If an HR department only gets one thing right, that must be compensation.  Too low, and your best people leave; too high and at best profitability suffers.  A compensation structure is generally aimed at achieving:

Development of a compensation system is now a requirement of Indonesian labour law.  While the law does not specify stringent requirements, it does require some type of system.

A fundamental requirement of most compensation systems is job evaluation.  We have had great success with the JE Leader software from .  The output of the job evaluation process is a table ranking jobs by whatever factors underly the evaluation system, such as impact and competency requirements.

Job evaluation points are placed into grades, and each job is associated with a particular grade.  Finally, salary ranges are associated with each grades.  While job evaluation is only done occasionally, salaries for each grade are typically adjusted annually, allowing for inflation and (perhaps not every year) external comparisons.

While the process is simple, many important decisions must be made in assigning grades and salaries, and these depend on a deep understanding of an employer's business and HR strategy.  Inevitably, difficulties arise in the application of a salary model, and the experience of an external consultant can be invaluable in making the right decisions.

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