Possible criteria for creating a remuneration system under the Genfer Scheme
Author: Lennart Mewes, Referendar at country court in Dresden (at present with bnt Vilnius)
The amended Lithuanian Labour Code requires an employer with a minimum of 20 employees to compile a list of salaries for each category of employees in its internal remuneration system. However, the format and content of the list is so far unclear due to the novelty of the legislation which is causing many employers further uncertainty.
The goal of the amendment is to create transparency for employees. In this way, they should be able to see their career prospects and an incentive for further education. At the same time it serves the purpose of classifying occupations and promotes equality of salaries. An employee must be able to deduce how their own and other salaries are made up. The criteria for salary composition can stem both from the person of the employee as well as from external influences on their activity and the environment in which they carry it out.
The so-called Genfer Scheme, created in 1950, provides a useful template for developing such a list. The scheme serves to provide a basis for job requirements and job evaluation and divides into 4 points: mental activity, physical activity, responsibility and environmental influences. The following illustrates what such a list would look like according to the scheme.
Classification under the Genfer Scheme
The Genfer Scheme aims at two specific factors for evaluating work performance: the employee’s ability and the tasks they are expected to carry out. These determine what rating attaches to an activity and therefore also what compensation that activity earns.
First of all, the Genfer Scheme divides the employee’s ability between mental and physical work. This separation is understandable, since the characteristics of both types of work are so different that an exact classification would otherwise not be possible. However, this classification should not be understood as a qualitative assessment of tasks performed. Belonging to one of the two groups is not a guarantee of a higher salary.
A job that meets both criteria must be qualified according to the proportion of work involved. Depending on where the focus is, the employee is assigned to one of the two categories.
After allocation, the task is determined by their activity. The higher the activity, the higher the salary must be.
In addition to the basics, additional special tasks ‒ responsibility and environmental influences ‒ are added. An employee’s abilities and qualifications are no longer a direct criterion here. Although certain additional activities require further qualifications, the additional task remains at the forefront of assessment.
For example, one additional responsibility might be managing several employees or managing the company’s cash register system. The point of interest might be dealing with certain people or substances, but the employee needs to obtain an additional qualification. An employee who does so can move up to a higher salary level. Depending on the level of responsibility and the associated additional qualifications, the salary of the employee also increases.
Environmental influences are external, partly independent of the activity or the enterprise, but include employee impairments. This might cover working outside all year long or only working in certain places. Again, salary increases alongside any higher burden or risk to which the employee is exposed.
The Genfer scheme is open to criticism in that it does not include employee seniority as a criterion. This increases their salary and is quite common in Lithuania. However, this was not necessary for the given goal of the scheme, which serves to evaluate an activity purely in terms of skill and responsibility, on which seniority has no influence. After this analysis, almost all criteria for salary formation are exhaustively taken into account. In particular, the two most important criteria for assessing a job are sufficiently taken into consideration: employee ability and employee responsibility.
The Genfer Scheme is well suited to creating a system for remunerating employees. Used as a general guide, the scheme results in comprehensible construction of how everyone’s salary is made up. It should be noted, however, that seniority could also be included. For this reason, the Genfer Scheme is not to be considered as exhaustive, but as a guide for developing a transparent remuneration system. This enables every employee in a company to assess themselves. At the same time, they have the opportunity to further their education and move up to a higher salary class. The Genfer scheme should thus meet the goal of the amended law and the goal of the remuneration system.
Nevertheless, it remains to be seen what the Lithuanian legislator and the courts will do on this subject in the coming years. Since this is a particularly recent change in the law, a change in the requirements can be made at any time. It is therefore important to keep remuneration systems up to date.