ALIGNING COMPENSATION & BENEFIT TO

BUSINESS STRATEGY
July 2019

HAP
 Big shifts shaping the landscape of Indonesian financial
institutions today

Source: Monitor Deloitte 2018 2

 The future works for Financial Services is also shifted

Banking Model in the Past Shifting from product to customer centric

Bank Branch
Embracing the fintech ecosystem
Partnering with regulatory agencies
Prioritizing technology capability
Mitigating risk (including cyber)
Call Center Online Mobile Mail
Reimagining the workforce

Banking Model in the Future

Bank Branch

63
Our competitors are not only Fintech already
Mail
Call Center conventional Bank, but also registered in OJK
Mobile Financial Technology *) https://www.ojk.go.id/id/berita-dan-
kegiatan/publikasi/Pages/Penyelenggara-Fintech-Terdaftar-di-
OJK-per-Juni-2018.aspx
Open APIs
Online

Source: Monitor Deloitte 2018 3

 Human Capital is required to focus on respond ing to the
big shifts

F U T U R E W O R K F O R C E T R E N D

Employer Workforce of Learning & Automation Jobs and

Brand
01 the future
02 Development 03 & Analytics
04 Compensation 05

• Increasing competition • More versatile • Immersive learning • Driving self-service • Redesign jobs and
from within and workforce driven by environment, not a delivery solutions compensation models
outside of Financial industry disruption stand alone • Adaptive automation to reward contribution
Services industry • Speed is key in capabilities and systems take over to business value
• Employee preferences deployment, flexible formats decision-making • Robust metrics to
are evolving workforce plan and • Learning curricula • Predictive analytics to reinforce meritocracy
• Personal-professional adaptability of talent focusing on both identify skills and • Rewards for positivity
life continue to blur • Pipeline of talent must technical gaps and experiences required through flexible
be strengthen mind-set requirements benefits scheme such
• Talent will switch to throughout careers • Labor market analytics
another organization to map talent as health rewards
that better aligns to • STARTUP-ify approach
their values to bring the best
“start-up thinking”

Source: PWC, BCG, Deloitte research on 2022 workforce trends 4

 Human Capital Framework is established to be our
foundation to support and sustain Business Growth

Company Objective
Human Capital Vision & Mission
Hiring process and
experience with
most efficient SLA

Operating Model Employer value Accelerate new

proposition to hire’s productivity
attract talent and engagement

EMPLOYEE EXPERIENCE Data Analytics

Equip/ support/
Key feedback gathered recognize with
from exit interview for
Organization further improvements
required skills, tools
and reward

Development

Performance and
productive relationship
support career growth

Human Capital Management System

Core Values

5
 Performance Management System

Sistem Penghargaan Sesuai Kinerja

6
 Performance Management

TA R G E T S E T T I N G
Alignment Objective
Company/
Directorate
STEP 1 STEP 2 Key
Initiatives

Self Manager
Objective Review on
Setting Objective
Setting

Cascading Objective

Setting Objective (ESS) Setting and Review Objective (ESS)

 Balanced Scorecard Category  Cascade Manager’s Objective

 Objective Name to employee (if any)
 Objective Description  Review (change/edit)
 Measurement employee objective
 Target  Lock employee’s objective
 Start Date & Due Date

7
 Performance Evaluat ion

Evaluation Step (ESS)

1 2 3 4 5
1:1
Self Mid Manager Manager Employee
Review Mid Calibration Communi Disclaimer
Review cation

Mid Year

65 7 8 9 10 11 12
Employee Manager Manager 1:1
Update Self End Manager Employee
Update End Calibration
Objective Objective Review Review Communi Signature
cation

Update Objective End Year

Doing by Employee
Doing by HCBP & Supervisor
Doing by Supervisor
8
 3 P Concept

Diagram by Mercer
9
 Compensation Philosophy

Attract and value critical position holders and our top-performers,

retain and motivate them to drive high performance culture
Pay for performance and commitment for sustainable growth
Compensation should be aligned with overall financial
performance and reflective company’s medium term business
strategy
Ensure competitiveness with suitable market benchmark
Align with shareholders values & encourage strong risk culture

10
 Compensation framework

‘3 DRIVERS
1
Company Business Strategy
Financial
Risk Culture
Perspective Performance

2
Meritocracy Availability of
Skills &
Principle Competencies
Individual Individual
Performance & Market Position
Contribution Valuation

Individual
Potential

3
Market Market Trends & Statutory
Perspective Competitiveness Requirements

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 Remuneration Component

• Retention purpose for selective key position • Very few selective key
holders & senior management people for retention
Long Term Incentive • Deferral mechanism for cash and equity
based instrument

• Assist employee basic needs (i.e. medical, life • All permanent

Benefits & Perks insurance, COP, housing loan, etc) employee

• Performance bonus or • Discretionary, only

• Incentive based on sales incentive scheme for those who
Short Term Incentive
Total remunerations
Total Compensation

• Apply meritocracy / SIPASTI perform well

[Performance based Pay]

• Different pay for different job • All employee

• Different pay for different skills competence and
Fixed Pay experience
• Consider Internal equity
[Position based Pay]
• Entry level role follows minimum pay (based on
labor law)

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 Remuneration Components (Details)

Best Practices in Common Organization:

Fixed Pay Benefits & Perks STI LTI

• Basic Salary • Medical Insurance • Performance Bonus • Long Term Cash

• Hardship allowance • Life insurance • Incentive Sales Deferral Bonus
• Loan interest subsidy allowance • Car Ownership Program (>3 years)
• Gasoline allowance • Housing loan • Shares or
• Driver allowance • Car/Motorcycle loan Phantom Shares
• Housing allowance • Computer loan • Stock option
• Transportation allowance • Emergency loan Plans
• Car Running Cost allowance • Club membership
• THR Ied allowance • Education saving subsidy
• THR Year end allowance • Loyalty reward
• BPJS Medical • DPLK (Pension Fund)
• BPJS Manpower • Long service award

STI = Short term Incentive

LTI = Long term Incentive

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 Compensation Elements (Mercer Approach)

Diagram: Mercer Compensation Elements

Source: Mercer IPE Methodology
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 Type of Incentive Scheme Linked With Business or
O r g a n i z a t i o n Ta r g e t

INDIVIDUAL INCENTIVE SCHEMES GROUP/

ORGANISATION-
PRODUCTION SALES MANAGEMENT WIDE SCHEMES
• Piece-rate plans • Commission • Bonuses based • Bonuses based
plans on work unit on group
• Standard time
performance performance
• Merit awards
• Individual
• Deferred • Gain-sharing
bonuses • Merchandise &
Compensation plans
travel incentives
• Share options • Profir-sharing
plans
• Suplementary
benefits • ESOPs
(Employee Share
• Merit increases
Ownership
Plans)
• Suggestion
System
 Pay Mix Philosophy

1. Pay mix is the composition of Fixed Pay versus variable pay components
2. Pay mix will be defined based on business unit/Job family, considering strategic
alignment and market practice
3. Target pay mix reflects the desired pay mix for employees who achieve an on-
target performance
4. Actual pay mix will be dependent on the actual company’s variable pay funding
5. The composition of variable pay :
– The higher position in the organization, the bigger portion of variable pay
– Job families with revenue/profit targets (i.e. sales job) will have higher variable
pay
– Must ensure not to weaken risk culture and control function

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 Pay Mix

120%
Paymix
Purpose Product 100%
10% 10%
20%
Pay for Long Term 30%
80% 20%
Commitment Incentive
for Growth 30%
60%
40%
Pay for Bonus/ 90%
40%
Performance Tantieme 70%
50%
Pay for 20%
Salary 30%
Position
0%
Director Senior Middle Junior
Salary Bonus/Tantieme

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 Fixed Pay

Provide fairness of individual pay relative to the job value, job

Objective holder’s expertise and suitable markets benchmark

1. Company applies clean wage salary system (single salary point)

2. Common Company to adopts broad band salary structure

3. Market pay position is determined based on:

Guiding  Company Business strategy
Principles  Suitable market benchmark

4. Individual salary position vary depends on:

 Skills competencies
 Performance
 Experience
 Position scarcity

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 Performance Bonus

Objective • Provide fairness based on individual performance and contribution

• Tools to motivate and drive for better performance and contribution

1. Bonus pool (staffs and senior management) is determined based on Bank

Performance against Plan & YoY
• Primary factor: NPAT/Profit
• Secondary factor: i.e. economic condition, regulatory, market,
restructuring, etc.
2. The amount of bonus pool is based on a certain percentage of NPAT/Profit
Guiding
3. Incremental or detrimental percentage of NPAT/Profit should consider
Principles relative performance against plan (above, meet or below plan).
4. Bonus distribution should be aligned with unit and Individual performance
5. Non performing employee will get no bonus
6. Employee who is being found guilty conduct issue (gross negligence, fraud,
etc), relating to previous period but only discovered later already paid
performance bonus may be subject to “claw back”.

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 LoB /Support Bonus Pool Allocation Method

Performance rating
Company Bonus Guidelines table Grade
3 4 5
Senior

MIddle

LoB/Support Function Bonus Pool First

Line

LOB/Support
Function
Calibration Process Market
Performance

Adjusted LoB/Support Function

Bonus Pool

LoB = Line of Business

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 I ndiv idual Bonus Dist ribut ion Factors

Clerical Staff Managerial level

Company Performance Company Performance
Profit/ROE Profit/ROE

LoB and Support

Function Performance
(Relative Performance &
Rank)

Individual
Market /Business
Performance
Segment
Rating 3, 4 and 5

Individual Performance
Rating 3, 4 and 5

Total Cash for rating 4 &

5/Critical Resources/Talent

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 Salary Increase Guideline

Merit Increase Matrix

Group of PA 3 PA 4 PA 5
PA 1 PA 2
Grade <P25 P25-P50 P50-P75 >P75 <P25 P25-P50 P50-P75 >P75 <P25 P25-P50 P50-P75 >P75
Senior
Middle
First Line
Staff

• Salary increase to the company performance and financial.

•Better performance will get higher salary increase
•Senior level in common practice get lower increase compare
lower level. This is align with paymix concept which Senior level
more drive with bigger portion of variable pay.
APPENDIX
 2019 Initiatives
2019
Excelling & Sustaining : Institutionalize HC process to sustain a high performing organization

HCMS Operating Model Organization Development

• Equip people with capabilities to use and • Identify new roles that directly support • N/A
leverage HCMS for day to day activities digital transformation
• EAZY Champions • Establish and implement digital ways of
People

working for the HR organization through

behaviors, operating model and how
works gets done within the function
• Reengineer business process related to • Revamp Human Capital Operating Model
HCMS by integrating internal and external
workforce trends
• Update Human Capital Manual Book
based on the New Operating Model
Process
• Rollout manpower plan aligned with
finance
• Establish Job Simplification Program to
build equity and productivity
• Develop agile organization structure

• Pilot the future of work open talent
concept internally (marketplace of
internal skills and capabilities), externally
(freelancers, outsourcing and gig talent)
and machines (RPA, automation)
through team based solutions that are
impactful and scalable
• Develop outsourcing framework

• Improve HCMS reporting capabilities • Establish human capital dashboard to • Manpower Planning Module
• Enhance HCMS to simplify the business track and monitor the effectiveness of Implementation in HCMS
Infrastructure

process Human Capital Operating Model

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