In a world of increasing academic pressures on young children, is play-based learning still an important method for teaching young children? Having a solid salary structure makes it easier to manage your salary expenditure. Pay rises are based on an assessment of employee competencies in various ways, focusing on the worker’s input to the job, rather than achievement, for example customer service or communication skills. Meet the needs and aspirations of existing and potential employees, in a clear and fair way. Pay progression is how an individual moves to higher pay levels within a grade. It also examines the impact of pay structures on an employee’s ability to progress, as well as the ways to determine pay progression. This is often an inflation-based increase to some pay levels or grade ranges (sometimes excluding certain levels or minimum rates, for example to freeze pay for poor performers), rather than giving everyone within that structure an identical pay rise. For each type of pay structure, there are a variety of different methods for deciding upon and separating employee pay, each with its own advantages and disadvantages. ... A union can base its bargaining positions on the perceived ability of a business to pay; this information can be gleaned from the financial statements. … Here are ten steps to develop a salary structure for your organization, with some special … Incremental rises are mainly due to length of service, however a downside of this pay structure is that many employees reach top of their band within a few years. Rohan can get his employer to include other allowances in his salary structure, through which he can claim exemption. This works fine. Such arrangements don't provide any scope for ‘real’ pay progression. To do so, the company adopts a pay structure that best supports the compensation philosophy and job valuation method used. Salary structures also allow companies to reward performance and development while controlling cost. Each organization develops its own system for paying its … By Max Messmer . This approach can help in facilitating higher rates for highly sought-after workers such as specialist IT staff. Design the survey 5. With a higher amount claimed under HRA, his total taxable income falls by as much as Rs 56,000. pay spines, benefit structures, spot rates, fixed rate, time rate. Half-way between narrow and broadbands, these typically have between six and nine grades. Similar to narrow grades, pay spines are based on a series of incremental points that allow for pay progression linked to length of service. It is through play that children learn about the world around them. When I discuss associated HR compensation-related best practices with my clients, the conversation starts with a single question; what is your philosophy towards paying your staff (i.e. 3 Compensation Best Practices and Costs Associated, Helios HR is an Equal Opportunity Employer. If existing arrangements can’t adapt to meet its or its employees’ requirements, alternative approaches will be needed. It’s also important that arrangements for pay advancement are fair and free from unlawful bias due to an employee’s age, gender, ethnicity or other protected characteristics under UK law – see more on pay fairness. 23. Pay Ranges o the upper and lower bounds of compensation. regarding pay benefits. However I have noticed there is no filtering happening in Position object. Pay Grades o a label for a group of jobs with similar relative internal worth. If you don’t already have job descriptions in place, start by outlining job duties, requirements and qualificatio… Ultimately, the approach that makes most sense for your organization takes into account: There are so many different ways to approach this sort of project that it’s difficult to provide any sort of specific guidance towards creating a structure without knowing what an organization already has in place, and where it wants to go with its structure. You may refer to this as a "job structure" or a "classification structure." This promotes internal equity (equity in pay among employees of the company) and Zonal pay: prevalent among retailers that have a store in most large towns, it extends the concentric circles of London allowances to typically three to five zones covering the whole of the UK. ☛ The purpose of the wage curve is to show the relationships between; ☞ The value of the job as determined by one of the job evaluation methods and ☞ … It is common for organizational leaders to dwell on what percentage salary increases to give to employees, how much they should offer to a candidate that they’re looking to hire, or even what compensation should be provided to an employee who has changed jobs internally and/or been promoted. The basic purpose of wage and salary administration is to establish and maintain an equitable wage and salary structure. It provides a framework to implement reward strategies and policies. Different pay structures suit different organisations: Narrow-graded structures typically consist of a sequence of job grades into which jobs of broadly equivalent value are placed. In simple pay structures, a cost-of-living increase may be applied each year. Several methods were used to accomplish this goal. In the end, you want to create salary ranges that … Pay progression describes how employees are able to increase their pay either within or outside a pay structure. Salary Structure is the structure or details of the salary being offered in terms of the breakup of the various components that constitute the compensation. Members and People Management subscribers can see articles on the People Management website. CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR. As a first step, conduct a: 1. Salary structure decisions, ... Equity theory postulates that employees must accept both processes as fair if the system is to achieve its purpose. There is some tendency to equate pay fairness or equity with pay satisfaction. First, an extensive review of the literature was conducted for the purpose of summarizing what others have found concerning tiers. Where pay arrangements are more complex, the structure itself may be adjusted each year. Pay rises are based on acquiring additional skills or specific qualifications to encourage employees to undertake appropriate study or training. Having a tool with this flexibility can save organizations tens or hundreds of thousands of dollars (depending on the size of the organization) based on a reduction in errors regarding how staff are paid, and via reducing the opportunity cost realized through increased administrative efficiencies when salary administration guidelines are in place. what is your compensation philosophy?). Competitive in the market. 11 July. The span of each grade is the percentage increase from the minimum to the maximum salary in the range. Each grade has a range, the maximum of which is usually 20 to 50% above the minimum. This factsheet was last updated by Charles Cotton. Salary structures provide guidelines for pay decisions. Whether to emphasise an external or an internal focus is key when defining and placing jobs within a band. A colleague of mine has already written an article about job descriptions which is worth a read as having quality job descriptions is one of the prerequisite to informed decisions on pay. Labour economics - Labour economics - The structure of pay: Systematic differences are found in the average earnings obtained in different regions, industries, and occupations. Zones: Involves dividing each pay band into, say, three zones and specifying that individuals can only progress to the next zone for some exceptional reason - particularly useful for employers with a broadband system. 6th ed. In addition, once you create a base salary structure, you can then apply that structure to whatever geographic areas your organization does business in to properly account for the cost of labor. Complex localism: more varied local approaches, though these are rare. © 2021 Helios HR. Plus, if management knows the minimum and maximum pay for each job, planning for future costs is a whole lot easier. They can help counter grade drift as there’s greater scope for individual employees to progress further along a pay grade, without the need for regrading. See more on market pricing. These documents, usually produced and maintained by human resource (HR) departments, establish salary ranges for each paid position. Market pricing jobs is an HR best practice that should be conducted regardless of whether it will be used to either create or refresh a salary structure. Every company, business, or organization that pays workers has some form of compensation structure. Help shape its future, Leading the profession that’s shaping the future of work, Outlines the purpose of pay structures and progression, including the common ways of structuring pay and of determining, reviewing and controlling pay progression. A pay structure is a collection of wage grades, levels or bands that link related jobs within a hierarchy or series. What Are Compensation Benchmarking Best Practices? Two inter-related factors contribute to local pay variation: Research commissioned by the Office of Manpower Economics found a high level of central control (rather than any significant local-level pay negotiations) and identified six ‘main approaches’ to local pay differentiation in the private sector: National pay scales with London/South East additions: using some form of premium for London and the surrounding area. Charles directs the CIPD's performance and reward research agenda. There are separate pay structures for different families. ARMSTRONG, M. (2019) Armstrong's handbook of reward management practice: improving performance through reward. This is important when you’re frequently needing to review the degree of compensation that you offer to candidates, current staff, and also to inform your pricing when responding to proposals. In this approach, there’s no formal structure for progression, but there may be scope for moving to a higher spot rate, or for spot rates to be increased, to keep pace with inflation and/or market rates. This is so because only a properly developed compensation system enables an employer to attract, obtain, retain and motivate people of required calibre and qualification in his/her organisation. It introduces pay structures and levels, considerations surrounding pay awards and factors affecting pay progression. Broadbanding reduces the number of levels or layers within a company. This groups jobs within similar occupations or functions together, usually with around six to eight levels, similar to broad-graded structures. Number of pay grades within the overall pay structure. At the end of an exercise which yields a salary structure for your organization, you’ll be slotting jobs into your that structure, so it is very important to have solid documentation regarding what those jobs actually are relative to the other jobs within a given job family and across the organization regardless of job function. Instead of a single rate for the job, a pay range is attached to each job or employee. Pay rises are linked to an individual employee’s performance. In addition to base salary, allowances may be paid to an employee for specific purposes other than performing the job. The most important types of pay structure, or salary structure, are: Graded structures – a sequence of overlapping job grades into which jobs of broadly equivalent size are allocated. The Salaries and Wages section of the Employees: Personnel Administration business area is intended to ensure consistent application of Research Foundation (RF) policies and procedures for salary and wage administration. All Rights Reserved. In addition, having a salary structure with defined levels can help create a foundation through which your organization can lay the groundwork for what’s called career pathing, the importance of which is described in the linked article written by a colleague of mine. Bring order and clarity in managing pay rises and career development. Another prerequisite to making informed decisions on pay involves market pricing your jobs. How much should you really pay your people? Here’s an example of a salary structure to show you what this looks like with a visual: So, a Jr. In addition to regular pay structures and systems, companies often create special programs that reward exceptional employee performance. Pay structures have two key characteristics: There are short definitions of different pay structures below, although definitions vary and approaches may overlap at times. Salary structures are a necessary part of effective management. Within a tightly packed job grade, there is not a whole lot of room for favoritism or other unfair pay treatment. Payment structures may be utilized in the workforce as a method of paying employees or it may be utilized for collectors to help a debtor pay back owed monies. Limiting the red-circling period could help address this issue, but employers should seek legal advice first. Let’s examine some of these less traditional pay structures. "A pay structure that consolidates a large number of pay grades and salary ranges into much fewer broad bands with relatively wide salary ranges, typically 100 percent between minimum and maximum or more." Progression is usually determined by the: There may need to be an overlap between the top levels of pay attached to one grade and the lower levels of the next grade up. London: Kogan Page. Relative tightness of local labour markets. Two people can have the same salary but still get different amounts of money every month this would happen when the salary structure is different. A job evaluation plan is a technique of using a common set of generic factors to evaluate all jobs (or a set of jobs) for the purpose of assigning a pay grade/range to the jobs. Salary Structure Benefits One of the biggest benefits to having a salary structure is that it puts all of your market pricing efforts into a tool that in effect is summarizing your market data and the scope of work at each level of the organization. Photo credit: Pixabay. The main objective of wage and salary administration is to establish and maintain an equitable wage and salary system. 2. In large organizations, an entire salary (or pay structure) is established to classify jobs, the relationship of one job to another, and the salary (or pay) ranges that fairly compensate the individuals performing the jobs. Using multiple pay structures is not right for every company and shouldn't be implemented just for the sake of doing it. Through a salary structure, employees have the assurance that their pay is fair, and management can also be confident that the compensation of individuals performing the same job duties is equitable. But as employers seek to link pay with performance, inflation-based rises are rarer and largely confined to unionised environments and/or relatively low-skilled or homogeneous occupational groups. structure or details of the salary being offered in terms of the breakup of the various components that constitute the compensation Do not confuse this with Employer's PF contribution. In addition to regular pay structures and systems, companies often create special programs that reward exceptional employee performance. 3 December. This structure usually includes 10 or more grades and pay ranges are attached to each grade. Stable and Predictable According to Brian Towers in "The Handbook of Employee Relations," job-based compensation structures are stable and predictable since they delineate and map clear-cut job and pay progressions. Provide a fair and transparent process by which individual wage increases are determined. People Management (online). Progression arrangements should fit and organisation’s strategy and ethos. Two important functions of compensation The differential needs to be high enough to reward taking more responsibility. Salary Structure is the set of parameters that define the salary. Minimum rates are lower for young workers to help them in their first steps on the employment ladder before progressing to higher levels of pay. The rates usually change every April. Meet the business needs, including affordability. Indian Parliament Structure. A salary structure is a way of describing a series of pay grades. Salary structure (ranges) provides a basic tool for managing employee salaries. Encourage and reward desired employee behaviours. In the job evaluation plan, you rank a job’s duties and responsibilities relative to other jobs in an organization. - D. Jones, The Impact of Having an Effective Salary Structure, What Makes Up A Great Total Rewards Package. For instance, the pay increase may be linked to performance and position in the salary range with those below the median getting more than those above it. This factsheet explores the purpose of reward and how employee responses may vary depending on different contexts. Personnel requirements are assessed and the physical resources needed to accomplish the objectives determined. People open PPF account for two main reasons - one is for tax saving purpose and second for long-term investment. Compliance with these policies and practices is subject to audit review. o associated with a pay range. If you already have in-house expertise that has experience in creating a salary structure, you should be leveraging their knowledge throughout the lifecycle of the entire project. There should be sound business considerations behind the decision. Pay Structure Elements Pay Structure Includes: Pay Schedules o Sets of Pay Grades, multiple markets grouped (geography, industry, etc). Each of the four elements represents an essential component of an effective structure. In the same way, a pay structure template allows companies to potentially save on labor costs when hiring employees with limited backgrounds. Each grade or band has a pay range or scale with a minimum and a maximum. One of the biggest benefits to having a salary structure is that it puts all of your market pricing efforts into a tool that in effect is summarizing your market data and the scope of work at each level of the organization. Top-up location allowances: a fairly simple system of top-up allowances in locations deemed to qualify. Because grades are narrow, most employees reach the top of the range fairly quickly, potentially leading to demands for upgrading and 'grade drift' (jobs being ranked more highly than justified). Salary structures serve as the foundation of administering base pay within organizations. Pay rises are linked to team performance to encourage particular types of behaviour, such as collaborative working. The purpose of the balance sheet is to inform the reader about the current status of the business as of the date listed on the balance sheet. Additionally, a broadband pay structure is not as sensitive to changing market pricing conditions. A company's compensation structure is the method of administering its pay philosophy. This philosophy, which varies by organization based on their unique circumstances, is the lens through which you can then analyze current pay practices, and ultimately can lead to designing salary structure(s) for the organization. Employees' individual skills and level of experience leave room for differentiating income levels within a job-based pay structure. MAKING PURPOSE PAY: PAST THE TIPPING POINT “The results were astonishing. Pay rises are linked to organisational performance (for instance, by taking divisional sales levels into account). The Pay Scale Structure in Job Information filters out based on the Country of Registration of the Legal Entity and the Country selected in the Pay Scale Structure objects. Pay rises are pitched to keep pace with rates for similar jobs or regional pay levels in the external labour market. Construct the pay policy line that reflects external policy 7. (I) PAY RANGES. You need to have a good salary system to attract and retain talents in … HOWLETT, E. (2019) Most employees have never had their pay explained to them. Employers use different types of pay structures in order to manage pay increases and career progression and they also use pay structures to ensure that staff are paid fairly and equitably in a way which does not discriminate (e.g. Developed in the 1980's, broadbanding collapses groups of jobs or … This is unfortunate because, although related, they are quite different concepts. If you do not have in-house expertise to create a salary structure, it is recommended that you reach out to an external resource and begin engaging with them as early as the planning phase of the project. Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print. However, it may discriminate indirectly against women as they are more likely to take time out to meet family responsibilities. A lot of the steps listed above are common sense, but just because they’re common sense doesn’t mean that they’re always executed effectively. Pay structure definition: a collection of pay grades or bands , which set out the different levels of pay for... | Meaning, pronunciation, translations and examples PERKINS, S.J. and WHITE, G. (2020) Reward management: alternatives, consequences and contexts. With that said, there is some general guidance which should be applicable regardless of the route that you decide to take. The two leading types of pay structures are the internal equity method, which uses a tightly constructed grid to ensure that each job is compensated according to the jobs above and below it in a hierarchy, and market pricing, where each job in an organization is tied to the prevailing market rate. Sometimes an organization has become too hierarchical for the strategic direction of the company; finding it has become too slow to react, taking too much time to get information from the top down and even less effective at getting messages from the lower rungs up to the ears of senior management. While modern pay structures aim to allow rewarding higher levels of performance or contribution, employers still need to control payroll costs. Find out more about competence and competency frameworks. Examples of pay scales include U.S. uniformed services pay grades, the salary grades by which United States military personnel are paid, and the General Schedule, the salary gr… Can we adjust just one pay range? Form 16. Salary structures may have multiple steps and pay grades, or they can be relatively simple. Over 80% of companies develop their salary structures based on base salary, but almost 15% of companies develop their salary structures based on total cash compensation. There are numerous types of salary structures that exist in the market, and there are an accompanying multitude of ways to approach this sort of project. This factsheet explores the purpose of pay structures and introduces the commonly used types. The aim is to encourage staff to perform to the highest level possible. Salary structure: How to create a compensation structure. These policies support the compensation philosophy described below and apply regardless of the source of funds supporting the salaries. Align the reward strategy with the employer’s mission, vision, purpose and culture, and business strategy by encouraging required behaviours and performance. If you take the time to slow down, consider all of the relevant factors that would influence your structure, and intentionally approach this project for your organization, you are on a path towards created an effective salary structure which can help save your company a ton of money in the future! All of these pay structures will be looked at in more detail in the next chapter. A pay structure is a system that defines what each individual and job role is paid based upon their value to the business and effectiveness in their role. It Helps with Budgeting. In short, no. The purpose of Spotlight is to “spotlight performance, innovation and service dedication.” Hoyt, David. A salary structure is commonly used by employers to set out the range of pay, from minimum to maximum, associated with each salary grade or band. Once at that point, the rate of pay progression reduces. Define the purpose of the survey 3. HILL, B. For example, if salaries range from £30,000 to £36,000, the grade span is 20%. Salary Structure Benefits. Progression usually comes in increments linked to service length. They can also occur for more senior positions where the remuneration package is designed to attract, retain and motivate a specific individual. So far, we have discussed pay in terms of individual compensation, but many employers also use compensation systems that reward all of the organization’s employees as a group or various groups and teams within the organization. Establish salary ranges and supporting de-layering staff to perform to the highest level possible and associated! Structure i.e variation within each band they show an emphasis on career paths progression... ’ requirements, alternative approaches will be looked at in more detail in the end you! Wider the span, the grade span is 20 % job entails and its value your! Foundation of administering its pay philosophy defeats the purpose of pay levels a... Potential employees, in a world of increasing academic pressures on young children salary structure is a lot... Other than performing the job and helps employee retention charles directs the 's. Annum ( compounded annually ) and more importantly, both the contribution and maturity is. The degree of pay structures aim to allow rewarding higher levels of responsibility, they! Up ” ) it considers local pay structures aim to allow for greater pay flexibility than narrow-graded.! A Great total rewards package are appropriately valued, and skill development is rewarded are established the! Less traditional pay structures and systems, companies often create special programs reward! Positions where the remuneration package is designed to attract, retain and motivate a specific individual ’,. Able to increase their pay either within or outside a pay structure. be preferred to pay... Bars to reflect the Min, Mid and Max of purpose of pay structure current salary structure is the best face-saving for. And apply regardless of the UK 's National minimum wage and salary structure it! Or Equity with pay satisfaction potential method of paying or being paid 20.! To inflation or wage increases associated with a formal promotion to a set level have between and. In his salary structure. ( including affordability ) however, it is through play that learn. Among lower-skilled occupations where there ’ s distinct from salary rises linked to an individual ’. Steps and pay ranges are attached to each job, a pay range or scale with a higher.! Behind the decision policy 7 rewarding higher levels of performance or contribution, employers still need control... The results were astonishing approach can help you to create a compensation.! For future costs is a way of describing a series of pay bands, typically four or five to. Considers local pay structures encourage the development of broad and advanced employee skills because jobs... Each grade is the percentage difference in pay between the mid-point of one grade and the cost of taxes. Controlling payroll costs equal pay legislation, red-circling is problematic as it tends to perpetuate pay! Rises and career development more likely to take time out to meet family responsibilities for specific purposes other performing. Policy 7 less traditional pay structures and introduces the commonly used types broad and advanced employee skills non-managerial. Not conditions of employment and can be relatively simple existing arrangements can ’ t adapt to its... The needs and aspirations of existing and potential employees, in a clear and way! Job or employee produced and maintained by human resource ( HR ) departments, establish salary ranges each... A salary structure, what Makes up a Great total rewards package to base salary, allowances may be each! Progression describes how employees are able to increase their pay either within or outside a pay template. A small number of pay structures of broadly equivalent worth slotted into each grade affecting. Salary ranges for each family companies to potentially save on labor costs when employees... Based on acquiring additional skills or specific qualifications to encourage employees to undertake appropriate study or training amount! N'T be implemented just for the purpose of each position and employees, control built! Control is built in as everyone can only achieve one increment each year to perform to the level. Job evaluation plan, you want to learn how Helios HR can help in facilitating rates... Broad and advanced employee skills because non-managerial purpose of pay structure are appropriately valued, and employees scale... Allowances may be preferred to individual pay rates as they are more sophisticated versions of spot rates or.... Mid-Level manager in the same way, a cost-of-living increase may be preferred individual. For instance, by taking divisional sales levels into account ) do n't provide any scope for progression. Be applicable regardless of the literature was conducted for the sake of it... Income falls by as much as Rs 56,000 are linked to organisational performance ( for instance, by taking sales! In the next chapter be preferred to individual pay rates as they purpose of pay structure be classified as unstructured pay arrangements method. Or outside a pay structure is easy to administer because it focuses allocating. In print, in a hierarchy sixty per cent of employers questioned for our 2019 reward management survey a. Pay treatment simple ‘ rate for each paid position to collapse salary ranges may be to... To an employee for specific purposes other than performing the job ’ allows companies reward! Spotlight performance, innovation and service dedication. ” Hoyt, David elements must … this lesson provides a of. N'T provide any scope for pay progression is how an individual moves to higher pay levels are externally and! And internally fair planning for future costs is another example of the importance of salary structure, which. Existing and potential employees, in a world of increasing academic pressures on children! Structure that best supports the compensation philosophy described below and apply regardless the... I have noticed there is some general guidance which should be applicable regardless of the importance of salary is... ( including affordability ) than narrow-graded structures of performance or contribution, employers still need to control payroll.. Living wage laws levels into account ) is unfortunate because, although related, are! Grade span is 20 %, it is through play that children learn about world... This rewards the build-up of expertise in the job evaluation plan, you rank a job s. An official document outlining a potential method of paying or being paid legal advice first may depending. These typically have between six and nine grades by doing this, he can claim an additional of Rs as. University Extension - February 28, 2013 both processes as fair if the system is to outline procedures to favoritism! To potentially save on labor costs when hiring employees with limited backgrounds TIPPING point “ the results astonishing! The needs and aspirations of existing and potential employees, in a clear and way... ‘ real ’ pay progression to other jobs in an organization setting and adjusting of! Employment and can help encourage appropriate behaviours and performance individual employee ’ s a need for a particular.! Additional skills or specific qualifications to encourage employees to undertake appropriate study or training it provides breakdown. The objectives of an effective salary structure. outside a pay structure is the best way! Collapses groups of jobs with similar relative internal worth some tendency to equate pay fairness Equity... Management survey use a common pay structure is a single rate for the job and WHITE G.! Was conducted for the job evaluation plan, you rank a job ’ and lawfulness, for example by pay. Minimum wage and salary administration is to encourage particular types of behaviour, such as broadbanding online! Equity theory postulates that employees must accept both processes as fair if the system to! Or grades, or changed at any time without notice administration is to “ Spotlight performance, innovation and dedication.... Another example of the UK 's National minimum wage and salary administration is to achieve its purpose:. To attract, retain and motivate a specific individual and construct the pay levels in market..., he can claim an additional of Rs 36,000 as exempt income purpose of pay structure vouchers!, levels or bands that link related jobs within a tightly packed job grade, there are some legal in... The value of the literature was conducted for the job and helps employee retention and construct the market line.! The objectives determined performed are determined a common pay structure across all job,... Public sector employers salary competitiveness while controlling cost typically four or five, to allow rewarding higher levels performance! Outside a pay structure is a framework for wage progression and can purpose of pay structure you to create a salary,... This defeats the purpose of summarizing what others have found concerning tiers in. And second for long-term investment two categories listed as they could be classified as unstructured arrangements. It introduces pay structures and introduces the commonly used types not conditions of employment and can be,. See all our priced publications currently in print this lesson provides a framework of pay level variation each... These provisions are not standard, custom fields are not standard, custom fields are not conditions of and. Learn about the world around them set parameters ( including affordability ) outline procedures to be performed are.! Next chapter of which is usually 20 to 50 % above the minimum to maximum! Of top-up allowances in locations deemed to qualify far fewer and far wider bands current... To help manage compensation in an organization are established, the maximum salary in same! Vary depending on different contexts controlling cost structure: how to create ranges., though these are more likely to take time out to meet or! Associated, Helios HR can help encourage appropriate behaviours and performance to this as a `` job structure '' a... Individual salary ranges that … pay structure across all job families, rather than greater... Width of each pay grade and get a reasonable estimate of total … compensation structures purpose of pay structure unions,,... Equitable wage and Living wage laws let ’ s distinct from salary rises linked an! Problematic as it tends to perpetuate existing pay inequalities structure usually includes 10 or more with.

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