A glimpse into the components of a salary

May 31, 2023 | 12:05 pm

The Kenyan public service is paid using two types of salary regimes, namely, the consolidated salary regime and the segregated salary regime.

Consolidated pay is a form of lump sum compensation based on the total cost of employment. The pay consists of all the entitlements joined together, without specifically stating any breakups.

It can be stated as consolidated gross salary and any statutory deductions that is paid as a ratio of monthly pay will be based on the consolidated amount.

Implementation of a consolidated pay structure in the public service has facilitated wage bill management and forecasting due to the predictability of the pay structure over time.

Segregated salary, on the other hand, is a form of salary regime that involves payment of basic salary and the other monthly remunerative allowances separately. The basic salary is the base income of an individual, which forms the fixed part of one’s compensation package.

A number of remunerative allowances form the amount payable either as statutory requirements or the amounts received by the employee to facilitate the attainment of certain service requirements or work under certain specified circumstances.

In Kenya, public servants who are not State officers are paid a segregated salary with most of the public service institutions paying house and commuter allowances, while others pay a variety of other allowances specific to various circumstances and work environment.

Implementation of this pay structure, without a cap on the number of allowances or setting the percentage of allowances to gross pay, has made it easy for institutions to increase the number of allowances. In general, higher cadres in the public service draw more allowances than the lower cadres.

Salary range

Salary ranges help employers control their pay expenses and ensure pay equity among employees based on an organisation’s defined compensation philosophy.

Employers usually consider the range of pay in the salary surveys and other information that may be relevant when establishing an average salary.

There are several advantages to using a salary range:

  1. Consistency: Salary range gives companies a system to pay employees consistently for the work they do in a given position. The range usually allows for differences in education, experience or performance. However, employees in the same type of job know they earn pay that is relatively similar to colleagues and this helps eliminate internal conflict.
  2. Flexibility: The benefit of having a range, rather than a single, set pay, is flexibility. You can pay slightly more or less for an employee based on his level of education, experience or performance. This gives companies an opportunity to offer a little more money to get an employee with a stronger background. In the same way, it allows them to potentially save on labour costs when hiring employees with limited backgrounds.
  3. Budgeting: It helps organisations analyse the number of jobs at each pay grade and get a reasonable estimate of total labour costs by job, department and organisation. This makes it easier for leaders to assess current labour, relative to need, and project future needs for certain jobs. Labour is usually one of the most expensive components of operating a business.
  4. Competitive Analysis: Along with promoting internal equity and consistency, a structured salary range gives companies a better ability to compare with competing organisations. This is much more possible than trying to analyse pay when it is customised for each individual job or employee. If a company finds its pay range is below competitors, it can increase the minimum and maximum to attract better talent.

Salary notch

A salary notch is a level of pay or a scale showing the rates of pay for employees working at each level of an organisation, and often falls within the salary range. It also shows the increases in pay an employee gets when they spend a certain length of time at a particular level. The number of notches per scale depends on salary range, terms of contract, and the organisation’s compensation policy.

Salary increments

Salary increments are often expressed as a percentage of an employee’s overall base pay. An increment usually represents a portion of what the employee earns per year. Employers use increments to increase or decrease base salaries or to award bonuses.

Employees use them as a benchmark to either negotiate a pay increase or a starting salary with a new employer. Public employees typically receive annual raises based on salary increments.

A salary increment may be a one-time payment that substitutes for a bonus. An employer could use salary increments to compensate for a benefit like higher health care costs in place of medical care reimbursements.

One-time increments are typically paid out during a single pay period. Alternatively, employees may receive annual increases in their pay, typically as a percentage increase of the base pay. This increase is sometimes referred to as a salary increment.

Employees sometimes use salary increment percentages to negotiate a higher rate of pay. An effective way to negotiate a higher salary is to gather market data on the average salary range for your field.

It is important to consider years of experience, education level, type of position and size of employer. Some employers may agree to award existing employees salary increments for college degrees and other types of education credits.

The employee earns additional degrees or education credits during his tenure. As a reward for enhancing his knowledge and staying with the company, the employer boosts his salary by an incremental percentage.

Key factors in determining salary increases

 Performance/merit based.

  1. General economic conditions, including inflation rate, changes in the cost of living, etc.
  2. Collective bargaining agreement for unionised employees.
  3. The employer’s overall financial situation.
  4. The employee’s length of service.
  5. The employee’s qualifications (that is, the scarcity of certain talents in the labour market and the likelihood that the employee will be paid more for them elsewhere).
  6. What other employers in the local area are paying for similar jobs.
  7. What the employee requires in the way of incentives.

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