Salary structure in management in Germany, Poland and the UK a comparative study

Table of Contents

1 Table of Contents
1TABLE OF CONTENTS.............................................................3 2INTRODUCTION.....................................................................4 3DEFINITION OF SALARY.........................................................4 4GENERALY TRENDS IN MANAGEMENT SALARY IN UNITED KINGDOM, GERMANY AND POLAND..........................................6 5SALARY IN UNITED KINGDOM.................................................6 6SALARY IN GERMANY............................................................8 7SALARY IN POLAND...............................................................8 8CONCLUSION........................................................................8 BIBLIOGRAPHY.......................................................................8

Analysis

2 Introduction
Compensation of employee is important and at the same time really difficult task. Important because it can contribute to growth efficiency and competitiveness in company. Difficult, because it arouses the most controversy and discontent of workers. An effective system of remuneration of employees enables to achieve the following tasks: - recruit and retain qualified employees. - increase or maintain morale/satisfaction. - reward and encourage peak performance. - achieve internal and external equity. - reduce turnover and encourage company loyalty. - modify (through negotiations) practices of unions1.

3 Definition of salary
Salary is financial compensation an employee receives for performing the job, and part of an employee compensation package. Salary can be on an hourly, daily, weekly, monthly, or yearly basis. In some definitions salary is equal wages but in another, salary also include other compensation components such as: Base Salaries The base salaries are the main compensation component and its role is simple to attract and retain employees. The base salaries are the component bringing the security to the life of employees as it is regular payment independent of the performance and it cannot be decreased easily. The base salary is the base component for the salary competition on the job market as it is the only guaranteed part of the total cash. Most employees are focused on the base salary as it is the only number they can count on. Benefits

1 HR Guide - Compensation: Outline and Definitions - http://www.hr-guide.com/data/G400.htm

Analysis

The benefits are the most difficult compensation component to explain. The role of the benefits is to retain the employees and the retention is the magic word to introduce a new benefit to the organisation. Honestly, it does not work and the organisations provide very similar benefit packages to its employees and they are not satisfied with them.

Examples of benefits2

Bonuses The role of the bonuses is the extra reward based on the performance of the organisation and the contribution of the individual employee to reaching the company goals. The bonuses also support the retention of employees as they have to wait for the bonuses to be paid, usually at least several months, but in some organisation, the payment can be deferred for more than 18 months.

2 http://www.healtheconomicsblog.com/2011/09/executive-summary-of-2011-he-blog.html

Analysis

Incentives The incentives are the strictly personalised bonuses, which are not affected by the results of the organisation. As the incentives are based on a strict formula, they are used just in units, where many people do the same job and have the same goals to be achieved. The sales staff and Call Centres are the best examples, where the Incentives are used. The role of Incentives is to focus employees on the immediate results with no long term vision. The incentives are excellent for building the market position and gaining the market share, they are not useful for building the relationship with the customer.3 These components are the basic ones. There are so many different types of components, because each company should have their own compensation system. Example of compensation in health and social services in organisation: Northwest Territories

3 Compensation Components Role -http://yourhrmguide.com/content/compensation-componentsrole

4 http://www.practicenorth.ca/index.php?page=total-compensation

Analysis

4 Generally trends in management salary in United Kingdom, Germany and Poland

In western companies in the last twenty years (and in polish companies in last ten years) the remuneration system has changed. In the past, the main part of the salary package were the basic wages and pensions. Bonuses and stock options were treated as a pleasant and an occasional supplement. Currently, base salary is only a small part of the package, and the most important role played by motivational factors. This applies especially to long-term plans (long-term incentives - LTI). For the majority of the representatives of senior management staff a fixed salary is often less than a quarter of total remuneration package, and long-term incentive plans is half or even more. Such a change in pay system largely influenced global change management principles that have occurred over the past fifteen years. The basic model is based on the assumption that the highest managerial staff will achieve better results from the viewpoint of shareholders, if you will be more motivated. The idea is to correlate the salaries of managers and shareholders' interests, so as to avoid situations in which managers receive unwarranted short-term rewards at the expense of shareholders.

5 Salary in United Kingdom

United Kingdom is place where another compensation components (beyond basic salary) are really important and may constitute a large part of total remuneration. That usually happens in the case of the CEO and higher managers. According to Watson Towers diagram benefits, bonuses and other additional components could be more than 56 %

Analysis

Keys: Amounts in US $ Basic Salary Other Components5 However in various part of management hierarchy situation is different. Basic salary plays dominant role (example of consulting company).

Salary in United Kingdom depends also about region. The best is to work in London, but also life expensive is the highest in the capitol of UK.

5 www.pszk.org.pl/motywowanie/Budowa_systemu_wynagradzania.ppt 6 http://www.top-consultant.com/Top-Consultant_Salary_Report.pdf 7 http://www.ons.gov.uk/ons/rel/ashe/annual-survey-of-hours-and-earnings/2010-results/stbashe-2010.pdf

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6 Salary in Germany
In Germany salary structure is similar to the british ones. According do Watson Towers diagram (below). Around 48 % is basic salary, rest are other components. Similar is also variation in wages in various regions. Interesting is fact that
capitol Berlin is not the most attractive place in case of salary. The best are Bavaria or Baden-Wurttemberg. The worst state is Thuringia.
8

7 Salary in Poland

Compare to UK or Germany, Poland is still one step behind them. Bonuses and benefits are still smaller parts of compensation. However, Poland is making the biggest progress in this are. The human resources departments in companies increased awareness of compensation system. They noticed that good system increases motivation, which increases profits and the effectiveness of the company. There is general agreement among experts opinion that Polish companies - if they want to stay on the market and provide competition for western companies in the first place they should disseminate good bonus schemes, where the premiums are dependent on company performance.

8 Conclusion
In Poland, Germany and UK, Over the last twenty years, the remuneration system top management has changed. This was due to market needs and other factors, such as the recent crisis. Constructing the "good" and what is the most important - fair pay system is a big deal for the current human resources managers. Fortunately, both HRMs and the board of directors are beginning to recognise the importance of this issue and bring better systems for their companies and organisations.

8 http://www.lohnspiegel.de/dateien/DBG%20INGENIEUREINKOMMEN
%20SONDERAUSWERTUNG%2027.01.2011.pdf.

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Bibliography
Stanisawa Borkowska (2001): Strategie Wynagrodze. Oficyna Ekonomiczna. Krakw Jacek Jdrzejczak (2000): Budowa i zarzdzanie systemami wynagrodze. Oddk, Gdask PricewaterhouseCoopers (2011): Dalsze komplikowanie systemu pac kadry menederskiej nie naprawi jego wad - Psychologia motywacji www.pwc.pl/pl_PL/pl/.../PwC_Raport_-_Psychologia_motywacji.pdf (Retrieved 19th December 2011) Top-Consultant (2011): Salary Benchmarking Report 2011/12 http://www.top-consultant.com/Top-Consultant_Salary_Report.pdf (Retrieved 19th December 2011)