1. Managers Guide to Planning a Salary Review Randy Fleckenstein / Icelandic Federation of Trade / Oct. 2007

2. Salary Reviews Do I have to? 2 R. C. Fleckenstein 3. The Contract Says So Objectives of the market-based wage contract To make employment terms andchanges more transparent To insure that employmentterms are competitive To retain and support the bestemployees To encourage employees toimprove their performance3R. C. Fleckenstein 4. Emphasis in the New Contract1. Review required once a year.2. The employer should initiate the discussion.3. Salaries shall reflect employee performance, competence, accomplishments, fl exibility in assuming new tasks, special work hours, the nature of the job, level of accountability and educational level if appropriate.4. Employer must adhere to the conditions of the equal rights law.5. It is permitted to agree upon a fixed total salary if maximum overtime hours are given. 4R. C. Fleckenstein 5. Market-Based Wages Consider Salary changes on the job market Performance and value ofindividual employees 5R. C. Fleckenstein 6. Preparing and Organizing the Salary Review 6R. C. Fleckenstein 7. What Do We Have to Work With? Salary surveys Salary structure within organization Length of service/tenure and jobhistory Goals attained Current wages and benefits Level of education, training records Attendance figures Other data? 7R. C. Fleckenstein 8. Market-based Salary Comparisons Heimild: www.hagstofa.is8R. C. Fleckenstein 9. Data from VR Trade Union Salary reviews result in 5% higher wages 3rd year in a row. ISK 368,000 per month in total salary vs. ISK 351,000 permonth for those who dont participate. 60% of union members participated in a salary or performancereview in 2006. Men participated more than women in 2005 and 2006. Those with higher education are more likely to participate. Younger employees more likely to participate than older. Women are more likely to use salary survey information. More education more likely to use salary survey data. 77% of those who participated received a raise a dramaticchange over the past few years. 9R. C. Fleckenstein 10. Information from the VR Trade UnionHighest wages are in financial, computer and other specializedservices sectorsAverage total wages change from 2006 Wages rose between 9% - 13% over all sectors.Larger companies higher wages Salaries were 11% lower at firms with less than 20 employees vs.firms with 100 employees or more. The biggest difference was among managers or 18%. 10R. C. Fleckenstein 11. Retail services salaries went up the most (VR) Avg. Total ChangeWages from 2006CEOs and other Senior565.000 15%ManagersDirectors, managers 545.0008%Lawyers 511.0005%CFOs 489.0008%Business grads486.000 15%Cafeteria workers and242.000 12%journeymen chefsReceptionists 238.000 10%Retail workers233.000 29%Grocery store clerks225.0001%11R. C. Fleckenstein 12. VR salary survey results (example) 12R. C. Fleckenstein 13. How Do You DetermineWages?13 R. C. Fleckenstein 14. Performance Factors (according to the bargaining contract) Work during special hours Job tasks and demands Accountibility Education Work completed Competence Personal drive Flexibility/ability to deal withother tasks14 R. C. Fleckenstein 15. Are you a valued employee? Positive toward changes Deals with weaknesses exhibits confidence Goes beyond the job description Uses the company to develop own competence Makes the job a constant opportunity to learn Is a risk taker Knows and understands the firms needs and values Takes on as much responsibility as possible Positive and contagious attitude Follows up on ideas and suggestions shows initiative Works hard and doesnt waste time 15R. C. Fleckenstein 16. How Big Will the Pot Be? consider... Inflation and wage index hikes overthe previous 12 months Other bargaining agreements Costs and earnings of the company16R. C. Fleckenstein 17. Price and wage developments (Statistics Iceland)Wage index for major employee groups 2005-2007 Employees in general labour force Change from the previous year(%)2007 2nd quarter 11.7 17 R. C. Fleckenstein 18. Employee Review WorksheetEmployee:____________________________________________________ ID #:__________________________Position:______________________________________________________________________________________Current salary:_________________________ Other arrangement/perqs:_____________________________Goals/accomplishments over the past year contribution to results:a. ___________________________________________________________________________b. ___________________________________________________________________________c. ___________________________________________________________________________d. ___________________________________________________________________________Other factors to consider:a. Wages in comparison to others & the markete. Market demand for his/her skillsb. Competence special or high valuef. Special hours of workc. Wage hikes in pastg. Level of responsibilityd. Ability to assume more responsibility, promotionh. EducationRecommendation:Monthly salary to: ____________________________________________________________________________Perquisites/work arrangements: _______________________________________________________________Signed: _______________________________________________________________Position: ____________________________________Date: _____________________ App. HR _____________Decision communicated to employee (date): ___________________________18R. C. Fleckenstein 19. What Can We Offer? 19R. C. Fleckenstein 20. Total RewardsThe importance and value of these factors vary by sector, company, employee life styles and ages20 R. C. Fleckenstein 21. Wage CompositionBase payContractual obligations - vacation, tenure, raises stipulated in bargaining agreement, pensionPerformance-based payR. C. Fleckenstein 21 22. Examples of Perquisites Vacation days Business credit card Employee cafeteria, coffee Entertainment budget bar, snacks Personal use of Raises tied to cost of livingcorporate facilities index Sign-up bonus Lump sum upon reaching Grants for certain years of serviceeducation, wellness fees Store discounts Car, cell Work clothes, cleaning phone, computer, VP services N, etc. Interest-free loans 22R. C. Fleckenstein 23. Popular Perquisites - VR findings -Cell phone35%Fitness centre grant35%Phone subscription32%Store discounts 20%Net services subscription 19%Automobile costs15%Education grant 13%Home computer from employer 11%23 R. C. Fleckenstein 24. Work Culture/Environment Recognition Cultural factors Service awards, praise, in- Management house newsletter, etc. style, diversity, level offormality, communications, Work-Life Balance empowerment, trust, etc. Flexible schedules, sports facilities, massage, financi Environmental factors al The job advice, childcare, various challenging, resources, vari services through employeeation, co-workers. association. Work facilities & conditions Personal Growth The firm Training, succession products, image, market track, mentoring, feedback position, drive, strategy , problem solving group participation, etc. 24 R. C. Fleckenstein 25. Total Rewards List (example)Benefits to EmployeesBenefitValue Note: Employees pay a lunchLunch and snacks (savings)15.602 perq tax of 480 kr. per mealClothing allowance*3.750Life insurance 1.500Debit card transaction fee (savings)650Transportation stipend*1.500Gym and sports stipend 2.500Sickness insurance 1.500Yearly eye examination 500Summer cottage rental (savings)1.000Education and training 6.250Performance bonus (variable)*8.333Total Benefits43.086*upon permanent hireEmployees receive discounts at a variety of stores, stipend for purchase of prescriptionglasses*, special terms at banks, interest-free computer purchase loan, etc. that individualemployees use in varying ways between months and years. 25 R. C. Fleckenstein 26. Negotiations26 R. C. Fleckenstein 27. Key Points Be positive, have conviction Communicate clearly: What! Explain: Therefore! Discuss any matters that remainunclear Get acceptance: Can I count on you?27R. C. Fleckenstein 28. Concluding the Discussion Summarize the final points andconfirm that you both are inagreement. Sign the document send to HR End on a positive note Revise the employment contract? 28R. C. Fleckenstein