TRS survey methodology definitions

SURVEY METHODOLOGY AND
DEFINITIONS

01 JUNE 2017

VIETNAM TRS

SURVEY METHODOLOGY AND
DEFINITIONS
1.

STANDARDS

1.1.

Data Confidentiality Standards

Mercer uses a number of market data masking rules in this report and in Mercer WIN ® to guarantee
client data confidentiality and to ensure the reported market data is as meaningful and useful as
possible.

Summary of Market Data Masking Approaches
1. A minimum number of incumbents, organizations and distinct organizations are required to
present remuneration statistics. If the minimums are not met, market data is suppressed
(“masked”) to protect confidentiality.
1.1. Incumbents represent the number of distinct employees (i.e. observations) that are used to
present mean, median and percentile remuneration statistics.
1.2. Organization is defined as any entity or operating unit (e.g., divisions, subsidiaries,
headquarters) providing unique incumbent remuneration data to the survey.
1.3. A distinct organization is defined as either a standalone organization or a parent
organization with multiple entities (i.e. divisions and/or subsidiaries). Multiple entities may

provide survey data and be part of the same distinct organization which is counted only
once.
2. We gauge whether or not an organization “dominates” the analysis, i.e. if an organization’s
incumbents represent a disproportionate share of the sample. We test for and report on two tiers
of dominance.
2.1. Tier 1 organization dominance alert – at this level we alert the data user that a certain
threshold of organization dominance has occurred and recommend that the user take this
into account and/or also consider switching to organization weighted statistics.
2.2. Tier 2 organization dominance masking – at this level we mask (suppress) all statistics
except mean and median.

Market Data Masking Criteria
Minimum counts to display statistics
Statistic

Mean (Average) and Frequency Percents
th

50 Percentile (Median)

Number of
Incumbents

Number of
Organizations

Number of Distinct
Organizations

3

3

2

4

4

2

th

th

5

5

2

th

th

10

5/10*

2

25 and 75 Percentile
10 and 90 Percentile

* 5 organizations if the statistics are incumbent weighted; 10 if they are organization weighted.
Note: Masked data is indicated in this report and Mercer WINđ with a double hyphen, i.e. --.

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Organization dominance criteria thresholds
Percent of Incumbents from One Organization
Dominance Indicator (Symbol)

Tier 1 Alert

Tier 2 Data Masking

35% to 50%

50% +

Single Asterisk “ * “

Double Asterisk “ ** “

®

Note: The dominance indicators are displayed to the left of the “num orgs” column in Mercer WIN . Most PDF reports do not display the
indicators although the Tier 2 masking is applied.

Peer Group Confidentiality
Peer groups (client defined subsets of this survey’s participants) may be created in Mercer WIN ®. To
protect the confidentiality of survey participants, the following rules apply to creating and modifying
peer groups.
Peer group minimums
Criteria

Minimum Number

Number of Organizations

10

Number of Distinct Organizations

5

Number of Organization Peer Groups to Vary by

4

1.2.

Ageing Standards

In Mercer WIN®, you may age all the remuneration elements in your view. All remuneration
elements will be aged using the client supplied ageing factor and dates.

1.3.

Treatment of Zeros

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

1.4.

Treatment of Negative Values

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

1.5.

Treatment of Expatriates (International Assignment) and Local Plus

From 2017, in Asia surveys, Expatriates data for Executives will be collected along with Local and
Local-plus. The Management/Professional / Para-professional career streams will still continue with
Local and Local-plus only.
Allowances and Perquisites usually associated with Expatriate package are also included in the

questionnaire. Please refer to the section 6. Compensation items.
When expatriates are included in the survey, WIN users will be able to exclude these records
through a refinement.

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Notes:
Local and Local Plus are incumbents who are employed on the basis of a contract that is entered
into with the entity of the country for which survey data is being provided.
Expatriate incumbents are employed not on the basis of a contract that is entered into with the
entity of the country for which survey data is being provided.
Local Plus incumbents are Employees who are paid according to the salary levels, salary structure,
and salary administration guidelines of the host location plus are provided some 'expatriate-type'
additional allowances or benefits such as housing, dependents’ education, enhanced transportation
support, etc.

1.6.

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 between January 1 and March 31 of the survey year.
When normalizing currencies in Mercer WIN®, there is a variety of time periods available for average
exchange rates. Mercer recommends using the 6 month (January to June) average for most of our
surveys which have Q2 data effective dates.

1.7.

Total Direct Compensation and Total Remuneration – Number of Incumbents

The total number of recipients reported for these remuneration types may be less than other
compensation aggregates because there may be organizations that only submitted cash
compensation.

2.

STATISTICS

2.1.

Descriptive Statistics

§

10th Percentile (10th %ile) – The data point that is higher than 10% of all other data in the
sample when ranked from low to high.

§

25th Percentile (25th %ile) – The data point that is higher than 25% of all other data in the
sample when ranked from low to high. Also known as the first quartile.

§

Median – The data point that is higher than 50% of all other data in the sample when ranked
from low to high. Also known as the 50th percentile.

§

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. Also known as the third quartile.

§

90th Percentile (90th %ile) – The data point that is higher than 90% of all other data in the
sample when ranked from low to high.

§

Mean – The sum of all data reported divided by the number of observations in the sample.
Also known as average.

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3.

SURVEY METHODOLOGY AND
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§

Receiving Item (Count Obs/Orgs) – The number of employees/organizations receiving the
compensation or benefit item. Each item, such as base salary or incentive amount, is
analyzed individually using the data reported for that item only. If an organization did not
provide a piece of data for a position, this organization’s information is not included in the
calculation of the statistics. Therefore the number receiving the item may differ by item.

§

Frequency (% Obs/Orgs) – The percentage of the employees/organizations actually
receiving the item based on the total number of employees/organizations in the position.

MARKET REGRESSION TREND LINES

Mercer uses statistical regression analysis to create market trend lines that depict the relationship
between remuneration and Position Class (PC). Regression market trend lines are published in this
report and are also available in Mercer WIN® on the entire market and on combinations of job
families, peer groups and other market refinements. The Mercer regression market trend line
methodology is described below.

Summary

1.
2.
3.
4.

Mercer market regression lines are created from actual data results.
The actual data results are organization weighted.
The Mercer market regression line is the market median.
Mercer surveys use bands (i.e. line segments) to optimally depict the different pay patterns that
exist by job level.

The Mercer regression methodology is executed as follows:
1. Market statistics (quartiles, mean and median) are calculated for each Position Class in the
chosen market (organization weighted).
2. An exponential regression on the actual market median is computed.
3. Quartile lines are computed:
§ At each PC, ratios between the quartile and median market value are calculated.
§ An exponential equation is calculated using all the quartile-median ratios.
§ The resulting ratio formula is applied to each regressed median value to arrive at the
regressed quartile value.

Business Rules
There are stringent data density checks to calculate market regression lines:
1. There must be sufficient market data to produce medians (i.e. a minimum of 4 data points are
required to produce a median).
2. There can be no more than 2 sequential PCs without data.
3. The minimum number of PCs with data to produce a line is 5.
4. Negative slopes are not permitted.
5. Results are reviewed to identify and correct relationships between remuneration type and line
segments – i.e. regression values for:

§ higher remuneration types (e.g., Total Compensation) exceed values for lower remuneration
types (e.g., Total Guaranteed Compensation);
§ the 2nd band exceeds the values for the 1st band;
§ 75th Percentile > 50th Percentile (Median) > 25th Percentile.

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Note that the Mercer Market Regression Lines are organization weighted median as described
above. However, Mercer WIN® provides the analytical flexibility to obtain incumbent weighted
regressions and also to use regressed means as well.

Bands, Line Segments
Mercer market regression trend lines consist of two or three “bands” or line segments to better
capture the different pay patterns (i.e. relationships between pay and job level as depicted by
Position Class) that exist between different job levels.
There are exceptions (noted below) but generally bands are globally consistent contingent on the
maximum PC with reported median results (table below).
st

2

nd

Maximum PC With Median Reported

1 Band

60 to 66

40 to 52

53 to end PC

67 to 74

40 to 54

55 to end PC

75 or Greater

40 to 56

57 to end PC

Less than 60 or Less than 15 Total PCs in the Survey

Band

No Bands

Note: Bands may begin at a PC higher than 40.

For the purposes of maintaining year over year continuity, there are a number of countries that have
retained the bands they used prior to implementing the global standard above. These are listed
below.
st

Country

1 Band

Belgium, Netherlands

nd

rd

Band

3 Band

40 – 49

50 – 59

60+

Bulgaria

40 – 50

51+

Sweden

40 – 53

54 – 64

65+

Argentina, Brazil, Chile, Mexico

40 – 44

45 – 53

54+

All Other Latin America

40 – 44

45 – 52

53+

4.

2

YEAR OVER YEAR MARKET PAY TRENDS

Despite challenges to measuring market pay trends, Mercer is able to provide meaningful insights
around market pay change for surveyed markets.

Overall Market Pay Trends
Inflation Forecast – This macroeconomic variable has a high-level influence on salary budgets,
especially in countries with high inflation. Mercer’s analysis includes this variable to understand its
relation to salary budgets. The Economic and Development Trends section in the overview report
provides details about inflation and other economic indicators.
Changes in Salary Increase Budgets – Salary increase budget estimates indicate the percentage
amount that surveyed organizations plan to increase their compensation spending over a specified
period (usually the current and upcoming years). They depict how the overall market is expected to
change based on the projected change in annual salary spending by surveyed organizations. The
salary budget statistics are helpful for setting baseline expectations of how the overall surveyed
market will change.

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Changes in Regressed Market Trend Line – Mercer regression trend lines depict market pay at
different job levels —- as measured by Mercer’s International Position Evaluation (IPE) Position
Class — and employee groups (that is career streams).
§

All Organizations – This approach compares the current regressed market trend lines to
those of the previous year to show how pay has changed from survey to survey.

§

Same Organizations – This approach compares regressed market trend lines using only
organizations participating in both years to eliminate the impact of any sample change. In
contrast to salary budget changes, the Same Organizations regressed market trend line
depicts how the overall market actually changed.

§

Same Incumbents – This approach compares the regressed market trend lines for Same
Incumbents. This approach is the optimal to determine overall market pay trends, because it
eliminates the impact of sample change at the organization and incumbent level.

Changes in Benchmark Positions
§

All Organizations – This approach compares the overall market pay of a benchmark
position to the previous year, using all organizations that provide data each year. No attempt
is made to control for sample change. In effect, it is the change in median base salary

observed from the two published surveys. This approach also provides number and
percentage change in organizations and employee/incumbent to assess the impact of
sample change on base salary changes.

§

Same Organizations – This approach compares the overall market pay of a benchmark
position to the previous year, using only organizations that provide data for the benchmark
position each year. This approach is optimal to determine market pay trends for individual
jobs, because it controls the composition of organizations and jobs each year and treats
each organization’s impact on the market equally. Median market pay change, using only
Same Organizations with the same jobs, is presented for each benchmark position. The
number of Same Organizations and the employee/incumbent sample change indicate
sample stability and potentially identify emerging, declining, or changing jobs within
organizations.
– Range of Organization Percent Change – This approach provides a valuable
complement to Same Organization. It shows the same job market changes by
illustrating the range of increases granted by organizations for a benchmark position.

§

Same Incumbents – This approach compares the overall market pay of a benchmark
position to the previous year using only same organizations and incumbents each year. This
approach is optimal to determine market pay trends for individual jobs because it controls
the composition of organizations, jobs, and incumbents each year. Median market pay
change, using only the Same Organizations with the same jobs and incumbents is presented
for each benchmark position.

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Detailed Year over Year Results
Detailed results illustrate the year over year change in regressed market trend line and benchmark
position, using each of the Mercer pay trends approach.
Year Over Year Trends by Benchmark Position – As in the example below, sample and pay
change information is provided for each of the Mercer pay trends approach.
Using this Information – This example is for the Head of Legal/General Counsel, typically a single
incumbent position in each organization. Conclusions drawn from the data on this position are:
§
§
§

The increase in organizations reporting this position contributes to the large increase in pay
from the previous survey (10.6%).
Pay levels changed 5.4% when measuring the market, using only organizations that
reported the position both years.
Individual organizations pay changes ranged from 2% (P25) to 8% (P75) with a median of
6%.

In this survey, 14

organizations match this
position, a 40% increase from
the previous year’s survey.

© 2017 Mercer LLC
September

The increase in pay from the
previous published survey results is
10.6%. This percentage is
substantially higher than the 5.4%
market increase obtained by only
using the 8 same organizations to
calculate the market change.

An examination of the
individual organization pay
changes reveals a range of
increases of 2% (25th
percentile) to 8% (75th
percentile) with the typical
organization increase being
6% (median).

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Calculation Example – The following illustration depicts Mercer’s approaches for calculating the
market pay trends in the above example. Columns 1 and 2 represent the organizations supplying
data in the current year (14 total) and previous year (10 total) and columns 3 and 4 represent their
average pay for the position each year. Column 5 shows each individual organization’s change in
pay. Note that individual organization pay change calculations are only performed on the eight
organizations supplying the data for the position in both years. The table shows market totals (that
is, the number of organizations and market pay levels and change) at the bottom of the columns.

Range of Organization Percent Change
(Same Organizations)
Pay for each of the individual organizations
matching to the job in both survey years changed
from a combination of factors (for example salary
increase policies, promotions, new hires). These
changes ranged from a decrease of 2% to an
increase of 11%; the quartile and median
individual organization change is illustrated by
the arrows to the left.
All Organizations Market Change
Fourteen organizations match the job in the
current year up 40% from 10 last year. This
year’s published market average is 10.6% higher
than the previous survey market.

Same Organizations Market Change
Eight of the 14 organizations in the survey

participated in the survey and matched the job in
both survey years. The average pay for the job in
these 8 organizations of $61 is 5.4% higher than
it was the previous year.

5.

AGGREGATE COMPENSATION VALUES

These values may appear in either, or both, Mercer WIN® and PDF reports.
§

Base Salary (12 month) – Includes only base salary (Monthly Base Salary x 12).

§

Base Salary – Includes only annualized base salary (Monthly Base Salary x Number of
Months Paid).

§

Total Guaranteed Cash Compensation – Includes Base Salary plus the annualized value
of guaranteed allowances.

§

Total Cash Compensation (Actual) – Includes Total Guaranteed Cash Compensation
plus the annualized value of any actual Short-term Incentive, Sales Incentive or Other
Incentive awards paid out on performance over a period of 12 months or less. The figures
reported reflect the actual amounts of the awards received over the last 12 months.

§

Total Cash Compensation (Target) – Includes Total Guaranteed Cash Compensation
plus the annualized value of any target Short-term Incentive, Sales Incentive, or Other
Incentive awards. The figures reported reflect the target amounts applicable to the

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incumbent. Only incumbents with valid incentive eligibility and target amounts will be
included in this calculation.
§

Total Cash Compensation (Actual) – Receivers – Includes Total Guaranteed Cash
Compensation plus the annualized value of any actual Short-term Incentive, Sales
Incentive, or Other Incentive awards calculated only when such awards were received. The
figures reported reflect the actual amounts of the last awards received.

§

Total Cash Compensation (Target) – Receivers – Includes Total Guaranteed Cash
Compensation plus the annualized value of any target Short-term Incentive, Sales
Incentive, or Other Incentive awards calculated only when such awards were actually
received. The figures reported reflect the target amounts applicable to the incumbent.

§

Total Direct Compensation (Actual) Black-Scholes – Includes Total Cash
Compensation (Actual) plus the annualized value of any Long-term Incentive awards,
valued using Black-Scholes methodology for appreciation-based awards.

§

Total Direct Compensation (Target) Black-Scholes – Includes Total Cash
Compensation (Target) plus the annualized value of any Long-term Incentive awards,
valued using Black-Scholes methodology for appreciation-based awards.

§

Total Direct Compensation (Actual) Accounting Cost – Includes Total Cash
Compensation (Actual) plus the annualized value of any Long-term Incentive awards,
valued using the organization’s internal accounting cost methodology.

§

Total Direct Compensation (Target) Accounting Cost – Includes Total Cash
Compensation (Target) plus the annualized value of any Long-term Incentive awards,
valued using the organization’s internal accounting cost.

§

Total Remuneration (Actual) – Includes Total Direct Compensation (Actual) BlackScholes plus the annualized value of the benefits: retirement plan, life and medical
insurance, motor vehicle, etc.

§

Total Remuneration (Target) – Includes Total Direct Compensation (Target) BlackScholes plus the annualized value of the benefits: retirement plan, life and medical
insurance, motor vehicle, etc.

§

Total Remuneration (Actual), less LTI – Includes Total Remuneration (Actual), but
subtracts the value of any Long-term Incentive awards included in Total Direct
Compensation (Actual) Black-Scholes.

§

Total Remuneration (Target), less LTI – Includes Total Remuneration (Target), but
subtracts the value of any Long-term Incentive awards included in Total Direct
Compensation (Target) Black-Scholes.

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COMPENSATION ITEMS

These values may appear in either, or both, Mercer WIN® and PDF reports.

Base Salary Items
§

Monthly Base Salary – The gross monthly base salary as of the data effective date,
excluding any allowances.

§

Number of Months Paid – The number of times the incumbent receives monthly base
salary in a full year including Fixed/Guaranteed Bonus (e.g. 13 months = 13).

§

Additional Number of Months Paid – The number of months base salary that are paid
beyond the annual 12 months.

§

Additional Months Base Salary Amount – The amount of base salary that are paid

beyond the annual 12 months.

Guaranteed Cash Items
§

Meal Allowance – The annual guaranteed cash allowance provided for subsidized meals or
luncheon vouchers.

§

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.g., to take up public transport,
gasoline consumption, road tax, parking, etc.).

§

Housing Allowance – Annual guaranteed cash allowance given to subsidize housing or the
annual cost of renting or providing the accommodation for the incumbent. This includes
rental and other associated costs such as management fees, government rates, etc.
Combined with Housing Rental Cost (Annually).

§

Position / Job–Based Allowance – The annual guaranteed cash allowance for holding a
position e.g., acting allowance etc.

§

Phone Allowance – The annual guaranteed cash allowance for phone expenses.

§

Skill Allowance – The annual guaranteed cash allowance for compensating the incumbent's
specialized skill.

§

8-hour Shift Allowance – The annual guaranteed cash allowance for working on an eighthour shift.

§

12-hour Shift Allowance – The annual guaranteed cash allowance for working on a twelvehour shift.

§

Shift Allowance – The annual guaranteed cash allowance for working on a specialized shift
schedule.

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§

Site Allowance (On-Shore) – The annual guaranteed cash allowance related to working on
a particular on-shore site or location or environment of hazardous nature.

§

Lump-sum Allowance (For Expatriates only)- An all-inclusive, consolidated lump-sum
allowance, meant to compensate for areas that are intended to be covered by (1) cost-ofliving allowance, (2) mobility allowance, or (3) hardship allowance

§

Mobility Allowance / Foreign Service Premium (For Expatriates only) - A cash incentive
provided to compensate for the inconvenience of being displaced.

§

Cost of Living Allowance (For Expatriates only) - A cash amount provided to compensate
for the difference in living costs between the home location and the host location in order to
enable employees to maintain their home location purchasing power. It is usually
determined by applying a cost-of-living index to the spendable income part of an employee’s
home country base salary.

§

Hardship Allowance (For Expatriates only) - A cash payment aimed at providing special
compensation and incentives to compensate expatriates for difficult living conditions in the
host country. Assessment of the difficulty is usually linked to the evaluation and comparison

of selected factors and criteria representative of the living standards of international
employees and their families

§

Other Expatriate / Local-Plus Allowances ( For Expatriates / Local-Plus only) - An
allowance that bundles together allowances meant to cover a variety of typical Local Plus
elements, such as for e.g. transportation, housing, dependents’ education, spousal
assistance, club-membership.

§

Clothing Allowance – The annual guaranteed cash allowance provided in lieu of a uniform
or to subsidize uniform related expenses for the incumbent.

§

All Job-based Allowance – The annual guaranteed cash allowance which includes Position
Allowance, Skill Allowance, 8-hour Shift Allowance, 12-hour Shift Allowance, Burn-In
Allowance, Cleanroom Allowance and Scope Allowance.

§

Children Education Allowance – The annual amount given as cash/benefit-in-kind cost to
the employee, for the education expenses of a employee's dependents/foreigner's
dependents. Combined with Children's Education Cost (Annually) and Tuition Assistance for
Employee's Children.

§

Grooming Allowance: Cash value of fixed allowance given for the purpose of maintaining
professional appearance per annum. Fringe benefit tax paid by employer (if any).

§

Other Guaranteed Allowances – Any annual guaranteed cash allowances not specified
above.

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Total Cash Items
§

Short-term Incentive Eligibility – Indicator that incumbent is eligible for a Short-term
Incentive award.

§

Sales Incentive Eligibility – Indicator that incumbent is eligible for a Sales Incentive award.

§

Short-term Incentive (Actual) – All payments received over the 12-month period ending on
the data effective date, which are associated with individual, team, and/or corporate
performance.

§

Sales Incentive (Actual) – All payments received over the 12-month period ending on the
data effective date, which are associated with sales achievement.

§

Short-term Incentive (Target) – The target amount of the Short-term Incentive award,
associated with expected individual, team, and/or corporate performance over the next 12month period.

§

Sales Incentive (Target) – The target amount of the Sales Incentive award, associated with
sales achievement over the next 12-month period.

§

Short-term Incentive (Target) as Percent of Base – The Target Short-term Incentive
award, associated with expected individual, team, and/or corporate performance over the
next 12-month period, expressed as a percentage of Base Salary.

§

Sales Incentive (Target) as Percent of Base – The Target Sales Incentive award,
associated with expected sales performance over the next 12-month period, expressed as a
percentage of Base Salary.

§

Other Short-term Incentive Eligibility – Indicator that incumbent is eligible for other bonus
scheme.

§

Other Short-term Incentive (Target) – The target amount of the Short-term Incentive award
associated with other bonus schemes over the next 12-month period.

§

Other Short-term Incentive (Actual) – All payments received over the 12-month period
ending on the data effective date that is associated with other bonus schemes.

§

Sales Commission - A percentage of share (or dollar amount rate) tied to revenue sales,
unit sales or profit dollars (can be with or without sales threshold/target/cap). Eg. 1% of
sales under $1m; 1.5% of sales over $1m.

§

Total Incentive (Actual) – The sum of all Short-term Incentive, Sales Incentive or Other
Incentive plan actual award payouts. Total Incentive is added to Total Guaranteed to arrive
at Total Cash Compensation (Actual).

§

Total Incentive (Target) – The sum of all Short-term Incentive, Sales Incentive or Other
Incentive plan target awards. Total Incentive is added to Total Guaranteed to arrive at Total
Cash Compensation (Target).

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Total Direct Compensation Items
§

Long-term Incentive Eligibility – Indicator that incumbent is eligible for a Long-term
Incentive award.

§

Long-term Incentive (Black-Scholes) – The annualized value, using Black-Scholes
methodology for the appreciation-based awards, of all LTI awards received over the

12-month period ending on the data effective date, which is associated with individual, team,
and/or corporate performance over a period longer than one year. Organization matches to
Short-term Incentive deferrals are included in the grant data.

§

Long-term Incentive (Accounting Cost) – The annualized value, using the organization’s
internal accounting cost methodology, of all LTI awards received over the 12-month period
ending on the data effective date, which is associated with individual, team, and/or corporate
performance over a period longer than one year. Organization matches to Short-term
Incentive deferrals are included in the grant data.

§

Long-term Incentive as Percent of Base (Black-Scholes) – The Long-term Incentive
Amount (Black-Scholes) expressed as a percentage of Annual Base Salary.

§

Long-term Incentive as Percent of Base (Accounting Cost) – The Long-term Incentive
Amount (Accounting Cost) expressed as a percentage of Annual Base Salary.

Total Remuneration Items
§

Housing Benefits (For Executive Career stream) - The annual amount of the housing
benefit which is provided in the form of a perquisite, e.g. rental reimbursement, rental cost
borne by the company, company-provided accommodation.

§

Club Membership (For Executive Career stream) - The annual subscription fee plus 10%
of entrance fee (if applicable). It includes various types of membership provided to
employees including golf, fitness, business club and any other club memberships.

§

Family Size (For Executive Career stream) - The size of the family covered under the
housing benefit.

§

Eligible for Children's Education Cost & Number of Children Covered (For Executive
Career stream) - The actual number of children receiving this benefit. Select “Yes” if the
organization has this policy even though the employee(s) do not have any children.

§

Children Education Cost (For Executive Career stream) - The total amount of the
children’s education provided in the form of perquisites, including annual school fee or
tuition fee +10% x Debenture Cost (if applicable), plus any other items such as books and
uniforms, and any travel benefit for ex post education. Only up to age 18 (inclusive).

§

Leave Passage (For Executive Career stream) - The cash value or allowance supported
by the company for R&R (rest & recreation) or non-business purpose in the form of
perquisites. Leave passage is also known as home leave for expatriates.

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7.

SURVEY METHODOLOGY AND
DEFINITIONS

VIETNAM TRS

§

Type of Medical Plan covered (For Expatriate in the Executive Career stream) - The
type of medical plan provided to the expatriates. If the expatriates are enrolled to local
medical plan but have a better protection than locals, please select “Local Plan with
Premium”.

§

Car benefits value (Motor vehicle) – The value provided to the incumbent, by the
organization, for motor vehicles. This value could take the form of a lease payment on a
vehicle, an allowance to reimburse an employee, or a purchase of a vehicle (in this case, a
valuation formula is applied based on information provided).

§

Flexible Benefits – The annual cost for providing flexible benefits to the incumbent.

§

Car / Housing / Personal Loans /Hard-Soft furnishing Loans – The value of the loan
entitlement provided to the incumbent.

§

Health Benefit (Medical Plan) – The value provided by the company for clinical, dental and
hospitalization coverage to the employee.

§

Life and Accident Insurance – The value provided by the company for accident and life
insurance coverage to the employee.

§

Retirement (Pension / Gratuities) – The value of supplementary pensions which depends
on the type of scheme (Defined Benefits, Cash Balance and/or Defined Contribution).

LONG-TERM INCENTIVES DEFINITIONS

Stock/Share Options – Stock/Share Options allow for the purchase of stock at a fixed price over a
specified period. The exercise price (known also as “strike” or “subscription” price) is often equal to
the market price on the date of grant, but may be less than (with discount) or greater than (with
premium) the market price on the date of grant.
Share Appreciation Rights (SARs) – Share Appreciation Rights provide an incumbent with the
appreciation in market value of the share. They may be paid out in cash, stock, or a combination of

cash and stock. No investment on the part of the incumbent is required. Share Appreciation Rights
include Phantom Appreciation Shares. Phantom Appreciation Shares are an award denominated in
hypothetical shares, the value of which is based on an increase in actual share value or another
measure of organization value (e.g., book value). There are three types of Share Appreciation
Rights:
§ Freestanding – SAR grant that is not attached to a stock/share option.
§ Limited – SAR that is exercisable only upon the occurrence of a specific event such as a
change in control.
§ Tandem – SAR that is granted with a stock/share option. The exercise of one cancels the
other.
Restricted Shares/Share Units – Conditional grants of notional, actual or phantom shares of stock
with vesting contingent upon employment for a specified period of time. The value of each share
depends upon the market value of the share at the end of the vesting period.

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Performance Shares/Share Units – Conditional grant of notional or actual shares, with payment or
vesting contingent upon achievement of specified performance goals over a multi-year performance
period. While the number of Performance Shares/Share Units earned depends on the extent to

which the performance goals are achieved, the value of each Performance Share/Share Unit
depends upon the market value of the share at the end of the performance period.
Performance Cash Units – Conditional grant denominated in units other than notional or actual
shares, with payment contingent upon achievement of specified performance goals over a multiyear performance period. Performance Cash Units are cash-denominated and not tied to the price
of a share of stock. Although units are usually cash-denominated, their value may also be based on
other constructs, such as dividends or EPS (Earnings Per Share). Where the value of each unit is
equal to 1.00, the incentive type is also known as “Long-term Cash.”
Long-term Cash – A pre-determined cash amount paid out contingent upon achievement of
specified performance goals over a multi-year performance period.

8.

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, monetary-based measure that can be used with other
compensation amounts to determine Total Direct Compensation. Organization matches to Shortterm Incentive Deferrals are included in the grant data. In this report, Long-term Incentive values
have been calculated using Mercer’s Black-Scholes and Accounting Cost Methodologies.

8.1.

Black-Scholes Method

Under the Black-Scholes methodology certain LTI awards are discounted for required performance
conditions. 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.
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. A 20% discount is applied if the performance
measure does not include Relative Total Shareholder Return. Other discounts, ranging from 35% to

50%, are applied depending upon the degree to which Relative Total Shareholder Return is used as
the performance measure. Otherwise, LTI values generally have not been adjusted to reflect any
discounts for service-based vesting, lack of transferability, or risk of forfeiture.
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. For example, 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.
Defined Maximum awards include a “maximum” number of shares/share units corresponding to
performance. The number of shares awarded may be less based upon performance. Fixed Amount
and Defined Maximum plans are in contrast to Defined Target Plans.
Defined Target awards include a “target” number of shares/share units corresponding to target
performance. The number of shares awarded may be more or less based upon actual performance
(e.g., payouts may be 0% to 200% of target). Defined Target awards are valued at the “target” level
with no discount.

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Appreciation Based Incentives – These plans include Stock/Share Options and Share
Appreciation Rights (SARs).

§

Annual Dividend Yield – based on dividends paid in the 12 months preceding the date of grant.
(For grant dates later than December 31, 2016, the annual dividend yield is based on
dividends paid from January 1, 2016 to December 31, 2016.)
§ Estimated Option Term – an assumed estimated term based on SEC safe harbor accounting
rule is used. The estimated term is the sum of (option term as reported by survey participants +
assumed 3 year vesting)/2. For example, an option with a reported term of 10 years will have
an estimated option term of 6.5 years (10+3)/2. If a participant does not provide an option term,
then we assume an estimated option term of 6.5 years.
§ 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 all countries other than the United States, Canada, and
Australia, the Risk-free Rate is based on available bond yield data using an estimated 7-year
rate as of December 31, 2016. Risk-free Rates for the United States, Canada, and Australia
are established using the following values:
– United States – Monthly U.S. Treasury rates in place on the date of the grant, rounded to the
nearest year.
– Canada – Monthly Bank of Canada Bond Yields in place on the date of the grant, rounded to
the nearest year.
– Australia – Monthly Reserve Bank of Australia Capital Market Yields – Government Bond
rates in place on the date of the grant, rounded to the nearest year.
§ Annualized Volatility of Stock Prices – based on daily closing prices for 36 months preceding
the date of grant. (For grant dates later than December 31, 2016, the stock price volatility is
based on daily closing prices from January 1, 2014 to December 31, 2016.) If the underlying
stock has not existed for three years, then the volatility is calculated for an abbreviated time
frame. Stock Price Volatility is capped at 50%.
The survey value is equal to the product of: (1) the per-share Black-Scholes value, (2) the number
of shares granted in the most recent grant and (3) where applicable, discounts detailed above for
certain performance-contingent awards to reflect the risk that the award will not vest or be paid out.
The result is adjusted for the frequency of awards, as appropriate, to annualize the result (e.g., if

awards are made every two years, then the product is divided by two).
For privately held organizations, 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.
Stock/Share Based Incentives – These plans include Restricted Shares/Share Units and
Performance Shares/Share Units. 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, (2) the number of shares
granted in the most recent grant and (3) where applicable, discounts detailed above for certain
performance-contingent awards to reflect the risk that the award will not vest or be paid out. The
result is adjusted for the frequency of awards, as appropriate, to annualize the result (e.g., if awards
are made every two years, then the product is divided by two).
Cash Denominated Incentives – These plans include Performance Cash Units and Long-term
Cash. For Performance Cash 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, (2) the number of units payable for
performance granted in the most recent grant and (3) where applicable, discounts detailed above for
certain performance-contingent awards to reflect the risk that the award will not vest or be paid out.

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The result is adjusted for the frequency of awards, as appropriate, to annualize the result (e.g., if
awards are made every two years, then the product is divided by two). For Long-term Cash, the
survey value is equal to the product of the monetary value payable for performance reported by the
survey participants and where applicable, discounts detailed above for certain performancecontingent awards to reflect the risk that the award will not vest or be paid out. This amount is
adjusted for the frequency of awards, as appropriate, to annualize the result (e.g., if awards are
made every two years, then the value is divided by two).

8.2.

Accounting Cost Method

We have provided this methodology as a comparison point to that of the Black-Scholes
Methodology. Survey participants were asked to report their total accounting cost per share on the
date of grant, under either FAS 123R or IFRS2.
Long-term Incentives under the Accounting Cost Method are not discounted for performance
conditions. However, for plans without accounting cost per share provided values calculated under
Black-Scholes Method will be used for reporting under this method.
Appreciation Based Incentives – These plans include Stock/Share Options and Share
Appreciation Rights (SARs). 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. The result is adjusted for the frequency of awards, as appropriate, to
annualize the result (e.g., if awards are made every two years, then the product is divided by two).
Note: If an Accounting Cost is not provided by a survey participant for an Appreciation Based
Incentive, an assumed value is equal to value obtained with Black-Scholes Method.
Stock/Share Based Incentives – These plans include Restricted Shares/Share Units and
Performance Shares/Share Units. 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. The result is adjusted for the frequency of awards, as appropriate,
to annualize the result (e.g., if awards are made every two years, then the product is divided by
two).

Note: If an Accounting Cost is not provided by a survey participant for a Stock/Share Based
Incentive, an assumed value is equal to value obtained with Black-Scholes Method.
Cash Denominated Incentives – These plans include Performance Cash Units and Long-term
Cash.
For Performance Cash Units 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 units payable for
performance granted in the most recent grant. The result is adjusted for the frequency of awards, as
appropriate, to annualize the result (e.g., if awards are made every two years, then the product is
divided by two).
Note: If an Accounting Cost is not provided by a survey participant for a Performance Cash Units,
an assumed value is equal to value obtained with Black-Scholes Method.
For Long-term Cash, the survey value is equal to the product of the monetary value payable for
performance reported by the survey participants and where applicable, discounts detailed above for
certain performance-contingent awards to reflect the risk that the award will not vest or be paid out.

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This amount is adjusted for the frequency of awards, as appropriate, to annualize the result (e.g., if
awards are made every two years, then the value is divided by two).

9.
9.1.

BENEFITS VALUATION METHODOLOGY
Benefits Valuation Assumptions

This section details the assumptions used by Mercer to value the main benefit plans. We have
applied these techniques, with adjustments where necessary, to the actual features of your plan.

Employee Value
The valuation process has been undertaken from the perspective of employee value as opposed to
employer cost. 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. This process
takes into account the fact that some benefit plans are tax effective when provided by the employer,
so that the valuation is grossed up where the equivalent benefit, if provided by the employee, would
be paid out of net salary. Employee contributions have been deducted from these values where
appropriate in order to establish the benefit provided by the employer.
We value the benefit based on value to a new employee (if he or she had to purchase this himself or
herself). Therefore we assume that all employees are receiving the current benefits available for a
new hire.

Gross Salary Equivalent
Values normally reflect the amount of salary that would be required to purchase the equivalent
benefit. Thus, the value of a benefit that enjoys a tax-preferred status in relation to salary (e.g.,
medical plans) will include a tax “gross-up” to equate it to taxable salary required to purchase a
similar benefit.

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.

Market or Actuarial Valuation
Benefits are valued using the “walkaway” method. 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. In many instances, these amounts will be greater than the cost to the employer. For
example, an individual medical plan that is identical to the employer’s medical plan will cost more
because of the greater marketing, administrative, and underwriting costs associated with an
individual plan.
Valuation reflects market pricing wherever possible. If there is a market yardstick which employees
are likely to use to determine the personal value attributed to an employee benefit, this is used.
Where market pricing does not exist, an actuarial valuation using standard assumptions and pricing
techniques will be used. For example, although individual medical or dental policies containing
provisions matching an employer plan would typically not be available in the open market, the value
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of the employer plan is estimated by valuing the employer plan using the same rate methodology as
is used for individual benefit.

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. For example, it is assumed
that all employees participate in medical, pension, and stock purchase plans (where offered). This
gives a measure of the opportunity value to the employee.

Personal Substitution
Values reflect as close substitution as possible to the benefit provided by the employer. For
example, it has been assumed that employees will replace their life insurance benefit with the same
amount of coverage. We understand that in reality this may not always be the case.

Demographic Profiles
As demographic characteristics, such as date of birth, date of hire, gender and family status, are
generally required to run benefit valuations, we have defined a standard employee profile for this
purpose. This is done in order to remove the effect of demographics from the valuation of benefits.
Profiles are attributed to the career stream definitions in the TRS job match. For information about
career streams, please refer to the section on the Mercer Universal Position Coding System
(MUPCS®). As an example career stream 1 refers to executives. All incumbents with a career
stream 1 will be assumed to participate in benefits offered to executive members. Incumbents with a
management career stream 2 will be assumed to participate in the benefit plans offered to
management employees. Incumbents in career stream 3 will be assumed to participate in the
benefits offered to professional employees and incumbents in career stream 4 are assumed to
participate in the plans for para-professional employees. It is possible that the same plan could be
applicable for all groups of employees.
Car benefits will be assessed on a per incumbent basis as eligibility for car benefits is not defined
per career stream typically.
The following provides the age/service characteristics for the profile used in the valuation.
Executive (Profile 1): Age 45 years and 10 years of past service, married with two children
Management (Profile 2): Age 40 years and 7 years of past service, marries with two children
Professional & Para-Professional (Profile 3) : Age 35 years and 5 years of past service, married with

two children.

9.2.

Benefits Valuation Methodology

On an annual basis benefits valuation methodology is reviewed and updated to take into account
changes in market practice, underlying premiums and rates and also changes to legislation. While
the valuation methodology is consistently applied across the survey, the participants should expect
some variation when making year-over-year comparisons.

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Retirement Plans – Defined Benefit Scheme
The quantification of this benefit is based on the organization cost of benefits accruing in the
following year. This means that the funding situation of the plan or the actual organization
contributions to the plan is not taken into consideration.
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. Early retirement subsidies such as unreduced benefits

or bridge supplements are also a factor. In order to produce values which differ based on plan
provisions, we use a single set of retirement probabilities.
We will assume that the employee will retire at Normal Retirement Age. All the calculations will be
based on the benefit that is accrued after service to retirement. Maximum and minimum benefits will
be considered. Accessory benefits such as pre-retirement death, disability and vesting benefits
would not be considered. For plans with employee contributions, we assume the maximum percent
of salary an employee is allowed to contribute.
For organizations with a mixed approach, both this section and the following (Defined Contribution)
will have to be considered.

Retirement Plans – Defined Contribution Scheme
The benefit is the contribution that is being credited during the year to the employee’s account.
When the organization contribution is defined as a percentage of the employee contribution and
where the employee can decide the contribution level, we will assume the maximum employee
contribution on which there is an organization match.
Accessory benefits such as pre-retirement death, disability and vesting benefits were not
considered. Past service contribution were also ignored.

Retirement Plans – Cash Balance Plans
Cash Balance Plans are Defined Benefit schemes with Defined Contribution characteristics.
Therefore the valuation is performed according to the Defined Contribution Plan methodology,
based on the assumption that the employee has 5 years of service.
In all instances, the matched and unmatched employer contributions are constrained by plan rules
and any government maximums.

Medical Plan
Medical and dental benefits are valued using a market representation of a mean cost of employer
provided benefits. 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. These amounts may be
greater or lower than the actual cost to your organization, depending on the organization’s overall

negotiation with plan providers.
Where employee contributions are required in the monthly cost of the plan, the amount is deducted
from the final value of the benefit.

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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. For valuation purposes, the value determined is based on the
expected coverage in the year following the valuation date. The coverage amount valued is equal to
the amount of coverage which is provided (i.e. paid for) by the employer.
The benefit is valued using a representation of an average cost of group insurance premium in the
market. Where employee contributions are required, the amount is deducted from the final value of
the benefit.

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. For valuation purposes, the value determined is based on the
expected coverage in the year following the valuation date. The coverage amount valued is equal to

the amount of coverage which is provided (i.e. paid for) by the employer.
The benefit is valued using a representation of an average cost of group insurance premium in the
market. Where employee contributions are required, the amount is deducted from the final value of
the benefit.

Share Purchase Plan
We assume that employees sell their stock immediately after the offering period. Each
organization’s offering period and discount rate are factored into the valuation. 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.

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.
The valuation of company cars can be based on the purchase price, lease cost or cash allowance,
which may be taken in lieu of the car. Where applicable, the costs of maintenance, insurance, and
fuel for private use are included in the valuation.

Car Loan, Housing Loan and Personal Loans
The method computes the annual average subsidy that the employer provides on interest cost of
the loan over the payment period. The total loan subsidy is calculated over the entire payment
period and divided by the payment period to derive the average annual employer-provided benefit
value. Average market loan rates are assumed in the calculations. If a company subsidies more
than the assumed loan market rate, then the company is assumed to have subsidized the entire
cost of the loan.

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Flexible Benefits
The value of flexible benefits is the monetary contribution of the employer to non core benefits on an
annual basis, based on the assumption that the employee is married with two children and has 5
years of service.

10. JOB MATCHING METHODOLOGY
Position Class – The Mercer level produced using Mercer’s International Position Evaluation (IPE)
system (discussed in detail in the next section).
Position Code – Based on Mercer Universal Position Coding System (MUPCS®) described in the
final pages of this section.

11. MERCER’S INTERNATIONAL POSITION EVALUATION
SYSTEM (IPE VERSION 3.1)
The IPE system is a proven approach to position evaluation and is used by thousands of
organizations around the world. As Mercer is dedicated to continuous quality improvements, the IPE
system is reviewed regularly based on input and feedback from users and consultants worldwide.
The improvements made to the system address the changing environment and evolution of
organization structures.
The system allows accurate comparisons between positions, as job titles alone can be misleading.
For example, 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. In other words, the scope and content of a finance manager position
could be broad in some organizations and limited in others.
By using the IPE method, we can further isolate similar positions and responsibilities.
The information in the survey is presented to allow a rapid and precise measurement of salary
levels. It is important to remember that, when conducting job matching and position evaluations, it is
the “position” that is being matched and not the person holding that position. The qualifications and
the performance of the present position holder may differ from what is actually required by the
position.
Position evaluation is not just a tool for salary comparisons but also instrumental in recruitment,
career planning, designing organization structures and, in addition, when dealing with expatriate
compensation and planning.
The Mercer IPE Methodology is available for internal use in organizations based on licensee terms
and conditions. 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.

11.1.

The Five Factors of the International Position Evaluation (IPE) System

The user should note that each position evaluation system has its own terminology and peculiarities.
It is always easier to learn these details from a specialist so that the “how-to-use” questions are
quickly understood. Equally important, the role of the Mercer survey specialist is to ensure proper

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representation of compensation available in each market, so that organizations can accurately
compare their compensation strategy across markets, regions and industries.

Factor 1: Impact
Organization’s context specific to the position is sized by a monetary scale such as sales or assets,
range of activity and number of employees. Within this context impact and relative contribution to
overall results is measured.

Factor 2: Communication
Required communication skills within as well as outside of the corporation.

Factor 3: Innovation
Specific responsibilities in the position for development of new ideas, methods, techniques and
improvements to products, procedures or services.

Factor 4: Knowledge
Relates to the knowledge level required, how this is applied in teams and the geographical and
intellectual breadth wherein the objectives are accomplished and value created.

Factor 5: Risk
Available for use in high-risk industries or specific professions where the position environment adds
special constrains to the incumbent.
The factors are weighted with points and the summary of points across all factors converts into a

Position Class.

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Table of Typical IPE Classes for each Hierarchical Level

Typically, we found the following distribution of the Mercer IPE Classes for the different hierarchical
levels involved:

Hierarchical Levels

Mercer IPE Classes

General Directors/Presidents

60 – 70

VPs/Directors

58 – 62

Managers

53 – 59

Supervisors/Specialists

50 – 54

Professional/Admin./Staff

45 – 51

Blue Collar

40 – 45

12. MERCER UNIVERSAL POSITION CODING SYSTEM
(MUPCSđ)
The coding system categorizes positions by:
Đ
Đ
Đ
Đ
Đ

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.
For example, the code 210.352 represents the Finance family (210) and the Financial
Planning/Analysis sub-family (352). Additional sub-families within Finance (e.g., Treasury, Audit,
Tax etc.) are represented with unique sub-family codes. These are used to ensure each position in

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the survey contains a unique code. The system has been designed with enough flexibility to allow
future positions to be added to the survey.
Career Stream, Level, 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.
Management – Typically includes Management and Supervisory Professionals focusing on tactical

and/or operational activities within a specified area.
Professionals – Typically includes Professionals with no management responsibility, although may
provide mentoring and coaching to less experienced staff.
Para-Professionals – Typically roles that are semi-skilled or unskilled with no supervisory or
management responsibility.
These career streams, when combined with a level and job activity (eighth and ninth digits), allow all
positions within a position family/sub-family to contain unique characteristics which differentiate
them from one another. The following chart illustrates how the position code is structured.
Example:

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