2.7
RTHKC management should note that any lowering of the recommended ranges will make it difficult to attract good candidates. On the other hand, raising compensation levels above market rates may bolster the chances of drawing strong applicants, but it will add unnecessary expense and have only a short-term effect as competitors respond with matching increases.
3 – OFFER COMPETITIVE MIX OF COMPENSATION AND BENEFITS
3.1 In designing the optimal mix of compensation elements and benefits, the team followed two guiding principles. First, the cash component should be maximized to attract and retain staff. Second, bonuses should be used to motivate superior performance among mid-level and senior managers. To achieve these objectives, we recommend a simple basic package for all staff, plus additional benefits and incentives for those in Grades 5 and up.
SIMPLE, COMPETITIVE
BASIC PACKAGE
3.2
The proposed structure is both simple and market-competitive: basic salary, superannuation, and medical, dental, and life insurance benefits for all staff, plus a housing allowance and performance bonus for those in Grades 5 and up (see Exhibits 8, 9). Salary should be payable over 12 months for those eligible for a bonus, and over 13 months for others. Other proposed terms of service such as leave, overtime, and allowances are in line with commercial practices. Appendix D provides details on the various package elements.
3.3 To provide a competitive retirement/severance benefit, RTHKC should contribute 10 percent of employees' basic salary to a provident fund, with no contributions required from employees. We also recommend a relatively short vesting schedule (i.e., 6 months to 1 year), which costs little yet increases RTHKC's attractiveness vis-a-vis its competitors. Life insurance coverage is extended to all staff. The medical insurance, which will cover staff and dependents, should provide basic outpatient, dental and hospitalisation benefits in line with the job grade. Administration of insurance and superannuation plans should be handled by a suitably qualified Hong Kong firm, of which there are a good number; this is the most cost-effective option given RTHKC's size.
McKinsey & Company, Inc.
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