GGS Cost Comparator
Cost Comparison
An essential factor for any robust business case are the potential financial benefits of taking action. To provide an example of the benefits that can be achieved by implementing GGS, we have taken a standard medium size
organization, and have put some conservative figures on solving typical people issues that exist in most
organizations, such as potential overpayment through grade drift and employee turnover.
Company X overview
- Company X
- Payroll Bill £50m for 2,000 employees
- Issues:
- Currently no robust grading structure or market comparison
- Turnover issues (approx. 20 percent)
Issue 1: No grading structure or market comparison
- Cost control exercise and market comparison: use WW Global Grading to ascertain appropriate levels within business and address market comparability
- Outcome
- Market comparison - approx. 20 percent of employees overpaid in relation to companies acceptable pay ranges
- The 400 (20 percent) employees split naturally through varying degrees of seniority (and base salary)
- Market comparison - approx. 10 percent of employees underpaid in relation to companies acceptable pay ranges
- The 200 (10 percent) employees split naturally through varying degrees of seniority (and base salary)
- Annual total cost of doing nothing:
- Approximately £1.5m plus knock-on effect on bonus, pensions, etc. - addressing the issue may result in freezing salaries or 'red circling'
- Addressing the underpaid:
- Moving the underpaid (10 percent) to within an acceptable pay range may only reduce the potential £1.5m savings to approximately £1.0m (again excluding the knock-on effect of bonus and pension). This would, of course, be subject to the
organization committing itself to re-addressing the underpaid population.
Issue 2: Turnover issues
- Reasons* given for employees leaving
- promotion elsewhere
- lack of development opportunities
- change of career
- level of pay
- Again, if turnover is approximately 20 percent* - 400 employees split naturally through varying degrees of seniority
- Costs of recruitment and labor turnover per employee*
- Senior Managers / Directors - £18,000
- Managers/professionals - £10,000
- Admin, secretarial and technical - £5,500
- Services - £4,745
- Estimated total cost of £2.6m
Our Global Grading System can therefore help with:
- creating a robust underpin - grading and leveling roles across different business units and countries
- market comparison in several sectors within different countries
- support talent and succession planning
* 2005 CIPD Annual Survey Report: Recruitment, retention and turnover
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