Compensation and Benefits - Human Resources Management

Assessments

Understand the basic principles and major elements of compensation.

Understand the various processes in compensation: Job Analysis, Job Descriptions, Job Evaluation
and CompensationSurveys.
Determine and explain what makes up a sound and effective compensation and benefits program.
Design a salary structure and related policies.
Design and carry out a compensation survey.

Compensation and benefits

Talented teams, performance-based compensation

The success of Novartis depends on the performance and dedication of our Group company associates. We
strive to be anemployer of choice that attracts, retains and motivates talented and performance-
driven people to our affiliates around the world.
Our performance-based compensation policy applies to all associates of Novartis Group companies and is
designed to:
 Align the objectives of associates with the interests of our shareholders
 Incentivize associates to create sustainable value for Novartis and its shareholders
 Support a diverse and performance-oriented culture that allows Novartis to reward people who
perform well
 Be competitive with world-class companies and industry peers
Base compensation
Each associate is given a fixed salary based on job characteristics, market competitiveness and the
associate’s skills. Salary growth depends on the associate’s individual performance and level compared to
the benchmark
Variable compensation
Novartis Group companies have three variable compensation plans:
Annual incentive plans
Most associates participate in annual incentive plans. Under these plans, awards are given each year based
on the associate’s individual year-end performance rating as well as on the Group’s or business area’s
performance.
Novartis Equity Plan “Select”
Annually, approximately 10 percent of associates worldwide receive equity grants under the Novartis Equity
Plan “Select.” Participants in this plan can elect to receive their incentive in the form of shares, share options
or a combination of both.
Long-Term Performance Plan
The Novartis Long-Term Performance Plan rewards key executives who have a significant impact on the
long-term success of the Group.
Benefits
Novartis benefits programs are an integral part of the total compensation policy and strategy and are
designed to meet the challenges of growing, global competition for talent.
These programs support the overall business objectives and strategy of Novartis. Benefits are aligned with
local legislation and practices in each country and are established to provide a framework of security for
associates.
 
Today there is a lot of talk about compensation, its cost to the organization and the company's return on
its compensation investment. As a result, a variety of new pay systems have been developed, each with
its own objectives, benefits and risks. Some companies have already installed new pay plans, and many
more are considering it.

Many companies that have implemented various new Pay Plans find that plan objectives become
disconnected from the larger picture; they have been designed with a local rather than a global view.
These companies are looking for a way to integrate their pay systems into a cohesive whole so the plans
drive the company objectives.

Other companies are beginning to look at new plans, wondering how these plans will fit into the current
pay system.

Often, there is little connection between the new pay systems and the overall business plan of the
organization. New pay systems are designed to achieve specific, departmental objectives or, worse, they
are because "everybody is doing it."

The traditional function of pay to attract, retain and motivate employees has not changed with the
introduction of new pay systems; but the emphasis has shifted from the attraction and retention functions
to the motivation function.

The planning Process

Strategic compensation planning allows an organization to focus on its strategic objectives and develop a
comprehensive plan, considering base pay, short- and long-term incentives, benefits and growth
opportunities. This kind of planning helps ensure that the compensation system will support the
organization's long-and short-term objectives without overlap, which would have more than one pay plan
driving the same objectives.

The ultimate objective of this process is to ensure that the compensation system attracts and retains the
desired employees and that it motivates them to do those things that support the business plan.

The steps involved are:

Step 1: Identify business objectives. We begin the process by focusing on the strategic objectives of the
organization. What does the company plan to do in the short and long term to gain and to keep a
competitive advantage? Will it increase its market share? Expand into new markets or new market
niches? Develop new products? Flatten its structure?