Assess the Competition and Labor Markets
We’re currently experiencing a period of high unemployment. Many skilled people are available because of job loss, the economic downturn, the demise of many dot com companies, and other reasons. Consequently, the economic reality is that you may be able to hire good people for less money than in the past.
This may be short-term thinking, however. Don’t get too far out of line with what you would have paid that employee during better times. You risk losing her when the economy improves. She may never feel valued by your organization if her pay is out-of-line with her experience and contribution. She may never really stop her job search, using your company as a resting place until the right offer arrives.
You will also want to consider percentages of increase in salary in similar jobs in your local area. Ask yourself if this is an employee you really want to keep? If so, pay the employee a salary that makes you the employer of choice.
Create Salary Ranges Within Your Organization
People always talk about salary and pay issues. No matter how many times you ask them not to discuss their salary and other personnel issues at work, they do. Thus, grouping similar positions with similar responsibility and authority into pay ranges, usually makes sense. Nothing impacts morale as much as individuals who feel they are underpaid in comparison with others based on their contribution and that of other similar jobs.
Recognize Your Benefit Package Role in Salary Satisfaction
An organization that offers better than average benefits may pay less salary and still have motivated, contributing employees. If your health plan fees go up and you continue to pay the cost, this is the same as pay in your employees’ pockets.
The range of benefits you offer, and their cost to the employer, is a critical component of any salary approach. The biggest mistake organizations make is failure to communicate the value of the benefits offered.
Determine Bonus Philosophy and Potential
You may pay a bonus that is determined individually based on the value of the goals accomplished and the person to your organization. You may give all employees the same bonus, based on group goal attainment, across the board. You may use profit sharing in which a portion of company profits is paid out equally to every person who was employed during the time period.
Ways to address bonus, as part of your overall pay system, are limited only by your imagination. I recommend bonus structures that are fair, consistent, understandable, communicated up front, and tied to measurable, achievable goals. The better the shared picture of what constitutes eligibility for a bonus, by the organization and the employee, the more likely the bonus will result in employee motivation and success.
Communicate Your Salary Philosophy and Approach
In many organizations, who gets what and why is a cause for consternation, gossip, demotivation, and unhappiness. The more transparent you make your pay and salary philosophy and determinations; the more likely you are to achieve positive employee morale and motivation. Don’t keep your salary philosophy a secret. Yes, individual compensation is confidential, but your methods for determining pay must be clear and understandable.
Conclusion
If you take these tips to heart and apply them within your organization, you increase the likelihood that you’ll have happy, motivated employees. The alternative is to use your salary system to create disgruntled, grumbling, unhappy people. Which group do you think will do a better job of serving your customers? Increasing your profitability? Making you the employer of choice? Increasing your positive visibility in your community? Is there any question in your mind?
