The most proper and effective salary calculation way in accordance with 3P system

Instead of paying salary based on qualifications or positions, currently the enterprises have been gradually applying the 3P system salary calculation method. This salary calculation method is considered accurate and effective for both enterprises and employees. Let’s find out 3P salary through this article with HR2B.
What is 3P salary?
3P salary is a salary calculated based on 3 main factors, including:
  • P1 (Position): Salary based on each position
  • P2 (Person): Salary commensurate with capacity
  • P3 (Performance): Salary based on performance
What are the benefits of 3P salary?
3P salary is beneficial for both enterprises and employees. While the traditional salary calculation method is only one-sided on the basis of seniority and qualifications, 3P salary is commensurate with the values and efforts that the employees put in.
For enterprises, 3P salary helps:
  • Create transparency when paying salary, thereby attracting talented people and keeping them to be attached to the enterprises.
  • Motivate the employees to make efforts and improve work performance.
For employees:
  • Receive a salary worthy of their contribution.
  • Feel happy when working at the enterprises, ensuring physical and moral life.
How to calculate 3P salary properly?

Proper and effective salary calculation way in accordance with 3P system
Because it is composed of 3 P factors mentioned in the concept section, the 3P salary calculation formula will be P1 + P2 + P3.
Step 1: Building salary framework P1
First, the enterprises should develop the following elements:
  • Corporate structure.
  • Title system.
  • Salary structure.
Hence, set up a salary scale for each working position.
Step 2: Building salary framework P2
The enterprises should establish a clear competency framework and evaluation system. Specifically, inclusive of:
  • Clearly understanding the requirements for capacity and responsibility of each position.
  • Developing a system including regulations and guidelines for personnel assessment, salary increase and promotion mechanisms.
  • Assessing capacity in accordance with 3 groups: A – S – K (Attitude – Skill – Knowledge)
Step 3: Building salary framework P3 
  • Determining the goals to be achieved for the enterprises
  • Allocating the goals to each department => each position
  • Determining salary and bonus calculation formulas based on KPI (results, efficiency)
  • Assessing work performance periodically monthly / quarterly / yearly.
For further advice on the 3P salary calculation method or use of an outsourced salary calculation service, please contact HR2B hotline.

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