You are on page 1of 17

01 April 2010

Survey Methodology and Definitions

Romania TRS

8
Survey Methodology and Definitions
Below please find details of the standards and methodologies used in the survey.

8.1.
8.1.1.

Standards
Ageing Standards

In PayMonitor®, there is a possibility to age the survey data, this ageing is applied to all elements of total cash (that is Comp1, Comp2 and Comp3).

8.1.2.

Treatment of Zeros

Throughout the reports, zeros have not been used in the calculations unless otherwise specified.

8.1.3.

Treatment of Negative Values

Throughout the reports, negative values have not been used in the calculations unless otherwise specified. Treatment of Expatriates Only data for the local incumbents (not expatriates) are included in the statistics, with the exception of Middle East countries, where local employment standards require otherwise.

8.1.4.

Exchange Rates

When there is a need to change currency in which data is provided, we use the average rate of the last trade rate since 1st January 2010 to 31st March 2010.

© 2010 Mercer LLC August

Survey Methodology and Definitions 1 of 17

8. Therefore the number receiving the item may differ by item. Market Regressed Line – The result of applying one of several mathematical models to fit a smooth curve through a series of graphed "X/Y" points (representing IPE Position Class and a compensation figure respectively) such that the curve best represents the overall trend in those points. Also known as the 50th percentile. Mean – The sum of all data reported divided by the number of observations in the sample. © 2010 Mercer LLC August Survey Methodology and Definitions 2 of 17 .2.01 April 2010 Survey Methodology and Definitions Romania TRS 8. is analyzed individually using the data reported for that item only. Annual Guaranteed Cash (Comp2 Actual) – Includes Comp1 Actual plus the annualized value of guaranteed allowances and cash benefits. Each item. this organization’s information is not included in the calculation of the statistics. or Other Incentive awards. Frequency (% Obs/Orgs) – The percentage of the employees/organizations actually receiving the item based on the total number of employees/organizations in the position. PayMonitor® and PDF reports. Also known as the third quartile. Annual Total Cash (Comp3 Actual) – Includes Comp2 Actual plus the annualized value of any actual Short-term Incentive. Receiving Item (Count Obs/Orgs) – The number of employees/organizations receiving the compensation or benefit item.3. such as base salary or incentive amount. Also known as average. Sales Incentive. The figures reported reflect the actual amounts of the last awards received. Also known as the first quartile. Profit Sharing. th Statistics 25 Percentile (25th %ile) – The data point that is higher than 25% of all other data in the sample when ranked from low to high. Median – The data point that is higher than 50% of all other data in the sample when ranked from low to high. If an organization did not provide a piece of data for a position. Market Ratio Nth Percentile – A smooth curve related to a Market Regressed Line but offset from it vertically at every "X" value (representing IPE Position Class) by a proportion generally equal to the ratio of the corresponding actual median to the actual Nth percentile at each of those "X" values. or both. Annual Base Salary (Comp1 Actual) – Includes only annualized base salary (Monthly Base Salary x Number of Months Paid). Aggregate Compensation Values These values may appear in either. 75th Percentile (75th %ile) – The data point that is higher than 75% of all other data in the sample when ranked from low to high. Annual Base Salary (Comp1 12-month) – Includes only base salary (Monthly Base Salary x 12).

or Other Incentive awards. life and medical insurance. motor vehicle. Compensation Items These values may appear in either. 13 months = 13). Annual Total Direct Comp (Comp4 Actual) – Includes Comp3 Actual plus the annualized value of any Long-term Incentive awards. Sales Incentive. Shift Allowance – The annual guaranteed cash allowance for working on a specialized shift schedule. but subtracts the value of any long--term incentive awards included in Comp4. and STI Eligible = N (in this case. Annual Total Remuneration (Comp5 Actual) – Includes Comp4 Actual plus the annualized value of the benefits: retirement plan.). The figures reported reflect the target amounts applicable to the incumbent. Annual Non-equity Comp (Target) – Includes Comp5 Target.g. Profit Sharing. Annual Total Direct Comp – Accounting Cost (Actual) – Includes Comp3 Actual plus the annualized value of any Long-term Incentive awards. PayMonitor® and PDF reports. to take up public transport. valued using Black-Scholes methodology for appreciation-based awards. Sales Incentive. 8. parking. Annual Total Cash (Comp3 Target) – Receivers – Includes Comp2 plus the annualized value of any target Short-term Incentive.g. or Other Incentive awards. Valid responses to STI (Bonus) Eligible include: STI Eligible = Y and Short-term Incentive Percent (Target) > 0. Profit Sharing. Base Salary Items (Comp1) Monthly Base Salary – The gross monthly base salary as of the data effective date. Only incumbents for whom we have a valid response to STI Eligible are included in this sample. etc. Only incumbents for whom STI Eligible = Y and Short-term Incentive Percent (Target) > 0 are included in this sample. Transportation Allowance – The annual guaranteed cash allowance given to incumbents who are not eligible for company car to subsidize transportation expenses to and from the workplace or other business-related travel requirements (e. but subtracts the value of any long--term incentive awards included in Comp4. Guaranteed Cash Items (Comp2) Meal Allowance – The annual guaranteed cash allowance provided for subsidized meals or luncheon vouchers. etc. we will use zero for the target percent). © 2010 Mercer LLC August Survey Methodology and Definitions 3 of 17 . road tax.01 April 2010 Survey Methodology and Definitions Romania TRS Annual Total Cash (Comp3 Target) – Includes Comp2 plus the annualized value of any target Short-term Incentive. excluding any allowances. The figures reported reflect the target amounts applicable to the incumbent. valued using the organization’s internal accounting cost methodology for appreciation-based awards.4. Annual Non-equity Comp (Actual) – Includes Comp5 Actual. or both. Number of Months Paid (Including Fixed Bonus) – The number of times the incumbent receives monthly base salary in a full year including Fixed/Guaranteed Bonus (e. gasoline consumption.

Sales Incentive Percent (Actual) – The Sales Incentive Amount (Actual) expressed as a percentage of Annual Base Salary (Comp1). team. associated with sales achievement over the next 12-month period. using Black-Scholes methodology for the appreciation-based awards. and/or corporate performance over the next 12-month period. Long-term Incentive Amount – Black-Scholes – The annualized value. which are associated with sales achievement. Short-term Incentive Amount (Maximum) – The maximum Short-term Incentive award. Sales Incentive Eligible (Y/N) – Indicator that incumbent is eligible for a Sales Incentive award. and/or corporate performance. expressed as a percentage of Annual Base Salary (Comp1 Actual). associated with expected individual. which are associated with individual. and/or corporate performance over the next 12-month period. which are associated with individual. Short-term Incentive Percent (Target) – The target Short-term Incentive award. team. Sales Incentive Amount (Target) – The target amount of the Sales Incentive award. Annual Total Cash Items (Comp3) STI Eligible (Y/N) – Indicator that incumbent is eligible for a Short-term Incentive award. Short-term Incentive Amount (Target) – The target amount of the Short-term Incentive award. associated with expected individual. of all LTI awards received over the 12-month period ending on the data effective date. and/or corporate performance over the next 12-month period. and/or corporate performance over a period longer than one year. © 2010 Mercer LLC August Survey Methodology and Definitions 4 of 17 . team. expressed as a percentage of Annual Base Salary (Comp1 Actual). Annual Total Direct Comp Items (Comp4) LTI Eligible (Y/N) – Indicator that incumbent is eligible for a Long-term Incentive award. team. and/or corporate performance over the next 12-month period. associated with expected individual. team. associated with expected individual. Short-term Incentive Percent (Actual) – The Short-term Incentive Amount (Actual) expressed as a percentage of Annual Base Salary (Comp1). expressed as a percentage of Annual Base Salary (Comp1 Actual). Sales Incentive Percent (Target) – The target Sales Incentive award. Short-term Incentive Percent (Maximum) – The maximum Short-term Incentive award.01 April 2010 Survey Methodology and Definitions Romania TRS Other Guaranteed Allowances – Any annual guaranteed cash allowance not specified above. team. associated with expected sales performance over the next 12-month period. Sales Incentive Amount (Actual) – All payments received over the 12-month period ending on the data effective date. Short-term Incentive Amount (Actual) – All payments received over the 12-month period ending on the data effective date.

team. an allowance to reimburse an employee. Death Benefits – The value provided by the organization for accident and life insurance coverage to the employee.01 April 2010 Survey Methodology and Definitions Romania TRS Long-term Incentive Amount – Accounting Cost – The annualized value. and/or corporate performance over a period longer than one year. Car Value – The value provided to the incumbent. Health Benefits – The value provided by the organization for medical (including clinical and hospitalization) and dental coverage to the employee. Defined Contribution Pension – The annual amount of the organization’s contribution to organization-sponsored defined contribution pension programs. Usually the organization imposes a limit on amount that employee can use to buy shares. by the organization. of all LTI awards received over the 12-month period ending on the data effective date. Annual Total Remuneration Items (Comp5) Defined Benefit Pension – Value calculated using the Projected Unit method which reflects the percentage of salary one would need to place in a retirement account to substitute for the benefits expected to emerge from the retirement plan. Share Purchase Plan – The value of the discount that employee can obtain on buying organization shares. which are associated with individual. using the organization’s internal accounting cost methodology for the appreciation-based awards. © 2010 Mercer LLC August Survey Methodology and Definitions 5 of 17 . for motor vehicles. Disability Benefits – The value provided by the organization for disability insurance coverage to the employee. Long-term Incentive Percent – Black-Scholes – The Long-term Incentive Amount – BlackScholes expressed as a percentage of Annual Base Salary (Comp1 Actual). a valuation formula is applied based on information provided). Long-term Incentive Percent – Accounting Cost – The Long-term Incentive Amount – Accounting Cost expressed as a percentage of Annual Base Salary (Comp1 Actual). or a purchase of a vehicle (in this case. This value could take the form of a lease payment on a vehicle. Flexible Benefits – The annual cost for providing flexible benefits to the incumbent. The contribution level is based on the value of the benefit being earned in the year following the valuation date.

3 Aggregate Compensation Values and 8.01 April 2010 Survey Methodology and Definitions Romania TRS Periodically. © 2010 Mercer LLC August Survey Methodology and Definitions 6 of 17 . but may be less than (with discount) or greater than (with premium) the market price on the date of grant. Limited – SAR that is exercisable only upon the occurrence of a specific event such as a change in control. which provides a look-up for elements in sections 8. actual or phantom shares of stock with vesting contingent upon employment for a specified period of time or achievement of specified performance goals over a multi-year performance period.5. The exercise of one cancels the other. book value). stock. The exercise price (known also as “strike” or “subscription” price) is often equal to the market price on the date of grant. local terminology is used in place of global standard terminology. or a combination of cash and stock. Share Awards include those that are commonly referred to as Restricted Stock..4 Compensation Items that have a Local Country label in place of the Global Standard label. Global Standard Label Local Country Label Incentive Amount (Actual) Short-term Incentive Percent (Actual) Short-term Incentive Amount (Target) Short-term Incentive Percent (Target) Short-term Incentive Amount (Maximum) Short-term Incentive Percent (Maximum) Long-term Incentive Amount – Black-Scholes Long-term Incentive Percent – Black-Scholes Health Benefits Flexible Benefits Annual Non-equity Comp (Actual) Annual Non-equity Comp (Target) Variable Bonus – Actual Variable Bonus (Actual) as % of Salary Variable Bonus (Target) Variable Bonus (Target) as % of Salary Maximum Bonus (Target) Maximum Bonus (Target) as % of Salary LTI (Actual) LTI (Actual) as % of salary Medical Plan Flexible Benefits/Cafeteria Annual Total Rem (Comp5 Actual) Excl LTI Annual Total Rem (Comp5 Target) Excl LTI 8. Phantom Appreciation Shares are an award denominated in hypothetical shares. Long-term Incentives Definitions Stock/Share Options – Stock/Share Options allow for the purchase of stock at a fixed price over a specified period. Restricted Stock Units. or Phantom Full Value Shares. Performance Share Units. Share Appreciation Rights include Phantom Appreciation Shares. the value of which is based on an increase in actual share value or another measure of organization value (e. Any exceptions to global standard terminology are noted in the table below. Stock/Share/Share Unit Awards – Conditional grants of notional. Tandem – SAR that is granted with a stock/share option. Performance Shares. No investment on the part of the incumbent is required.g. The value of each share depends upon the market value of the share at the end of the vesting period. They may be paid out in cash. There are three types of Share Appreciation Rights: Freestanding – SAR grant that is not attached to a stock/share option. Share Appreciation Rights (SARs) – Share Appreciation Rights provide an incumbent with the appreciation in market value of the share.

. the incentive type is also known as “Long-term Cash. with payment contingent upon achievement of specified performance goals over a multi-year performance period. monetary-based measure that can be used with other compensation amounts to determine Total Direct Compensation (i. lack of transferability. Defined Maximum awards include a “maximum” number of shares/share units corresponding to performance. A 20% discount is applied if the performance measure does not include Relative Total Shareholder Return. Fixed Amount and Defined Maximum plans are in contrast to Defined Target Plans. Other discounts. their value may also be based on other constructs. Fixed Amount awards do not have a downside or upside potential and in some markets may commonly be referred to as an “All or Nothing” type of award. The number of shares awarded may be less based upon performance.” Long-term Cash – A pre-determined cash amount paid out contingent upon achievement of specified performance goals over a multi-year performance period.e. 2009. 2009. LTI values generally have not been adjusted to reflect any discounts for service-based vesting.g. Otherwise. Appreciation Based Incentives – These plans include Stock/Share Options and Share Appreciation Rights (SARs). such as dividends or EPS (Earnings Per Share). are applied depending upon the degree to which Relative Total Shareholder Return is used as the performance measure. A performance discount is applicable to all plan types if vesting is designated as performance based and the plan structure is defined as Fixed Amount or Defined Maximum. these might include awards where a participant will receive 100 shares if an EPS (Earnings Per Share) goal is met and nothing if the goal is not met. In this report. Defined Target awards are valued at the “target” level with no discount. Performance Units are cash-denominated and not tied to the price of a share of stock.. Comp 4). The number of shares awarded may be more or less based upon actual performance (e. the annual dividend yield is based on dividends paid from January 1. Long-term Incentives Valuation Methodology Grant data provided by the survey participants was used to calculate the value of Long-term Incentives (LTI) such that the result is a fair. Performance-contingent awards with these plan structures are discounted by 20% to 50% to reflect the risk that the award will not vest or be paid out. Defined Target awards include a “target” number of shares/share units corresponding to target performance.01 April 2010 Survey Methodology and Definitions Romania TRS Performance Units – Conditional grant denominated in units other than notional or actual shares. (For grant dates later than December 31. payouts may be 0% to 200% of target). long-term incentive values have been calculated using Mercer’s Black-Scholes and Accounting Cost Methodologies. or risk of forfeiture. For example. 2009 to December 31.) © 2010 Mercer LLC August Survey Methodology and Definitions 7 of 17 .00. ranging from 35% to 50%. Black-Scholes Method Under the Black-Scholes methodology certain LTI awards are discounted for required performance conditions. Annual Dividend Yield – based on dividends paid in the 12 months preceding the date of grant. Although units are usually cash-denominated. 8.6. Where the value of each unit is equal to 1.

Treasury rates in place on the date of the grant. discounts detailed above for certain performance-contingent awards to reflect the risk that the award will not vest or be paid out. Cash Denominated Incentives – These plans include Performance Units and Long-term Cash. then we assume an estimated option term of 6. 2009. Risk-free Rates for the United States. (2) the number of shares granted in the most recent grant and (3) where applicable. (2) the number of shares granted in the most recent grant and (3) where applicable. 2007 to December 31.S. rounded to the nearest year. as appropriate.01 April 2010 Survey Methodology and Definitions Romania TRS Estimated Option Term – an assumed estimated term based on SEC safe harbor accounting rules is used. For all countries other than the United States. discounts detailed above for certain performance-contingent awards to reflect the risk that the award will not vest or be paid out. Mercer refined the valuation methodology by moving from a monthly to a daily assessment of stock market volatility as an input to the Black-Scholes valuation. and Australia. Stock/Share Based Incentives – These plans include Stock/Share/Share Unit Awards. (For grant dates later than December 31. we assume that the per-share Black-Scholes value of an appreciation based incentive is equal to 33% of the market price of the underlying shares on the date of the grant as reported by the survey participants. If a participant does not provide an option term. Canada. – Australia – Monthly Reserve Bank of Australia Capital Market Yields – Government Bond rates in place on the date of the grant.) If the underlying stock has not existed for three years. © 2010 Mercer LLC August Survey Methodology and Definitions 8 of 17 . the stock price volatility is based on daily closing prices from January 1.. an option with a reported term of 10 years will have an estimated option term of 6. to annualize the result (e. then the volatility is calculated for an abbreviated time frame. – Canada – Monthly Bank of Canada Bond Yields in place on the date of the grant.5 years. then the product is divided by two). the Risk-free Rate is based on available bond yield data using an estimated 7-year rate as of December 31. Canada.g.g. For privately held companies. Stock Price Volatility – based on daily closing prices for 36 months preceding the date of grant. Risk-free Rate of Return – this value is based on a rate of return for the country in which the stock for the LTI grant trades. For Performance Units the survey value is equal to the product of: (1) the per-unit value on the date of the grant as reported by the survey participants. The assessment of volatility based on daily rates has a smoothing effect when stock market volatility occurs in the short-term. if awards are made every two years. 2009. The result is adjusted for the frequency of awards.. The result is adjusted for the frequency of awards. if awards are made every two years. discounts detailed above for certain performance-contingent awards to reflect the risk that the award will not vest or be paid out. In 2009. and Australia are established using the following values: – United States – Monthly U. For example. rounded to the nearest year. rounded to the nearest year. 2009. The survey value is equal to the product of: (1) the per-share Black-Scholes value. to annualize the result (e. Stock Price Volatility is capped at 50%. (2) the number of units payable for performance granted in the most recent grant and (3) where applicable. similar to what existed during the latter half of 2008. as appropriate. The survey value is equal to the product of: (1) the per-share value on the date of the grant as reported by the survey participants. then the product is divided by two). The daily volatility calculation also more closely approximates the long-term incentive values typically used for accounting and compensation purposes.5 years (10+3)/2. The estimated term is the sum of (option term as reported by survey participants + assumed 3 year vesting)/2.

g. Defined Target awards are valued at the “target” level with no discount. However. then the product is divided by two). if awards are made every two years. these might include awards where a participant will receive 100 shares if an EPS (Earnings Per Share) goal is met and nothing if the goal is not met.. to annualize the result (e. to annualize the result (e. lack of transferability. under either FAS 123R or IFRS2. Other discounts. Fixed Amount awards do not have a downside or upside potential and in some markets may commonly be referred to as an “All or Nothing” type of award. Accounting Cost Method We have provided this methodology as a comparison point to that of the Black-Scholes Methodology. © 2010 Mercer LLC August Survey Methodology and Definitions 9 of 17 . then the value is divided by two). Survey participants were asked to report their total accounting cost per share on the date of grant.. The number of shares awarded may be more or less based upon actual performance (e. the survey value is equal to the product of the monetary value payable for performance reported by the survey participants and where applicable. The survey value is equal to the product of: (1) the accounting cost on the date of the grant as reported by the survey participants and (2) the number of shares granted in the most recent grant. ranging from 35% to 50%. Note: If an Accounting Cost is not provided by a survey participant for an Appreciation Based Incentive. For Long-term Cash. for Appreciation Based Incentives. Fixed Amount and Defined Maximum plans are in contrast to Defined Target Plans. if awards are made every two years. then the product is divided by two). Performance-contingent awards with these plan structures are discounted by 20% to 50% to reflect the risk that the award will not vest or be paid out. if awards are made every two years..01 April 2010 Survey Methodology and Definitions Romania TRS The result is adjusted for the frequency of awards. LTI values generally have not been adjusted to reflect any discounts for service-based vesting. Defined Maximum awards include a “maximum” number of shares/share units corresponding to performance. The result is adjusted for the frequency of awards. payouts may be 0% to 200% of target). Stock/Share Based Incentives and Cash Denominated Incentives are discounted for performance conditions under the Accounting Cost Methodology if the plan structure is defined as Fixed Amount or Defined Maximum. This amount is adjusted for the frequency of awards. Appreciation Based Incentives – These plans include Stock/Share Options and Share Appreciation Rights (SARs). discounts detailed above for certain performancecontingent awards to reflect the risk that the award will not vest or be paid out. as appropriate. Appreciation Based Incentives under the Accounting Cost Method are not discounted for performance conditions. A 20% discount is applied if the performance measure does not include Relative Total Shareholder Return.g. to annualize the result (e. as appropriate. Defined Target awards include a “target” number of shares/share units corresponding to target performance.g. as appropriate. Otherwise. The number of shares awarded may be less based upon performance. For example. an assumed cost is not applied to the incentive and the incentive is excluded from the calculation..g. or risk of forfeiture. are applied depending upon the degree to which Relative Total Shareholder Return is used as the performance measure.

the survey value is equal to the product of the monetary value payable for performance reported by the survey participants and where applicable. then the product is divided by two). Benefits Valuation Assumptions This section details the assumptions used by Mercer to value the main benefit plans. discounts detailed above for certain performance-contingent awards to reflect the risk that the award will not vest or be paid out. 8. Employee value reflects the amount of gross salary required to purchase an equivalent benefit in the marketplace to replace the benefit provided by the employer. would be paid out of net salary.g. This amount is adjusted for the frequency of awards.7. then the value is divided by two). The result is adjusted for the frequency of awards.. Gross Salary Equivalent Values normally reflect the amount of salary that would be required to purchase the equivalent benefit. 8. Cash Denominated Incentives – These plans include Performance Units and Long-term Cash. We have applied these techniques.7.. if awards are made every two years. to annualize the result (e. discounts detailed above for certain performance-contingent awards to reflect the risk that the award will not vest or be paid out. if provided by the employee. This process takes into account the fact that some benefit plans are tax effective when provided by the employer. © 2010 Mercer LLC August Survey Methodology and Definitions 10 of 17 .g. Employee contributions have been deducted from these values where appropriate in order to establish the benefit provided by the employer. to annualize the result (e. (2) the number of shares granted in the most recent grant and (3) where applicable. Mean Use Two organizations with the same benefit plan will each have the same value attributed to their plan irrespective of the costs of the plan to the employers.g. to annualize the result (e. then the product is divided by two). Therefore we assume that all employees are receiving the current benefits available for a new hire.g. The survey value is equal to the product of: (1) the per-share value on the date of the grant as reported by the survey participants. if awards are made every two years. (2) the number of units payable for performance granted in the most recent grant and (3) where applicable.7. For Long-term Cash. Employee Value The valuation process has been undertaken from the perspective of employee value as opposed to employer cost. the value of a benefit that enjoys a tax-preferred status in relation to salary (e. with adjustments where necessary..7. medical plans) will include a tax "gross-up" to equate it to taxable salary required to purchase a similar benefit. as appropriate. as appropriate.1. For Performance Units the survey value is equal to the product of: (1) the per-unit value on the date of the grant as reported by the survey participants. as appropriate. to the actual features of your plan. We value the benefit based on value to a new employee (if he had to purchase this himself). discounts detailed above for certain performancecontingent awards to reflect the risk that the award will not vest or be paid out.3. 8. if awards are made every two years.2. Thus.01 April 2010 Survey Methodology and Definitions Romania TRS Stock/Share Based Incentives – These plans include Stock/Share/Share Unit Awards. 8. so that the valuation is grossed up where the equivalent benefit. The result is adjusted for the frequency of awards..

administrative. an individual medical plan that is identical to the employer’s medical plan will cost more because of the greater marketing. it is assumed that all employees participate in medical. the participants should expect some variation when making year on year comparisons. For example. For example. although individual medical or dental policies containing provisions matching an employer plan would typically not be available in the open market. 8. underlying premiums and rates and also changes to legislation. it has been assumed that employees will replace their life insurance benefit with the same amount of coverage. Where market pricing does not exist.8. This means that the funding situation of the plan or the actual organization contributions to the plan is not taken into consideration.8.4. Benefits Valuation Methodology On an annual basis benefits valuation methodology is reviewed and updated to take into account changes in market practice. the value of the employer plan is estimated by valuing the employer plan using the same rate methodology as is used for individual benefit. Retirement age is a key factor when determining the value of the benefit because it affects both the accumulation period and the pay-out period.6.7.7. pension. Valuation reflects market pricing wherever possible. and stock purchase plans (where offered). these amounts will be greater than the cost to the employer. we use a single set of retirement probabilities. 8. and underwriting costs associated with an individual plan.01 April 2010 8. Retirement Plans – Defined Benefit Scheme The quantification of this benefit is based on the organization cost of benefits accruing in the following year. © 2010 Mercer LLC August Survey Methodology and Definitions 11 of 17 . For example. While the valuation methodology is consistently applied across the survey. this is used. Employee Participation Values are calculated assuming that all employees participate in the primary plans offered even when they are voluntary and certain employees may have opted out. The values represent the cost to the employee of employer provided benefits if he or she left the employer and were to duplicate them in the marketplace. Personal Substitution Values reflect as close substitution as possible to the benefit provided by the employer. In many instances. If there is a market yardstick which employees are likely to use to determine the personal value attributed to an employee benefit. For example.1. This gives a measure of the opportunity value to the employee. Survey Methodology and Definitions Romania TRS Market or Actuarial Valuation Benefits are valued using the "walkaway" method.7. 8. Early retirement subsidies such as unreduced benefits or bridge supplements are also a factor. an actuarial valuation using standard assumptions and pricing techniques will be used.5. 8. In order to produce values which differ based on plan provisions. We understand that in reality this may not always be the case.

Maximum and minimum benefits will be considered.8. Past service contribution were also ignored. For valuation purposes. depending on the organization’s overall negotiation with plan providers. paid for) by the employer. © 2010 Mercer LLC August Survey Methodology and Definitions 12 of 17 . Retirement Plans – Defined Contribution Scheme The benefit is the contribution that is being credited during the year to the employee’s account.8. For valuation purposes.01 April 2010 Survey Methodology and Definitions Romania TRS We will assume that the employee will retire at Normal Retirement Age.2. For organizations with a mixed approach. we assume the maximum percent of salary an employee is allowed to contribute. Where employee contributions are required in the monthly cost of the plan. the amount is deducted from the final value of the benefit. 8. Accessory benefits such as pre-retirement death. both this section and the following (Defined Contribution) will have to be considered. Where employee contributions are required. we will assume the maximum employee contribution on which there is an organization match. 8.e.8. disability and vesting benefits would not be considered. These amounts may be greater or lower than the actual cost to your organization. the value determined is based on the expected coverage in the year following the valuation date.5. For plans with employee contributions.4. Medical Plan Medical and dental benefits are valued using a market representation of a mean cost of employer provided benefits. 8. paid for) by the employer. the amount is deducted from the final value of the benefit.e. Death Benefits Death benefits are valued as the amount of insurance premium an individual would need to pay to acquire the same level of coverage. All the calculations will be based on the benefit that is accrued after service to retirement. disability and vesting benefits were not considered.8. This means that the benefits are valued as the amount an employee would need to individually pay a medical provider to acquire the same level of coverage. The coverage amount valued is equal to the amount of coverage which is provided (i. The coverage amount valued is equal to the amount of coverage which is provided (i. When the organization contribution is defined as a percentage of the employee contribution and where the employee can decide the contribution level. the value determined is based on the expected coverage in the year following the valuation date. Long-term Disability Benefits Disability benefits are valued as the amount of insurance premium an individual would need to pay to acquire the same level of coverage. 8.3. The benefit is valued using a representation of an average cost of group insurance premium in the market. Accessory benefits such as pre-retirement death.

1) The IPE system is a proven approach to position evaluation and is used by thousands of organizations around the world. Where employee contributions are required. lease cost or cash allowance.01 April 2010 Survey Methodology and Definitions Romania TRS The benefit is valued using a representation of an average cost of group insurance premium in the market. the scope and content of a finance manager position could be broad in some organizations and limited in others. the IPE system is reviewed regularly based on input and feedback from users and consultants worldwide. the title "finance manager" in one organization may describe a position that has greater operational responsibilities as compared to a finance manager in another organization with more strategic responsibilities.7. the amount is deducted from the final value of the benefit.9. which may be taken in lieu of the car.8. the participants were provided with job matching tools. The valuation of company cars can be based on the purchase price. The improvements made to the system address the changing environment and evolution of organization structures. as job titles alone can be misleading. Mercer Consultants are available to discuss the job matching methodology used on this survey in detail as required.10. The value is taken as the amount of the gain available to the employee on the basis that the stock could be bought and sold on the same day at a defined discount. While this survey is based on a set of role descriptions. 8. 8. Share Purchase Plan We assume that employees sell their stock immediately after the offering period. Where applicable. and fuel for private use are included in the valuation. 8. In other words. The system allows accurate comparisons between positions. insurance. designed by Mercer specifically to support this survey. Mercer's International Position Evaluation System (IPE Version 3. Company Cars This benefit’s value is based on the assumption that the employee will replace the company car provided by the employer with the same type of car. Each organization’s offering period and discount rate are factored into the valuation.8. the costs of maintenance. 8. For example. © 2010 Mercer LLC August Survey Methodology and Definitions 13 of 17 . it is also supported by IPE to assist participants in interpreting the data.6. As Mercer is dedicated to continuous quality improvements. As part of the survey process. Job Matching Methodology Mercer surveys around the world are underpinned by the International Position Evaluation (IPE) System.

regions and industries.01 April 2010 Survey Methodology and Definitions Romania TRS By using the IPE method. Communication Position 3. Position evaluation is not just a tool for salary comparisons but also instrumental in recruitment. when conducting job matching and position evaluations. designing organization structures and. The Four Factors of the International Position Evaluation (IPE) System The user should note that each position evaluation system has its own terminology and peculiarities. we can further isolate similar positions and responsibilities. Knowledge Team Breadth © 2010 Mercer LLC August Survey Methodology and Definitions 14 of 17 . it is the "position" that is being matched and not the person holding that position.1. 8. in addition.10. It is important to remember that. Equally important. The Mercer eIPE Unlimited web software is available through the license and Mercer consultants offer fee based in-house training and position evaluation expertise in most countries and languages. the role of the Mercer survey specialist is to ensure proper representation of compensation available in each market. Impact Impact Contribution 2. career planning. Organization 1. The information in the survey is presented to allow a rapid and precise measurement of salary levels. The Mercer IPE Methodology is available for internal use in organizations based on licensee terms and conditions. It is always easier to learn these details from a specialist so that the "how-to-use" questions are quickly understood. when dealing with expatriate compensation and planning. The qualifications and the performance of the present position holder may differ from what is actually required by the position. so that organizations can accurately compare their compensation strategy across markets. Innovation Communication Frame Innovation Complexity Knowledge 4.

range of activity and number of employees. Factor 3: Innovation Specific responsibilities in the position for development of new ideas. how this is applied in teams and the geographical and intellectual breadth wherein the objectives are accomplish and value created. methods. procedures or services. Factor 4: Knowledge Relates to the knowledge level required. An additional Risk factor is available for use in high-risk industries or specific professions where the position environment add special constrains to the incumbent. The factors are weighted with points and the summary of points across all factors converts into a Position Class. techniques and improvements to products. Factor 2: Communication The required communication skills within as well as outside of the corporation. Within this context impact and relative contribution to overall results is measured. Table of Typical IPE Classes for each Hierarchical Level Impact Contribution Communication Frame Impact Organization Innovation Complexity Knowledge Teams Communication Innovation Breadth Knowledge © 2010 Mercer LLC August Survey Methodology and Definitions 15 of 17 .01 April 2010 Survey Methodology and Definitions Romania TRS Factor 1: Impact The organization context specific to the position is sized by a monetary scale such as sales or assets.

These are used to ensure each position in the survey contains a unique code. Career Stream.01 April 2010 Survey Methodology and Definitions Romania TRS Typically./Staff Blue Collar 60 – 70 58 – 62 53 – 59 50 – 54 45 – 51 40 – 45 8. although may provide mentoring and coaching to less experienced staff. Additional sub-families within Finance (e.11.. Tax etc.352 represents the Finance family (210) and the Financial Planning/Analysis sub-family (352). Professionals – Typically professionals with no management responsibility. Para-Professionals – Typically roles that are semi-skilled or unskilled with no supervisory or management responsibility. and Job/Activity – Career stream (seventh digit within the position code) defines the level within the organization hierarchy and the knowledge and competency requirements: Executives – Typically includes top executives and function heads providing strategic vision and/or tactical/strategic direction across multiple functions or sub-functions. Audit. Treasury.g. The system has been designed with enough flexibility to allow future positions to be added to the survey. Mercer Universal Position Coding System (MUPCS®) The coding system categorizes positions by: Position Family Position Sub-family Career Stream Career Level Activity Code (this unique identifier is necessary when positions are coded the same in all other categories above) Family and Sub-family – The family and sub-family are defined in the first six digits of the code. we found the following distribution of the Mercer IPE Classes for the different hierarchical levels involved: Hierarchical Levels Mercer IPE Classes General Directors/Presidents VPs/Directors Managers Supervisors/Specialists Professional/Admin. © 2010 Mercer LLC August Survey Methodology and Definitions 16 of 17 .) are represented with unique sub-family codes. Level. For example. the code 210. Management – Typically management and supervisory professionals focusing on tactical and/or operational activities within a specified area.

Example: 8. Executive 1. For example. Function Head 3. Experienced 3. Head of Organization 2. Expert 3. Para-Professional 2.01 April 2010 Survey Methodology and Definitions Romania TRS These career streams. Individual Professional 4. you may want to analyze bonuses for all positions at function head level across job families or collapse the para-professional level positions to compare pay regardless of level. MUPCS Career Stream and Career Level Framework The table below illustrates the breakdown of career streams by career level. Entry 1. Specialist Levels 2. Career Streams 1.1. allow all positions within a position family/sub-family to contain unique characteristics which differentiate them from one another. Sub-function Head 1. Senior 2. Pre-eminent 2. Team Leader (professional) 4. Management 3. © 2010 Mercer LLC August Survey Methodology and Definitions 17 of 17 . Senior Manager 1. Manager 3. When using PayMonitor®. Entry Please contact your local Mercer consultant for more information on MUPCS.11. Senior 5. you can complete various analyses. Experienced 6. Mercer’s online data analysis tool. when combined with a level and job activity (eighth and ninth digits). Team Leader (paraprofessional) 4. The following chart illustrates how the position code is structured.