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Assume that the salary range for a job extends for 20% on either side of the midpoint salary. If the midpoint salary is nominated as the 100% mark, then the range is from 80% (100%-20%) to 120% (100%+20%) of the midpoint salary.

For example if the mid-point salary for the job is $50,000 (100% mark), then the salary range is $40,000 (80% mark) to $60,000 (120% mark). [20% of $50,000 is $10,000]

Assume further that the mid point salary is the salary paid to an incumbent deemed to be fully competent in the job. This implies that those paid less than the mid-point are deemed less than fully competent, and those paid more better than fully competent.

A common model divides an 80% to 120% range into five performance zones:

Range Range Name Range Brief Description
80-87% Marginal Marginal performers: those relatively new to the job.
88-95% Adequate Those performing the job adequately, but not yet fully competent in all aspects of the position.
96-103% Competent Satisfactory performance of all aspects of the job's requirements.
104-111% Superior Performance noticeably better than required.
112-120% Distinguished Performance of such standard that it is openly and broadly acknowledged, both inside and outside the organisation.

The organisation's appraisal system assigns the incumbent's performance to a position in one of these zones. This position, expressed as a percentage in the range 80% to 120%, becomes the position of the incumbent's salary level in the salary range for the job.

For example, if the midpoint of the salary range for a job is $50,000, and the performance of the person in the job is assessed as 90% Adequate, then the fair and equitable salary level for the incumbent should be 90% of $50,000, which equals $45,000.

The percentage value of this performance appraisal assessment becomes the compa-ratio to be used in calculations for the salary review.

We are now in a position to carry out calculations that take into account both the revised compa-ratios based on performance appraisal, in conjunction with a realignment of the organisation's salary policy line.

Assume that a performance appraisal has taken place and that new compa-rations have been determined for all six employees in our sample company. Assume the results are as shown in Table 5.

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