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Thread: Comparing 2 different salary structures

  1. #1
    Mar 2011

    Question Comparing 2 different salary structures

    Hello Everyone, I have a problem and I feel very sure that Math can solve it!

    I hope this is the correct place to post, because it does have to do with Human Resources and is business related.

    I will go over some background information before I get into it. There is Company A which also has employees under it that work at Company B which is sort of a Joint Venture so it is also made up mostly of employees from a third company (C). Company A will be giving a bonus of a certain multiple of the actual salaries of each employee. the employees that belong to company A but work at Company B must also receive this bonus. However, they are not on the same Pay Scale. there in lies the problem. Previously the way they used to solve this is to calculate the position of the employee on Company B's scale and match it to that in Company A and give them a bonus based on that since Company B's actual salaries are much too high. Now what has happened is that Company B has increased the ceiling for their structure and now employees at company B are at a lower position in terms of the structure but could have a higher salary than before, now if you try to perform the previous type of matching they will get a bonus less than that of the year before! ouch. does anyone have any ideas on how to mathematically solve this problem? Like take the actual Company B salary and match it to the same level in company A?
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  2. #2
    Senior Member
    Nov 2010
    Hong Kong
    As I see it, it's not a mathematical problem, it's OB (Organisational Behaviour) problem. What bonus level will provide similar incentive to employees at different salary grades and different companies?

    First, you define your bonus policy, then just follow it. Nothing to do with mathematics )))

    For eg, it is common to fix bonus as % of annual salary. (Then higher paid employees receive higher bonuses.) Everyone understands exactly what to expect in their annual bonus, as they know their salaries. And everyone gets equal %age of salary as bonus (relatively fair...), may be dependent on their performance (say, you can have 5%, 10% and 15% for low performers, average, high performers).

    Another approach is to say everyone gets fixed absolute amount, regardless of their salaries. In my company, we use % of salary (with grading based on performance), but some employees (lower grades) are not eligible for that, so they get a fixed annual 'handout' of say 1000 dollars or similar. Everyone at their grade gets the same.

    So, your stragegy will be determined entirely by what you are trying to achieve - to equalise pay and bonus in both companies? just do that. To keep the salaries difference but give out equal bonus to everyone? do that (you can fix absolute amount of bonus so that everyone sees they get what the other guy in Company X is getting).
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