3P compensation is a new salary payment mechanism based on established criteria, allowing HR managers to comprehensively assess the performance of each employee in the company. So what is 3P compensation and what are the benefits of using it? Let's find out more in the following article.
1. What is 3P salary?
The 3P compensation system is a method currently being applied in many companies in Vietnam. The goal of 3P is to ensure internal and market fairness in compensation, thereby ensuring the ability to attract, retain, and motivate employees.
The three "P"s are:
- Pay for “Position” – Salary based on position. (Part 1)
- Pay for “Person” – Individualized Salary Payment. (Part 2)
- Pay for Performance – Compensation based on performance and job results. (Part 3)
2. So what are the benefits of using the 3P compensation mechanism?
2.1. Ensure internal fairness.
This explains previously unanswered questions from employees about why salaries vary between positions and employees. It helps employees understand how to earn higher salaries and better incomes, enabling them to strive and compete for better results for themselves and the company.
2.2. Ensuring external fairness
If creating internal fairness involves constructing a P1 and P2 scoring system, then external fairness is about determining the market salary for various positions, across different company sizes, based on market research to identify a salary level that matches market needs. This allows companies to attract talent through their compensation policies.
2.3. Creating motivation for business development
Through the 3P compensation model, it encourages employees to pay more attention to the final results and make greater contributions to mitigate risks and worst-case scenarios, leading to higher employee productivity, greater efficiency, and the company paying salaries that are more appropriate to its business situation at any given time.
In short, regardless of the criteria used, as a Human Resources Manager, you need to balance the essential needs of employees with the interests of the employer so that the business can develop sustainably and prosper.
Given the benefits that the 3P compensation system offers, businesses should adopt it in their compensation mechanisms to better manage their operations.
Refer: Payroll management services
3. Guidelines for establishing and determining salary grades/levels in enterprises.
Suppose we need to determine the salary range for the following job titles:
- Clerk
- Business supervision
- Training staff
- Sales manager
- Chief accountant
Step 1: Identify the evaluation criteria
For positions requiring salary grade determination, we need to evaluate based on the following six criteria:
1. Physical and mental effort
Definition: This criterion measures the physical, observational, and mental demands of the job. These demands should be assessed in terms of frequency, duration, and intensity.
2. Qualifications and experience
Definition: This criterion refers to the amount of knowledge and understanding of the job's professional expertise when a person first takes on this role. This knowledge can be acquired through formal education or training programs, and some is gained through experience.
3. Decision-making ability
Definition: This criterion refers to the extent to which the job performer must make independent decisions and the difficulty level of these decisions. Additionally, the level of creativity, innovative thinking ability, and analytical skills are also considered.
4. Communication skills
Definition: This criterion measures the job requirements regarding the frequency and level of communication with others and the ability to persuade others to successfully complete transactions.
5. Consequences of making mistakes
Definition: This criterion measures the magnitude of the consequences of each error on the company's internal operations or on its customers, and what needs to be done to correct it. The consequences of an error are measured by financial losses, damage to machinery and equipment, and the impact of corrective action on the safety of others. Only typical errors are considered.
6. Working conditions
Definition: This criterion measures the level of risk and inconvenience surrounding the work and environment.
Step 2: Build the scoring framework
Clearly describe/define the different scoring levels for each criterion.
Step 3: Conduct the evaluation and compile the scores for each job title.
- Enter the job titles (listed above) in the job title column of the scoring sheet.
- Consider each criterion (6 criteria) for each job title: for each job title, fill in the "Level" column to indicate the level of each criterion, and in the "Points" column, record the corresponding score in the "Points" column of the scoring method table.
- Evaluate all job titles in turn.
- The total score is based on the 6 criteria for each job title.
After reading the article above, you're probably still worried about how to build a proper 3P payroll spreadsheet. Expertis offers you a payroll system building service; we will help you build a payroll spreadsheet for your company yourself.
