Red Eléctrica de España Uses Integer Programming for Annual Salary Revisions

Ángel Mahou (), Álvaro García-Sánchez (), Miguel Ortega-Mier () and Ana Moreno Romero ()
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Ángel Mahou: Red Eléctrica de España, 28109 Madrid, Spain
Álvaro García-Sánchez: Research Group in Industrial Engineering and Logistics, Higher Technical School of Industrial Engineering, Technical University of Madrid, 28006 Madrid, Spain
Miguel Ortega-Mier: Research Group in Industrial Engineering and Logistics, Higher Technical School of Industrial Engineering, Technical University of Madrid, 28006 Madrid, Spain
Ana Moreno Romero: Research Group in Sustainable Organizations, Higher Technical School of Industrial Engineering, Technical University of Madrid, 28006 Madrid, Spain

Interfaces, 2014, vol. 44, issue 4, 384-392

Abstract: In this paper, we present a mixed-integer linear programming model for determining salary-revision matrices for an organization based on that organization’s general strategies. The solution obtained from this model consists of salary increases for each employee; these increases consider the employee’s professional performance, salary level relative to peers within the organization, and professional group. In addition to budget constraints, we modeled other elements typical of compensation systems, such as equity and justice. Red Eléctrica de España (REE), the transmission agent and operator of the Spanish electricity system, used the model to revise its 2010 and 2011 salary policies, and achieved results that were aligned with the company strategy. REE incorporated the model into the salary management module within its information system, and plans to continue to use the model in revisions of the module.

Keywords: mixed-integer linear programming; optimization; salaries; compensation policy; human resources (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:inm:orinte:v:44:y:2014:i:4:p:384-392

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