What is the Salary Management System?
Salary Management system is a method that determines how the worker receives payments and other compensation for tasks performed for the company. Something that may vary depending on the productivity, effort, ability, and responsibility of an individual.

A well-structured salary system is a useful tool to facilitate compensation management, helping to control personnel costs, and allowing effective recognition of the contribution and performance of its employees.

 

Many companies ask themselves: How much is the work of my employees worth? How much should the total cost of the payroll be? How can remuneration contribute to incentivize performance?

 

We start from the principle of establishing a salary structure that ensures internal salary equity while maintaining competitiveness concerning the market. We also define the variable salary management systems that can encourage productivity.

Different types of economic remuneration :

  • Salary: The mandatory money that all companies must pay their employees on behalf of their services and work activities. It can never be less than the minimum interprofessional salary when it is a typical 8-hour contract. 

  • Bonus: The payment of overtime that any worker can perform. You cannot demand more than 3 hours a day or abuse this function more than three times a week.

  • Benefit: Amounts of money that the worker receives annually, is not part of the salary and is intended to cover needs that are not included with the monthly salary. 

Commission: Percentage that corresponds to an employee according to the sales made.

Types of Salary Management systems

When choosing a salary management system, we can do it as follows:

  • Depending on the periodicity with which the payment occurs: for example, if it is a monthly, biweekly, or daily salary. Something closely related to the type of contract and the nature of the work.

  • According to the form of causation: here we refer to variable salary, in-kind or fixed. The first has incentives, while the second adds other types of compensation, such as bonuses in the gym, medical insurance, and the like. Regarding the fixed and as its name indicates, it lacks fluctuations beyond overtime and the like.

  • According to the elements included in the compensation: we distinguish between ordinary salary and basic salary. The ordinary only includes work done during the day, while the integral includes overtime, shifts, benefits, etc.

The importance of Salary management System in HR

Choosing the right salary management system in HR is critical. Why? Because doing so, motivates retains, and compensates employees (and consequently prevents the brain drain ). The worker, feeling that his work is valued and that he is financially incentivized, acquires a stronger feeling of belonging to the company and does not seek other job opportunities outside.

Characteristics of a salary management system

A valid salary management system must meet the following characteristics:

  • That the incentive is directly proportional to the work done by the employee, so that if one is more productive than another, they receive a higher remuneration

  • That the effort is rewarded in a notorious way and is not a mere formality of the company, that does not make too much difference, with what the worker already received.

  • Make clear the business objectives and of each employee, to establish productivity ranges associated with increasingly higher remuneration ranges

  • That HR knows the needs and concerns of each worker and there is a good communication climate.

How to choose a salary management system

To choose the most appropriate salary management system for our company and our employees, we must take into account a series of variables. Namely:

The objective of the salary management system

It is necessary to clarify the objective, that is, what we want to achieve when implementing a salary management system. That is why we will have to be clear:

  • If we want to have a payment system with a fixed salary and commissions in which there are remuneration scales based on productivity. This means that the payment of the incentives is fair and equitable.

  • If we look for variable procedures that allow to reduce or cancel the incentives if the worker assumes unnecessary risks to achieve his objective.

  • If we want employees to be able to balance their work with their family life . Thus, for example, there are companies that have installed nurseries inside the building. This measure not only reduces work absences, but also increases productivity.

  • If we seek to attract and retain qualified personnel. An optimal salary management system draws the attention of external staff and motivates the internal.