2. Consider internal equity holisticallyInitial research will identify if there are any internal equity concerns to factor into the new pay structure. People want to know they are working for a company who pays fairly and that they are not being underpaid in comparison to a colleague. This applies in law through the Equal Pay Act 2010, but also extends to Gender Pay reporting. The discovery phase exercise of putting in place pay structures can help identify areas of risk from an equal pay perspective. Show
Our UK Reward Management Survey highlighted how organisations are increasingly looking at their wider demographic pay records to achieve parity of pay throughout the business. 85 per cent of respondents have diversity and inclusion initiatives in place, up from 76 per cent last year, demonstrating the focus on fairness by employers. 3. Use a robust methodologyWhen competitors change their reward design, it is tempting to want to pick and choose elements to copy and to pay the most. However, understanding the market position is the start of the process. This will need to be balanced with affordability and the other reward elements in terms of the investments being made, but also the culture. One pay structure will not work identically for another company. When we work with employers to pay structure projects we take an evidence-based approach to guide the selection of the best pay structure. A key choice will be whether to follow an analytical or non-analytical job evaluation. There are pros and cons to each choice, as there are when it comes to selecting pay ranges or spot rates when it comes to setting salary. We recommend following the analytical method so that decisions around roles and where they fit into the structure can sustain the organisation in the long-run. It also provides a defence in Employment Tribunal proceedings over equal pay too. 4. Actively listen to employeesBy identifying what your employees want from their reward package, this will help to guide the design and any nuances required of the new structure to truly drive employee engagement. Whilst the data analysis part can focus on balancing what is currently being paid against what the market is doing, it is important to meet the needs of stakeholders which should not be assumed. It is important to approach the exercise as a blank slate, with employees given the opportunity to outline what matters to them. Feedback may be more about the importance of internal parity of pay or opportunities to progress that go beyond purely financial equations. We recommend an implementation period of between 3 – 12 months to ensure the success of the project. Without proper methodology and a strong communications plan, 70 per cent of change projects fail. Bringing your employees with you, by communicating why a revised structure is needed and the benefits to them, will need to be planned as early as possible to achieve maximum buy-in across the organisation. 5. Manage career progression within a clear and transparent structureEmployees need to be able to see where they go from here. By having a clear pay structure, employees are equipped with a roadmap for progression. This also supports Line Managers roles as they can all sing from the same hymn sheet, producing more consistent performance management decisions across an organisation. A clear structure organisation-wide can also assist with managing payroll costs. One third of UK Reward Management Survey respondents anticipate that they will award out of cycle pay increases that account for up to one per cent of their annual pay bill. 78 per cent cite market pressures being behind the decision to make an out of cycle increase, whilst 52 per cent cite internal pay alignment and 28 per cent say they are driven by pay restructures. This matrix of individual decisions affects affordability and control, directly skewing ‘official’ figures for pay awards. Introducing a robust structure can reduce inconsistencies and provide Finance with more budget certainty. Get in touchWhether it’s a health check, analysis on your existing job evaluation framework or benchmarking, get in touch with us today so we can help you improve your current approach to pay. To listen to Joe’s advice in full, watch our latest webinar on demand about the key elements you need to consider when developing a pay structure and the main pay structures open to you. Skip to content
7 Key Considerations to Develop an Effective Pay StrategyPayment Strategy Consideration FactorsDeveloping an effective pay strategy is critical to attracting and retaining good employees. The more employees feel that they are being compensated fairly and equitably for the work they do, the more likely they will want to stay working with you. Here are 7 key considerations when determining your company’s pay strategy: 1. External Equity – how the company pays in relation to the external market
2. Internal Equity – how positions within the company are paid in comparison to one another
3. Payroll Budget
4. Variable pay
5. Long-term Incentives
6. Benefits
7. Rewards and Recognition
Paying fairly is the first requirement for an effective pay strategy. It is important to ensure that all components of pay (including base pay, salary increases, and bonus or incentive compensation) are well thought-out, easy to explain, and are considered fair, in comparison to both the external market and internally within your company. For assistance in creating an effective pay strategy for your Vancouver-based small- to medium-sized business, please contact Clear HR Consulting. Copyright Clear HR Consulting Inc. All rights reserved. clearhr2019-07-22T11:56:29-04:00Related PostsWhat are some of the pay theories that organizations should consider in developing a pay system?The three main compensation management theories are: behavior reinforcement theory, equity theory, and agency theory.
What is the most important standard for determining pay?5 essential factors for determining compensation. Years of experience and education level. It probably goes without saying, but the more experience and education a candidate has, the higher their expected compensation. ... . Industry. ... . Location. ... . In-demand skill sets. ... . Supply and demand.. Which theory of compensation explains the employee & employer relationship?Agency Theory: This theory states that both the employer and the employee are the stakeholders of the company, and the remuneration paid to the employee is the agency cost.
What are the pay systems?What Is a Job Pay System? A pay system is the method used to determine what a position should pay and how much a person should earn. It may take into consideration a person's experience, knowledge, and the skills necessary to complete a job. It also provides a fair and consistent method for determining a pay rate.
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