To be able to form an effective salary policy, comprehensive salary benchmarking with competition on the labour market is essential. We recently carriede out a survey of all existing management positions in electro-technical production companies in western Slovakia. Our client opted for this survey because several managers left for companies for substantially higher salaries.
One of the positions was engineering manager. The salary range for this position at modern international production companies in Slovakia ranges from 24,000 crowns ($480) to 78,000 crowns ($1,550) gross monthly. Being faced with such a wide salary range, every engineering manager was interviewed in person to find out who would fill the clients' criteria for engineering manager. We analysed each manager's job description, job profile, responsibilities, size of the company, number of subordinates etc. The outcome was that only four engineering managers qualified with a salary ranging between 35,000 crowns ($700) and 60,000 crowns ($1,200) gross monthly.
Based on this information our client had to decide to which level they should adjust their salary range. Their decision was based on the following considerations: Salary range within specific management level (the range at our client was 30,000 crowns to 50,000 crowns); Present salary of the manager, in this case 35,000 crowns; Estimated minimum salary to prevent leaving; Comfort salary level, guaranteeing that key people cannot get a substantially better salary elsewhere; Necessary salary to attract newly-qualified professionals.
The estimated minimum salary was set at 47,500 crowns ($950), the maximum offered by all researched companies. The comfort salary level was set at 60,000 gross monthly as from the research we learned that no company pays more than this. Salary necessary to attract a newly-qualified engineering manager on short notice is set at 72,000 crowns (20% above top salary).
Salary was a very important factor for our client in their decision to raise their engineering manager's salary from its present 35,000 crowns to 55,000 crowns. The main reason was that the financial costs of their manager leaving would be very high, as outlined below:
It is very likely that the firm will be forced to pay a higher salary to a new applicant, influencing the engineering manager's salary and his or her colleague's salaries on the same management level! There are also costs of having a vacancy, additional recruitment costs and the fact that a new person is less productive when he or she first starts their job.
In this case we can conclude that our client did not take into consideration only present salary levels to determine their salaries. They also took into consideration the extremely high costs involved if key people left the company, justifying big salary increases for part of their management team.
Gerard Koolen is a partner at Lugera & Maklér. His column appears monthly. Send comments or questions to email@example.com.
6. Nov 2000 at 0:00 | Gerard Koolen