| June 2008 © 2008 IBM Corporation 2008 Employee Salary Program Application Services US Employee Briefing
| June 2008 © 2008 IBM Corporation
2008 Employee Salary Program Application Services US
Employee Briefing
2 ©2008 IBM Corporation
2008 Employee Salary Program
Purpose of Today’s Session
Discuss the current GBS business climate and drivers
Provide overview of key components of the 2008 employee salary program
Discuss AS specific Employee Salary Program
Overview on promotions
Review key dates and resources
3 ©2008 IBM Corporation
2008 Employee Salary Program
GBS Business Climate and Drivers
Recent, consecutive quarters of strong performance are a level of performance expected by IBM, the market and our shareholdersThe services business continues to be extremely competitive, requiring prudent investment decisionsWe are essentially a labor based business and labor costs represent our largest expense…talent is becoming a competitive advantage, making balanced, thoughtful investment decisions keyExecution of GBS’ 3-D strategy is critical to our success
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The Delivered Globally component is evolving to an integrated delivery model with continued focus on sourcing the right skill at the right cost
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Focus on differentiating your skills and deepening your client relationships
4 ©2008 IBM Corporation
2008 Employee Salary Program
IBM Compensation Strategy
Differentiate strongly
Pay for performance
Pay competitively
Rewards based on business and individual performance
Investments focused on paying the “best like the best”
Markets for jobs drive pay rates
Focus on competitive pay levels over time
Results/outcomes drive differences
5 ©2008 IBM Corporation
2008 Employee Salary Program
Background: Annual Salary Investment Decisions
+Balance of:
Business performance
Affordability
Competitiveness
Primary Considerations Other Factors
Projected market movement
Voluntary attrition rates
Industry trends
Other annual investments
Senior business leaders: Business unit, country, IOT and CHQ
Decision Makers
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2008 Employee Salary Program
Background: IBM’s Analysis of Market Pay and PracticeSurvey Participation
Participate in 100+ major benchmarking surveys globally, conducted by third-party consultants, for all major job families
Ensure rigorous process for job matching to comparable jobs at other companies; approximately 80% of employees are covered by job matching
Concerted effort to obtain survey data that includes all key competitors for business and for labor; list reviewed annually with senior line management
Trusted Survey Sources
Reliable surveys ensure quality control in compensation data collection and analysis, and safeguard data
Confidence in survey data is established and fostered by surveys maintaining continuity over time
Surveys offer robust job descriptions and responsibility criteria for companies to use in matching comparable jobs
Data Not Considered Reliable
Internet or other open surveys generally match jobs by title alone and do not ensure quality control or continuity in their participation
Research studies/reports where data collected lacks the rigor and process of trusted survey sources
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2008 Employee Salary Program
Overview of the employee salary program
Market-Based Adjustment Top Contributor Reward
Designed to support and achieve pay competitiveness over time
Designed to support pay for performance
Those in high-demand countries and job families; may differ each year by country/job
family
Employees with a PBC 2 or higher, with base salary below market for their job family
Top-performing employees (PBC 1 and 2+) in all countries and job families
Based on relative contribution
Determined company-wide; some manager differentiation
Managers, through team-based decision-
making
Why
Who
Who decides
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2008 Employee Salary Program
PBC Below Market Reference Point At or above Market Reference Point
1 Market-Based Adjustment and Top Contributor Reward Top Contributor Reward only
2+ Market-Based Adjustment and Top Contributor Reward Top Contributor Reward only
2 Market-Based Adjustment only Not eligible for Market-Based Adjustment and Top Contributor Reward
3 & 4 Not eligible for Market-Based Adjustment and Top Contributor Reward
Not eligible for Market-Based Adjustment and Top Contributor Reward
Eligibility for Market-Based Adjustments and Top Contributor Rewards*
* Not all countries, units and/or job families will receive MBA/TCR funding each year.
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2008 Employee Salary Program
+10% *
Geographic Pay DifferentialsMarket data supports differentiating pay by region
IBM exempt population (i.e., generally bands 6 - 10) has become more geographically diversified and geographic pay differences are commonplace in the marketSurveys of competitors show wide acceptance of separate pay zones for exempt employees
Accenture, Dell, EDS, HP, Intel, Microsoft, Sun, Texas Instruments and others have differentials for their exempt population
Three geographic zones of payAll job families within a location/city will be assigned to the same zone (based on the CERIS Work Location Code)
Every location with an IBM population has been assigned to a zoneAnnual reviews are conducted to assess location assignments to a zone
Benefits of geographic pay zonesImproves employee competitive positioningHelps ensure we are not overpaying or underpaying employees
* Represents the differential at the market minimum, midpoint, and maximum from the national average
-10% *Premium
e.g., Silicon Valley, New York City, Westchester County, Northern New Jersey
15% +/- of employees
National
e.g., Boulder, Cambridge, Chicago, Dallas, Philadelphia, Poughkeepsie
40% +/- of employees
Regional
e.g., Atlanta, Austin, Burlington, Endicott, Raleigh, Rochester
45% +/- of employees
10 ©2008 IBM Corporation
2008 Employee Salary Program
Promotions within GBS US will be planned for in cycle with an effective date of June 1.
To be eligible for promotion, employees must be at the appropriate PDF and certification levels. Promotion to Band 10 requires VP approval.
Employees being promoted must be given increased job responsibilities/role to demonstrate increased scope, skill level and responsibility commensurate of an increased band level/promotion.
Affordability within business units is a consideration factor which is necessary to remain competitive.
IBM is committed to EO and Diversity throughout promotion consideration process.
Promotions
11 ©2008 IBM Corporation
2008 Employee Salary Program
Sample Notification Statement
MBA/TCR percent
New salary
12 ©2008 IBM Corporation
2008 Employee Salary Program
Sample Notification Statement – Incentive
Incentive Information
13 ©2008 IBM Corporation
2008 Employee Salary Program
Key Dates – U.S.
Activity Dates
Managers communicate salary decisions to employees June 17 -
26
MBA/TCR effective date June 1
MBA/TCR
reflected in pay statement June 30
14 ©2008 IBM Corporation
2008 Employee Salary Program
Resources to Help
You and IBM –Your Salary - Your Money Web site(http://w3.ibm.com/hr/hrinfo/totalrew.nsf/0/9b358408ec336aba85256b48007
04750?OpenDocument)
Employee Service Center1-800-796-9876 or IBM Compensation/Raleigh/IBM
–General policy
Your Manager
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2008 Employee Salary Program
Appendix
16 ©2008 IBM Corporation
2008 Employee Salary Program
Frequently Used Terms
MBA – Market-Based Adjustment, an adjustment for eligible employees in eligible countries, units and job families who are below the MRP
TCR – Top Contributor Reward, an increase for eligible top contributor employees to recognize pay for performance
MRP – Market Reference Point, otherwise known as competitive pay point or 100% PMR. The MRP is the mid-point for the market for a particular job based on competitive information by industry and country
PMR – Percent to Market Reference, 100% PMR is a synonym for MRP or competitive pay point or market mid-point. To calculate PMR divide current monthly reference salary by the market reference point multiplied by 100. For example: if the Market Midpoint is $45,000 and the employee's Reference Salary is $50,000: $50,000 / $45,000 * 100 = 111. Therefore, the employee is at 111% of the market range