Executive Compensation, Remuneration & Salary Survey Reports May 12th, 2008  

International Human Resources Management

International HQ
290 9th Street N., Suite. 200
St. Petersburg, FL 33705

For general requests and information, e-mail to: info@erlimited.com

Survey Methodology – Benchmarking to Report Generation

I. EXECUTIVE RESOURCES’ METHODOLOGY

Our Survey Database
Executive Resources has been collecting international remuneration data from clients and participants at large for twelve years in over 125 countries. The current database contains a total of 4,000 respondent organizations from all of the traditional business/industry sectors (public and private).

The standard international benchmark survey is conducted during the last quarter of each calendar year. Throughout the year special “club surveys” are conducted, and new participants may submit to the standard benchmark survey. All data collected off-cycle is aggregated with the standard database. Every two months each data set is statistically brought current (aged), so that the database may provide the most current representation of market data in each location surveyed.

Data extraction is flexible through our Survey Technology Architecture (STA™) to allow tailoring on the basis of participants, as well as, a very low level of detail relative to remuneration data elements. Additionally, a high degree of statistical modeling is available to allow the validation of multiple scenarios and to regress data elements for scope matching.

Job Evaluation
ERL uses a point factor evaluation system to ensure job/role/competency matches to position descriptions and incumbents. The pricing of positions is based upon current market pricing focused upon total remuneration.

The basic evaluation elements used for each exercise are generally: education, relationship, guidance (authority), position level, size of risk/scope, discretionary factors. These factors, including competencies have been mapped to other qualitative and quantitative methodologies.

After analyzing each discreet element of a position description against the criteria above, a range of points is assigned to each duty/responsibility/qualification and aggregated in total (a range total to be used to test the best “line of fit”). At the same time each position is qualified as a standard benchmark position or a non-qualified (slotted) position.

Executive Resources’ job evaluation system is designed to provide a medium for companies to compare internal grading and remuneration to external equivalent positions.

Data Collection
Executive Resources collects its survey data by using a series of instruments (hardcopy and electronic), which all track (or relate) to our standard job evaluation and current market pricing model.

Normally, survey respondent organizations have a 90%+ perpetual participation rate. Unless the surveyed position changes materially or a new position is added to the survey, a participant will not be required to complete a position description questionnaire. The aggregate point value of most benchmark positions (unchanged) remain the same, so ease of survey participation is facilitated.

Data is submitted in local currency for all cash elements of remuneration, and ERL utilizes its knowledge of the in-kind benefits valuation to determine the economic value of each provided. Data collection is supported by its representatives and affiliates in over 30 offices worldwide and follow-up research is provided locally for all data elements in question.

International Employee Benefit Survey

Remuneration Elements
The remuneration data sheets present each position and related pay information associated therewith. Remuneration data for each position is tabulated by category. These categories are as follows:

  • Base Salary: annual gross cash compensation designated as current base pay (12 months)
  • Guaranteed: annual gross base salary plus guaranteed cash compensation provided to incumbents (e.g., extra customary/statutory months, vacation premium, aid plans, etc.)
  • Total Cash: guaranteed cash figure as above, plus all forms/elements of non-guaranteed and variable pay (e.g. profit sharing, performance bonus, other cash pay, etc.)
  • Gross Integrated: the sum of guaranteed and variable pay plus the cash value of in-kind benefits (e.g., company car, fringe benefits, etc.). May be expressed as just “Total”.

    Note: In the event that any payment is fully or partially paid as a net amount, the gross equivalent was used to avoid distortion in the totals of the extracted data.

    II. METHODOLOGY

    Standard Data Cuts
    First Quartile: the value in the array that falls at the first quarter or 25th percentile. Seventy-five percent or three-fourths of the values in this sample are greater in magnitude than the first quartile value. The first quartile may be interpolated when no value in the array corresponds to an exact twenty-fifth percentile.

    Median: the value in the array that is at the 50th percentile. Half of the values in the sample fall above this number and half fall below it. When an array contains an even number of values the median is equi-distant between the central values.

    Average Salary: a non-weighted average (arithmetic mean) of pay reported by survey respondents. The results are totaled and divided by the number of respondents.

    Third Quartile: the value in the array that falls at the third quarter or 75th percentile. Twenty-five percent or one-fourth of the value in the sample is greater in magnitude than the third quartile. The third quartile may be interpolated when no value in the array corresponds to an exact seventy-fifth percentile.

    III. EXECUTIVE RESOURCES’ PROCESS TO SATISFY THE CLIENT’S NEEDS

    Job Evaluation Rating of the Client’s Positions
    Utilizing ERL’s quantitative job evaluation methodology each of client’s positions in each location is evaluated and assigned points. ERL bases its analysis of the client’s positions upon the data provided by the client. Additionally, the relative relationship of each position is validated against the ranking provided by the client (both numerical and alpha). Where applicable occupational streams are used to match functional positions in the survey sample.

    Where available criteria relating to all of the following factors are utilized (when available) to rate the client’s positions:

  • education, experience, area of responsibility, and type of decision;
  • relationships: internal and external;
  • guidance available to job holder, discretion or authority to act, nature of problems and area affected by job holder decisions;
  • position level relative to subordinates and superiors and influence on results;
  • size of risk (i.e., turnover, sales or operating revenue affected by job). The number of employees might also be factor for determining job size; and,
  • discretionary factors: language, working environment, support staff, abilities of support staff, special research responsibility, development of new designs and products, development of new markets.

    The job evaluation process is used to determine the relative relationship of the client’s positions, and to serve as a reference range of points to be used to access the “line of best fit” for job matches in the selected organizations.

    Validation of Benchmark Equivalents (Matching)
    On the basis of points associated with each job evaluation factor and the aggregate of points for each of the client’s positions, a preliminary matching abstract will be generated from the database.

    The data abstract will be evaluated manually to determine the highest probability of match at the micro and macro level of point ranges. A range of points will be used to ensure that all probable matches or near matches were considered.

    A second abstract will be produced to examine job families within the point ranges of best fit to correlate the quantitative methodology in the database to the occupational streams provided by the client. This abstract will be analyzed manually to ensure that we select the appropriate level within each functional job family for the survey sample.

    Current Local Market Survey Data Extraction
    The client may select several organizations (15-20) in each country/city from a “suggested” list prepared by ERL.

    The data previously collected in our most recent survey cycle will be collated and placed in a format consistent with the client’s file structure (or by job code, if High or Bio-tech). The positions, which were matched to the generic positions, will be flagged so that they would be a part of any data extraction made. Several data cuts of the extracted data will be made separately and with the selected sample extraction group. This aggregate extraction will be passed through ERL’s statistical package calculations to ensure quality of data matches and samples in preparation for final calculations and analysis in the process.

    Data Extraction and Filter Analysis Technology
    The nature and scope of this review requires a profound understanding of project deliverables, sensitivity to the human element in valuing reward for work, and the capability of collecting and manipulating a vast database of information – both quantitative and qualitative.

    Survey data collected or manipulated will be filtered and transferred into several of the many statistical programs, which we use, such as the Statistical Analysis System (SAS), Engle Curve, Hedonic Curve, etc. A data set was derived and thoroughly analyzed for relevant statistical patterns (i.e., correlation, negative-correlation, clustering, standard deviation, z-scores, and x-scores, etc.).

    This process will be continued until we thoroughly analyzed the data to our satisfaction. The discreet trends and patterns we will learn from the data assisting us to develop recommendations to satisfy this tender and bringing forward broader findings, as may be required.

    Calculation of Data Array/Test Data Set
    ERL will create a data set of the calculated remuneration elements for the specific organizations and positions matched. The discreet data elements of pay will be analyzed to ensure that the values were in acceptable range limits. The elements of in-kind benefits will be aggregated by like or similar type and valued on a gross basis utilizing ERL’s valuation model. The elements of cash and in-kind (value) at this point are in gross pay terms or to the Client’s specifications.

    For Not-for-profit organizations all of the data elements will be aggregated on the basis of taxable, non-taxable, or partially taxable within limits. The data will be statistically analyzed and arrayed on the basis of the standard data cuts. Each data point within the array by category will be applied to the tax model on the single employee withholding basis (taxable/non-taxable). The net value of each category will be created in the same relationship to the gross array discounted for tax advantageous pay elements, if any.

    As a validation, each aggregate of the “gross integrated” category will be manually exposed to standard tax tables for each country at the single withholding rate. These calculated net amounts are then compared to the output of our tax model, and analyzed if a variance results.

    Final Data Array
    In the case of Private Sector Clients the data will be arrayed to the specifications of the Client by data element by pay or benefit category (base, incentives/bonuses, value of in-kind benefits, and total remuneration) in gross pay/value terms. Any percentile within each incumbent sample is available.

    For Public Sector (Not-for-profits) after validation of the netting down exercise a final data array will be created. The resultant calculation by position by pay expressed, as net will be shown on the data sheets in provided. It is against these values, either in whole or in part (by element) that this sector’s net total remuneration will be compared.

    Fees (without volume discounts)
    Base plus bonus or sales incentive *$175
    Total rewards (at any percentile by base, bonus, value of in-kind benefits, total)*$250
    Sales compensation (actual and target) and LTI (Black-Scholes)*$150
    Total rewards, sales compensation, long-term incentive (6 percentiles arrayed)*$300
    *per position per location


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