Designing Remuneration Packages Best Practices

Our Digital MBA for Technology Leaders covers a wide range of business, technology and skills-related topics. One of the lectures in Module 1 (Leadership & Teambuilding) goes into detail about remuneration packages and renegotiating better terms for yourself.

It is one of the responsibilities of every technology leader that is not limited to the onboarding process of new developers but to the retention of talent as well.

In this summary of Julian Costley‘s lecture, we bring you the gist of everything, starting with the very first step.

Prerequisites for Designing a Remuneration Plan

• Clear definitions of the roles and responsibilities of every member of your team and their level of experience.
• An industry benchmark data by job title, industry and company’s geo-location.
• Guidance from your CEO or CFO.
• Company’s policies on stock options.
• Company’s policies on bonus schemes.
• The timescale for delivery of your plan.

How to Use Annual Salaries Reviews

1. First, match your people to the roles identified in the surveys.
2. Attenuate by industry and location.
3. Note growth rates and take into account expected rises for the following year.
4. Run your staff’s salaries against the benchmark salaries for their role.
5. Create variance columns:
   • One in absolute money and the other as a percentage variance to what they should be paying (benchmarked against the company and your new staff)

RULE OF THUMB: There’s nothing wrong with paying less than the benchmark figure, but only if you’re confident as a company that you can offer real advancement for that individual, training or projects that the competitors can’t match.

Example Bonus Against Performance

In a tech department, it should be a mix of technical milestones hit during the year in relation to what is expected to be achieved within the budget.

For example:

5% over performance = 10% bonus (max. 25%)

Remember, setting maximum percentage caps prevents some problems that you might run into.

TIP: Avoid setting individual bonuses for individual milestones. It’s a massive headache to set up and it sets you up for potential accusations of unfairness or favoritism.

Now that you have some idea how to set remuneration for your employees (the lecture explains it in much more detail), it’s time to learn how to improve your financial position in a few bullet points.

How to Negotiate a Better Package for Yourself

• Explore the scope of promotion.
• Use benchmark data.
• Push for basic salary increases (by pointing out all your achievements).
• Is more expected from you next year? (Larger budgets to manage, more staff, upcoming uniquely complex or business-critical issues and projects.)
• If all else fails get a bonus increase.
• Suggest that you want a salary increase three or six months ahead.

TIP: Ensure that your role in the company is fairly set at an equal level to other senior executives.

Key Points

• Money is rarely the most important factor to IT professionals (but it does play an important role).
• There are proven processes to benchmark salaries against the market.
• Build incentives into your remuneration packages.
• Be cognizant of the constraints the CEO and the CFO are under. In other words, help solve their problem don’t be the problem.
• Look after your interests, but be careful not to reward yourself at the expense of your team.