How can I best structure a global employee bonus program?
January 25, 2011 2:47 PM Subscribe
How can I best structure a global employee bonus program?
I am in the process of creating a global employee referral program for our company. I need to find a way to structure the program so that the bonus amounts that will be paid are appropriate for various countries. In other words, even though I might pay $1,000 USD to a U.S. employee for a hired referral, I do not plan to pay the equivalent of $1,000 USD in local currency to an employee in developing country X. If I did, I might be paying the person a bonus equal to months of their normal salary. I'm trying to keep the 'value' of the bonus consistent.
As I started to research the question, I came across the 'Big Mac Index' . This index is based on the theory of purchasing-power parity. Exchange rates should equalize the price of a basket of goods (a big mac in this case) in different countries.
I've hit a roadblock and am appealing to the hive mind for help. What are some ways that I can use this index to determine what an appropriate 'local' bonus would be for a country?
I am in the process of creating a global employee referral program for our company. I need to find a way to structure the program so that the bonus amounts that will be paid are appropriate for various countries. In other words, even though I might pay $1,000 USD to a U.S. employee for a hired referral, I do not plan to pay the equivalent of $1,000 USD in local currency to an employee in developing country X. If I did, I might be paying the person a bonus equal to months of their normal salary. I'm trying to keep the 'value' of the bonus consistent.
As I started to research the question, I came across the 'Big Mac Index' . This index is based on the theory of purchasing-power parity. Exchange rates should equalize the price of a basket of goods (a big mac in this case) in different countries.
I've hit a roadblock and am appealing to the hive mind for help. What are some ways that I can use this index to determine what an appropriate 'local' bonus would be for a country?
You could pay it as a percentage of the salary range being offered for the position. That way you both reward people more for recommending people to fill higher demand, better paid positions, and keep things relatively stabilized from place to place.
posted by jacquilynne at 2:54 PM on January 25, 2011
posted by jacquilynne at 2:54 PM on January 25, 2011
How about paying a bonus equal to some percentage of the hired referral's annual salary?
posted by Perplexity at 2:55 PM on January 25, 2011
posted by Perplexity at 2:55 PM on January 25, 2011
Response by poster: I like the 'percentage of the hired person's salary' idea, but I would like to avoid making it possible for others to then calculate the salary of the new hire.
posted by mockjovial at 2:59 PM on January 25, 2011
posted by mockjovial at 2:59 PM on January 25, 2011
Why would the cash amount of the bonus be public information any more than the amount of the salary is? Just don't make that public, problem solved.
posted by brainmouse at 3:03 PM on January 25, 2011
posted by brainmouse at 3:03 PM on January 25, 2011
Response by poster: The cash amount of the bonus would not be public, but person who receives the bonus would then easily be able to calculate the salary.
posted by mockjovial at 3:11 PM on January 25, 2011
posted by mockjovial at 3:11 PM on January 25, 2011
Oh, I misunderstood the nature of the bonus. Can you base it off the middle of the hiring salary range for that country or something like that? I don't think the person should get more money for the referral bonus if the hiree got paid more, but using salary range as the jumping off point would still be fair.
posted by brainmouse at 3:16 PM on January 25, 2011
posted by brainmouse at 3:16 PM on January 25, 2011
Make it a percentage of the referrer's salary instead of the new hire's. You can play with monthly or annual salaries and whether to scale it based on filling high-demand or high-level positions to see whether you get numbers you're comfortable with. For example, 2% bonus for someone making US$50,000 annually is $1,000, but if they filled a job that's worth more to your company you could scale it to 3-4% (i.e. $1,500 or $2,000).
posted by asciident at 3:20 PM on January 25, 2011
posted by asciident at 3:20 PM on January 25, 2011
Response by poster: That's a good suggestion, asciident, but the problem there is that people on the lower end of the compensation range in the organization....customer service, admins, are going to feel penalized under this setup and resent that a more highly compensated employee like an accountant or sales manager would receive more of a bonus for the same kind of referral.
posted by mockjovial at 3:26 PM on January 25, 2011
posted by mockjovial at 3:26 PM on January 25, 2011
Why would they be able to guess the salary if they don't know the multiplier you're using?
posted by turkeyphant at 4:05 PM on January 25, 2011
posted by turkeyphant at 4:05 PM on January 25, 2011
When I was at a large international company, there was a fixed amount for referrals (which was more than $1000 four years ago). There were also added bonuses depending on desperation ($3000 for finding a sorely-needed IT manager, say), but it was on a case-by-case basis. I'm not sure I would like a percentage-of-mine structure as an employee, what if an admin assistant successfully refers a new CFO? I think it's just best to keep it as flat as possible.
posted by rhizome at 4:18 PM on January 25, 2011
posted by rhizome at 4:18 PM on January 25, 2011
Start with the bonus amount you'd pay a US employee. We'll use your example of $1,000. Now let's imagine a Big Mac in the US costs $2. So a $1,000 bonus equals 500 Big Macs. Pay employees in other countries a bonus equal to the price of 500 Big Macs in their country.
posted by MexicanYenta at 4:33 PM on January 25, 2011
posted by MexicanYenta at 4:33 PM on January 25, 2011
pay two weeks (or whatever) of the median salary of employees that work in the same country as the new hire.
posted by tylerkaraszewski at 4:52 PM on January 25, 2011
posted by tylerkaraszewski at 4:52 PM on January 25, 2011
% of (estimated) marginal revenue product of the new hire.
posted by anigbrowl at 5:12 PM on January 25, 2011
posted by anigbrowl at 5:12 PM on January 25, 2011
The ability to calculate the salary is why I suggested using the range. When you put the job out there for referrals, your HR people should have a sense of a salary range they're willing to pay, even if it's not published, so you set the bonus based on a percentage of the bottom or middle of that range. Rounding it to the nearest logical number (whether that's even 100s or 500s or whatever) will add even more fuzziness. Make it independent of the actual salary of the actual hired person by doing it up front.
posted by jacquilynne at 7:24 PM on January 25, 2011
posted by jacquilynne at 7:24 PM on January 25, 2011
rhizome: "what if an admin assistant successfully refers a new CFO? I think it's just best to keep it as flat as possible."
Sounds like you've got a new executive recruiter then.
To answer the question, how about paying a multiple of the lowest paying job in the company? I won't pretend to know what job that is, but if you're worried about exposing personal details you can either take the average of wages or the number you advertise when hiring that role.
posted by pwnguin at 8:31 PM on January 25, 2011
Sounds like you've got a new executive recruiter then.
To answer the question, how about paying a multiple of the lowest paying job in the company? I won't pretend to know what job that is, but if you're worried about exposing personal details you can either take the average of wages or the number you advertise when hiring that role.
posted by pwnguin at 8:31 PM on January 25, 2011
How do you determine your salaries for people outside the US? Do you take your US salary and adjust it by a multiplier to adjust it to market salary? If you do, then it's easy - take your market value multiplier and apply it to the $1000, and there's your bonus. If you don't have a formal multiplier, try to derive it by comparing the salaries of two equivalent employees in the US and abroad.
posted by crazycanuck at 10:17 PM on January 25, 2011
posted by crazycanuck at 10:17 PM on January 25, 2011
This thread is closed to new comments.
posted by maxwelton at 2:52 PM on January 25, 2011