Is 20 Percent The Ideal Differential?

In a company in which the general manager earns $10,000, what should be the ideal salary for assistant general managers and managers? Until recently the ideal differential between different levels in the corporate hierarchy was thought to be around 20 percent. But performance-related salary systems have meant that the differential rate is no longer so clear.

If the general manager of a company is earning a salary of $10,000, what should be the salary of the assistant general manager? Or what should be the difference in a healthy salary system between the salary of someone who is starting at the bottom and that of the general manager?

It is not easy either for companies or for human resources experts to find an answer to these two questions. For this reason, companies are paying particular attention to this issue. Many companies try to use different systems in order to determine the salary differentials between positions. For example, at Turkcell the salary system is based on an the category of the position, personal performance and ability. The emphasis on personal performance means that it is impossible to talk of a fixed rate for salary differentials between positions.

JTI is one of the companies which conducts annual salary surveys. It determines minimum and maximum salaries for each position according to the salaries of other companies in the market and its own salary targets. Employees who start at JTI for the first time or have been newly appointed start at the minimum for their position and can then, depending on their performance, work their way up to the maximum.

The idea differential was 20 percent
So, is it possible to talk of an ideal salary differential between positions in all the sectors and companies? Amrop International Managing Partner Yeşim Toduk Akış says that in the past the ideal differential used to be 20 percent but that the situation has now changed. Akış says: “There are now broadband applications. The fact that there are so many variables, particularly with open-ended bonuses, means that it is impossible to know.”

Many experts have different ideas about what this ideal figure should be. Ayşe Öztuna, Profil International General Manager for Turkey, suggests that as a general rule the average differential between positions that follow each other in the corporate hierarchy should be 15 percent. Öztuna says that this ensures that an employee can count on a significant increase in salary when s/he is promoted.

Murat Yeşildere of Egon Zehnder International has the following to say about how much more the general manager should be earning than someone who is starting at the company: “It is difficult to talk of an idea figure, but the examples I have compared range from 8-9 times as much to 30-35 times as much.”

Nilüfer Gözütok
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