1/28/2012

How to justify high pay

My human resource experience apparently has gone out of date as far as justification for pay or higher pay is concerned. Let me just recall some of the basic premises in designing the compensation package for employees. HR will normally look at the job specs, the qualifications needed, the skill, risk involved if applicable, health hazard, even look at environment. Then HR will mix these with the incumbent’s qualifications and skill, add in market comparables, stir them thoroughly in a pot, remove the flotsams, and there we have it, a pay package for the various jobs.

Today it is more complicated and complex and a totally new dimension. I am told that corruption is now a factor to be added in the pay package. There are a few variations to this. One is if other people are corrupt and the total income is more than their actual, this must be taken into account, eg the opportunities to receive bribe or under table money, to gain from issuing of licences or approvals. The other aspect is the infamous notion that since people are likely to be corrupt, let’s pay them upfront so that they need not be corrupt anymore.
Revolving door? I just heard of this new phenomenon. In short it is like jobs laying in waiting for top people who left their offices. The most common quoted examples are the American political leaders who have high paying jobs waiting for them after their terms in office. Actually in my time, or even today, this is nothing new. The top dogs are in demand when they quit their jobs. Many offers will come in from organizations or job hunters waiting in queue. Why should this be a factor to use to mark up pay of incumbents, I really dunno.

I am also told that if other people can go on lecturing circuits and collect millions, this is also a factor to consider. Also, along the same line of argument, people who can write books and sell because their country’s readership is big, and people like to read what they write, this can also be a factor to consider in working out a pay package. The reference point is always some American Presidents. I am just wondering what kind of conceitedness and arrogance would dare one to compare with American Presidents.

Oh, another thing, when one engages an employee, one must make provision for his retirement or his opportunity cost for coming on board. If he will lose out in terms of skill, seniority or contacts, this must also be compensated in the whole pay package.

The golden handshake is also quite a norm now for senior employees. Now this is fair as no one would want to move from their comfort zone to try out something new. This could be another substitute for the above. There have been many instances of great talents receiving a big payout for doing badly on the job or not even starting on it.

The most troublesome one is sacrifice especially in public service. How much to measure sacrifice? This is very tricky, trickier than trying to compensate for the temptation to corrupt. How to value what a person is sacrificing, family time, quality time with children or grandparents etc etc. Everyone it so family oriented. Another quality time which is ominously absent is time with mistresses or girl friends. But this is noted I am sure. And being ridicule in public forums and cyberspace surely command quite a price too.

Another thing to consider is to motivate the top management with a carrot dangling in their face. Do good work boy and the carrot will be yours. Blimey, top management needs additional carrot to do their very best. If not, even with out of this world salary, they will slack and not do their best. Is this motivation thing going a bit too far? In all my HR time, I have never doubt that the top management, with or without the carrot, will be there to do their very best, to lead by example. If their leadership example is to do mediocre work unless the carrot is big enough, they should not be hired in the first place.

I think I will be quite lost if ask to do the job again. I am already feeling inadequate. This will require new skills and mindset from the HR profession to be equipped to do a proper job in view of the new challenges and new social norms. Luckily I am no longer in the profession. I am sure I have missed out quite a lot of the new factors that I don’t even know.

During my time, HR’s job was much easier. You interview the candidate, lay down the package without having to worry what happens if the candidate decides to quit later. The responsibility is to offer the candidate a suitable package, agreeable by both parties there and then. If there is a separation for whatever reason, the candidate would have to look for a new job on his own merit. And that is a non issue as the candidate should be good enough to do that with his qualification and experience. The candidate is always a top dog or else he would not even be considered. Don’t they have any confidence in themselves to land another equally big paying job?

13 comments:

Anonymous said...

"Pay me well. Or else I will dishonest."

I guess only government scholars can use this logic in their salary negotiation.

The rest of us Singaporeans will be shown the door out of the interview room immediately.

agongkia said...

Your HR experience definitely outdated if you think everyone look only for higher pay.

HR should consider recommending mei meis to employee as incentive.
Especially those handsome but shy graduates who may not know the way to find a girlfriend .

Add in the contract,guarantee them a Swee Char Bor if they take up the job offer.
Dun stick to the rules with those normal perks and rewards.Not everyone interested.Look into welfare that others never think of.Be extraordinary.

Anonymous said...

RB, spot on and thanks for the clear and comprehensive comparison.

Enlightening and liberating especially to those who choose to keep an open mind.

Kakilang said...

Wow this new normal is absolutely 'mo tuck teng' my whole family, brothers, sisters,uncles,aunties,in-laws and friends also want to apply can or not?

Matilah_Singapura said...

It is a natural human tendency to OVER STATE one's abilities and thus "intrinsic" value. Therefore the only reasonable and fair way is to allow the market (demand plus willingness to pay a specific price).

There is no market in govt. or quasi government executive job market. So the "anything goes" policy is as GOOD a system as any. ie. Suka-suka is the norm.

Anonymous said...

Thank you for pointing out the humbug excuses higher mortals use to legally line their pockets while in office. They are just not honest enough to admit that it is nothing more than greed, pure and simple.

Saycheese

Anonymous said...

Human Resource in Public Service Organizations should never be compare or equate with Commercial Organizations.
One works for the state and the people, the Other works for money.

Today the Role of the Government has being too commercialized by the Authority and has resulted in the anomalies that Redbean mentioned. How long can the Regime goes on with the Current System is anybody's guess as there is widespread dissatisfaction in the people.

What is worrying is that there is the danger of the State collapsing with the Authority and the People both unprepared for it. OF COURSE MEN IN AUTHORITY ARE FINANCIALLY EVER READY TO FACE ANYTHING EXCEPT WHENCE STRUCK BY LIGHTNING.

The said...

What HR practices are you talking about? The only HR concept the government has is the best of the East and West.

From Japan, they have wholehearted adopted the Amakudari concept.

From Russia, they have perfected the practice of Nomenklatura.

So, what else is new in the world?

Anonymous said...

There is no such thing as a top dog. If you believe that crap, you might as well anoint an emperor or a king over you.

Awarding supreme pay to supposedly top dogs is nothing but exploiting the market place.

Chua Chin Leng aka redbean said...

Hi kakilang, welcome to the blog.

Today it is better and more lucrative to be an employee, esp the top dogs. There you decide how much you want to pay yourself using OPM. Appoint the directors and pay them well and they in turn will reward the top dogs just as well also with OPM.

Anonymous said...

They are dogs...feed them with curry

Anonymous said...

Subject: Comments by Dr. Tan Cheng Bock

Annual Reporting of Ministerial Salaries.
When I was in parliament (1980-2006) I was under the impression that Ministers did not get any Pension because all office holders were required to switch from pension to CPF in 1998. Imagine my surprise when I read in the newspaper (5 Jan 2012,ST) that in 2008,two years after l left parliament ,the Pension component was re- introduced and this resulted in a further increase in salaries for Ministers. This Pension component, which caused a lot of anger, is now removed. I am glad that this is being done. However, such a trend of changing policies mid-stream is not good. Singaporeans want more transparency. To be transparent, an annual report of ministerial salaries must be published.

A Win Win Formula for Ministerial Pay.
While using the bench mark of the median income of the top 1000 Singapore earners is better than 48 high earners in the past -the formula has not changed, only the numbers. Every year, the median income of the top 1000 earners will be used to calculate Minister’s pay. Some of those 1000 would have fallen off the list the next year. But, because the current formula only takes in the best 1000 in the high earners cohort each year, those fallen ones in the first year will not be considered in the second year. They will be replaced by better performing ones. Thus it is a win win formula. Consider this; if we were to use the SAME 1000 cohort over the term of office of the Ministers in our calculations each year, we may have a clearer and truer reflection of the fortunes of our top earners. It will be a case of comparing apples to apples. This will be reflected in our minister’s pay.

Revised Ministerial Pay in Singapore

To Serve or Not to Serve. A consistent theme in the revised Ministerial Pay review is Pay high or loose Talent. We can buy administrative talent but political talent I am not sure. They are two different skill sets. One is working for Salary, one is working for a Cause.
One has obedience and self, the other is about passion and public service. In schools, we were taught Service before Self. This is an important ethos of character building. However this over emphasis on using money as an incentive goes against all that.
We must bring back the public spirit of serving as our First Call and not be constantly swayed that Money in Politics will attract talent. The review committee was tasked to review the former committee’s rational for the level of salaries for the President and office holders.
The fact that the committee has not deviated from using the top private sector earners as a reference tells me the formula was only tweaked. Lets follow the debate in Parliament and I will share more comments.

By Dr. Tan Cheng Bock.

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