Pay Model – Summary
The Pay Model is a framework used in compensation management to design and
evaluate an organization’s pay system.
It helps ensure that employee pay supports business objectives, motivates
performance, and remains fair and competitive.
The model has three main components:
1. Policy Decisions
These are the basic principles that guide pay system design.
They answer the question: “What do we want our pay system to achieve?”
There are four key policy areas:
Policy Focus Example
Pay differences among jobs A manager earns more than a
Internal Alignment or skills within the cashier because of higher
organization responsibility
External How the organization’s pay Matching market pay rates to
Competitiveness compares with the market attract talent
How pay varies for
Employee Giving bonuses for high-
individual performance or
Contributions performing employees
seniority
How pay decisions are Transparent pay structure with
Management
managed and communicated clear rules
2. Techniques (Pay System Structure)
These are the methods and tools used to implement the pay policies, such as:
Job evaluation (to set internal alignment)
Market surveys (to ensure external competitiveness)
Performance appraisals or incentive systems (to reward contributions)
3. Objectives
The objectives show what the pay system aims to accomplish:
Efficiency: Improve performance, quality, and customer satisfaction
Fairness: Ensure equal pay for equal work
Compliance: Follow laws and regulations
Ethics: Maintain transparency and trust
🌟 Example: McDonald’s Pay Model
Component Example
Crew members, shift managers, and store managers have
Internal Alignment
structured pay differences based on responsibility.
External McDonald’s benchmarks wages against other fast-food
Competitiveness chains to stay competitive.
Employee High-performing employees may earn bonuses or be
Contributions promoted faster.
Pay policies are standardized globally but adjusted for local
Management
labor markets.
Motivate employees to deliver quick, friendly service while
Objective controlling labor costs and staying compliant with wage
laws.
✅ In short:
The Pay Model helps organizations decide how much to pay, to whom, and why,
balancing fairness, competitiveness, and motivation.
Example: McDonald’s (Fast Food Industry)
Objective: Efficiency and fairness
Policy Decisions:
Internal alignment: Crew → Shift Manager → Store Manager → Area
Manager
External competitiveness: Pay matches fast-food industry averages.
Employee contributions: Bonuses for sales, punctuality, and customer
service.
Management: Standardized pay policies across branches.
Techniques: Job evaluation, performance appraisal, incentive system.
Outcome: Motivated workforce, reduced turnover.
2️⃣ Example: Google (Technology Industry)
Objective: Attract and retain top talent; promote innovation.
Policy Decisions:
Internal alignment: Higher pay for technical roles requiring unique skills.
External competitiveness: Salaries above market average.
Employee contributions: Stock options, innovation bonuses.
Management: Transparent total reward philosophy.
Techniques: Market surveys, equity-based compensation, peer reviews.
Outcome: High employee satisfaction, innovation-driven culture.
3️⃣ Example: Walmart (Retail Industry)
Objective: Balance efficiency and cost control.
Policy Decisions:
Internal alignment: Clear job grades from cashier to store manager.
External competitiveness: Matches competitors in retail market.
Employee contributions: Annual bonuses based on store performance.
Management: Centralized HR system manages pay decisions.
Techniques: Job evaluation system, performance targets.
Outcome: Cost-effective labor system, consistent pay fairness.
4️⃣ Example: Microsoft (Technology Industry)
Objective: Reward performance and innovation.
Policy Decisions:
Internal alignment: Technical specialists earn more than generalists.
External competitiveness: Salaries benchmarked globally.
Employee contributions: Bonuses, stock grants, and promotions for high
performers.
Management: Performance reviews every 6 months.
Techniques: Market surveys, 360° appraisals, pay-for-performance model.
Outcome: Increased innovation and long-term retention.
5️⃣ Example: General Motors (Manufacturing Industry)
Objective: Efficiency and compliance with labor unions.
Policy Decisions:
Internal alignment: Wage differences based on skill and seniority.
External competitiveness: Follows auto industry union standards.
Employee contributions: Overtime pay, safety bonuses.
Management: Joint union–management wage committees.
Techniques: Collective bargaining, job evaluation.
Outcome: Stable labor relations, consistent wage system.
Example: Starbucks (Service Industry)
Objective: Retain skilled baristas and ensure fairness.
Policy Decisions:
Internal alignment: Pay based on role (barista, supervisor, manager).
External competitiveness: Competitive hourly wages and benefits.
Employee contributions: Performance bonuses, free education program.
Management: Open communication and clear pay policies.
Techniques: Market survey, job classification, incentive plan.
Outcome: Employee loyalty, brand reputation for fairness.
Summary Table
Company Industry Main Objective Key Feature of Pay Model
Tiered pay & performance
McDonald’s Fast Food Efficiency & fairness
bonuses
Innovation &
Google Technology High pay, stock options
retention
Walmart Retail Cost control Centralized pay structure
Microsoft Technology Reward innovation Pay-for-performance system
General Compliance &
Manufacturing Union-based pay structure
Motors efficiency
Starbucks Service Retention & fairness Education & benefit-based
Company Industry Main Objective Key Feature of Pay Model
rewards
Sure! Here are some examples of how the Pay Model is applied in Bangladesh, across
different industries. I’ll show it in the same structure: Objectives → Policy Decisions →
Techniques → Pay Structure → Example.
1️⃣ Example: Grameenphone (Telecommunications)
Objective: Attract skilled telecom professionals and retain top talent.
Policy Decisions:
Internal alignment: Pay varies by role: customer care, technical, management.
External competitiveness: Salaries benchmarked against other telecom operators in
Bangladesh.
Employee contributions: Performance bonuses, KPI-based incentives.
Management: Transparent HR policies and clear promotion paths.
Techniques: Job evaluation, market surveys, performance appraisal.
Pay Structure: Competitive base salary + performance bonus + benefits (insurance,
mobile perks).
Outcome: Retention of skilled staff, high motivation.
2️⃣ Example: BRAC (NGO / Development Sector)
Objective: Fair compensation for field and office staff while maintaining budget sustainability.
Policy Decisions:
Internal alignment: Field officers earn less than program managers.
External competitiveness: Pay compared with other NGOs in Bangladesh.
Employee contributions: Incentives for completing projects efficiently.
Management: Structured HR policies across multiple regions.
Techniques: Job evaluation, performance assessment, regional salary scales.
Pay Structure: Base salary + project incentives + benefits (training, health insurance).
Outcome: Motivated staff, efficient project delivery.
3️⃣ Example: Square Pharmaceuticals (Manufacturing / Pharma)
Objective: Motivate employees, ensure fairness, and comply with labor laws.
Policy Decisions:
Internal alignment: Pay based on job role (factory worker → supervisor → manager).
External competitiveness: Benchmarked against local pharma companies.
Employee contributions: Overtime pay, productivity bonuses.
Management: HR oversees structured pay and career growth.
Techniques: Job classification, performance evaluation, productivity tracking.
Pay Structure: Fixed salary + performance bonuses + benefits (medical, transport).
Outcome: Stable workforce, increased productivity.
4️⃣ Example: Robi Axiata (Telecom / Service Industry)
Objective: Attract young talent and reward performance.
Policy Decisions:
Internal alignment: Pay differences by level: entry-level → mid-level → senior
management.
External competitiveness: Market-based salaries in telecom and IT sectors.
Employee contributions: KPI-linked bonuses and recognition programs.
Management: HR monitors market trends and internal equity.
Techniques: Market salary surveys, annual appraisals, incentive programs.
Pay Structure: Base salary + performance bonus + benefits (mobile, health, learning
opportunities).
Outcome: Retains skilled employees, boosts engagement and sales.
5️⃣ Example: BRAC Bank (Banking / Finance)
Objective: Reward performance and maintain competitive salaries.
Policy Decisions:
Internal alignment: Officers → Managers → Senior Management
External competitiveness: Salaries benchmarked with private banks in Dhaka.
Employee contributions: Commission for sales targets, annual performance bonuses.
Management: Clear policies and structured promotions.
Techniques: Performance appraisal, KPI tracking, incentive plans.
Pay Structure: Base salary + incentives + benefits (medical, provident fund).
Outcome: Motivated staff, high customer service quality.
✅ Summary Table for Bangladesh Examples
Company Industry Main Objective Key Pay Feature
Grameenphone Telecom Retain talent KPI-based bonuses
BRAC NGO Fair pay & efficiency Regional salary scale + incentives
Square Pharma Manufacturing Productivity & compliance Fixed + overtime + benefits
Company Industry Main Objective Key Pay Feature
Robi Axiata Telecom Attract & retain young talent Performance bonuses + benefits
BRAC Bank Banking Reward performance Incentives & structured career growth
If you want, I can make a diagram showing the Pay Model specifically in Bangladesh, with
these examples integrated, so it’s perfect for a presentation or report.