presenting Sales xxxx …. Competence Expert Sup. Prac Pract T rainee Average 47% of 20% Performance pay O1 O2 … For meeting individual objectives Divided from bonus pool Discretionary 120% Base pay 80% Static per job Job levels Assit . Engineer Engineer Senior Engineer Job families Engineer Admin (Business) Director Engineer Admin (Marketing) Cost of Living Added Here

Judging Where to Pay:

Judging Where to Pay 60% of Market Price Distribution of matched salaries Used in calculating Base Pay

The Practical Pay Model:

The Practical Pay Model £000’s increasing Support Staff Admin (Business) Admin (Marketing) Managing Director Graduate Engineer Engineer Lead Engineer Principal Engineer Base Pay – at 60% Competence Pay Practitioner Level

Working the Model:

Working the Model 1 3 2

Conclusion:

Conclusion There’s a science to getting pay right Pay models last 5-10 years Re-calibrate bi-annually by benchmarking

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