What is the 3P salary system? Strategies help businesses manage human resources effectively
24 Oct, 2023
The 3P salary system is being widely applied in many Vietnamese businesses. Using the 3P salary payment method helps businesses retain and attract many talented people. So which strategy helps businesses attract and manage human resources most effectively? Please help us answer this question in the article below.
1. What is the 3P salary concept?
The 3P salary system is a salary payment method used by businesses based on the following 3 factors:
P1 – Pay for Position: Salary method based on job position.
P2 – Pay for Person: Salary method based on the capacity assessment table of each job position.
P3 – Pay for Performance: Method of paying salary based on work results, work performance and benefits brought to the business.
Therefore, the employee's salary received in the month P = P1 + P2 + P3. In particular, salary P1 is a fixed amount. If employees want to increase their income, they must depend on salary levels P2 and P3.
The combination of salary calculation is based on the above 3 basic factors to create fairness for the value that employees bring. Limit the one-sidedness and bureaucracy in traditional salary calculation in some businesses today.
2. Important elements of the 3P salary system
Below are 3 main important factors in the current 3P salary system.
2.1. Pay for Position - Pay for Position
Pay for Position is a form of pay based on the job position of each employee with the same position or title. Businesses will refer to the salary level for positions in the same field, then set the clear and most suitable salary for employees.
This salary is applied entirely by businesses without combining it with other factors. Because it helps businesses save costs by cutting many tasks for accounting and HR.
Based on the following 4 important criteria, businesses will set salary regulations for each position and title:
Creative thinking and decision-making ability: The job position requires processing, analysis, and the ability to handle arising tasks.
Mental and physical effort: Positions require capacity according to the level of difficulty from low to high.
Errors at work: Errors often bring serious consequences to businesses in terms of image, finance, and equipment.
Working environment: Hazardous job positions and low or high risk.
2.2. Pay for Person - Pay for Person
It can be said that this form is the most difficult to determine in the 3P salary system. Businesses will evaluate capacity based on each individual's results. Then convert it to the corresponding amount and incentive level. Based on this salary calculation method, workers always strive to learn new knowledge and skills. To increase your own income further.
Enterprises have 2 ways to calculate salary based on capacity as follows:
Ignore the knowledge, skills, attitudes of employees... only pay salaries according to actual capacity.
Using the ASK model, businesses can evaluate each position and pay salaries according to the results of that model. Although a bit complicated, this method will be more complete than method 1.
2.3. Pay for Performance - Pay for Performance
Businesses will pay salaries to employees when their performance and work results are at a good level. And employees meet the criteria and bring a lot of value to the business.
Salary is calculated based on employee performance according to each specific process:
Assigned work goals
Level of completion
Currently, there are 3 forms of salary payment as follows:
Personal: salary increase, bonus, commission,...
Organization: excellent group rewards, hot rewards,...
Company-wide: company profit sharing, company stock bonus and stock purchase rights.
3. Steps to build a 3P salary system
Currently, businesses that want to build a 3P system must go through 5 steps. Enterprises that want to standardize the organizational structure and salary framework corresponding to each position cannot skip any steps. Because they are all important in establishing the most standard 3P salary system. Specifically:
Step 1: Adjust the organizational structure, functions, and job position descriptions.
Step 2: Build a competency framework and employee competency dictionary.
Step 3: Set KPIs and employee performance evaluation tables.
Step 4: Develop salary regulations and salary system for employees.
Step 5: Implement implementation, control and adjustment
4. What benefits will businesses applying the 3P salary system bring?
The enterprise's 3P salary system helps employees clearly understand their job positions, creating fair salary regulations for everyone.
Thanks to a clear and transparent salary policy, it helps businesses easily pay salaries to employees. Employees are not dissatisfied, businesses do not lose their talent source.
Thanks to the personnel competency assessment table, businesses can easily find potential talents. From there, provide the right development and investment directions for this labor source.
Transparent salary policies help businesses easily consider bonuses and salary increases appropriately. From there, develop the internal quality of the business more strongly.
Applying the 3P salary system helps employees self-assess their abilities based on actual results, and set big goals to strive to improve their own salary.
Salary and bonus levels depend on individual abilities, so it creates more motivation and will for employees at work.
Employees are proactive in their work, manage their working time effectively... this contributes to increasing the productivity and quality of work of each individual in the business.
5. Some notes for businesses when paying salaries using the 3P method
Currently, not all businesses can easily implement the 3P salary system. Because it involves many necessary factors in a business. First, businesses need to accurately assess employee capabilities, then arrange salaries appropriately according to employee qualifications.
During the capacity assessment process, many businesses are often distracted by some extraneous factors such as seniority, emotions... This affects the fairness of the assessment process. Enterprises applying the 3P salary system failed, causing internal disunity.
6. The business model is suitable for the 3P salary system
In reality, not every business that wants to apply the 3P salary system will be suitable and effective. Trying to incorporate the 3P salary system into the business model will often become an internal crisis.
How to classify business models and the appropriate level when applying the 3P salary system is as follows:
Organizations or businesses that own a professional management system: High level of suitability, applying 3P salary helps management evaluate employee productivity more accurately.
Newly established organizations or businesses: Suitable for the 3P model, helping businesses build organizational structure and recruit personnel.
Organizations or Enterprises with large scale and long history: Enterprises need to carefully research the application of the 3P salary system. Because this will face strong opposition from within. Employees are used to adjusting their salaries every year. Changing this new regulation will make everyone disappointed. From there, it directly affects working performance. And fluctuations in the number of personnel in departments within the enterprise.
What is the 3P salary system? What is the strategy for applying the 3P salary system to effectively manage human resources? We have updated the details in the above article. Hopefully, readers will find a reasonable strategy for their business model. Along with that, readers should learn more about how to apply overall enterprise management software (ERP) for businesses. To support the comprehensive and effective management of key business activities.