It’s becoming more common for employee resource groups to voice their concerns about internal pay equity. Over the last year, we have been getting more calls from leaders either responding to requests or proactively doing their due diligence to ensure they are rewarding their people equitably. As trends in pay transparency increase, it is also important to consider the position your managers are often in. Another frequent situation we hear about is employees approaching managers with data from online sources about what their job is worth in the market and/or with questions about why their peer in the organization is being paid more than they are.
If this has ever happened to you, then you know how uncomfortable that can be when you are caught off guard.
Compensation is a topic of conversation these days and the way people are paid has escaped the black box. Clients have shared with me some of the reasons as to why these compensation challenges occur:
- “We have a target salary when hiring for a role, but the offer can vary based on the candidate’s qualifications.”
- Yet, they have not defined their compensable factors.
- “Our promotion percentage varies based on the employee’s performance.”
- Yet, there is no performance management system at the organization.
- “We allow managerial discretion for annual increases.”
- Yet, no guidance or parameters are given to managers.
Is this ringing any bells with you? If so, you’re not alone. These are all very common situations in many businesses, especially those experiencing fast growth.
Businesses approach their pay practices in various levels of sophistication, complexity, and rigor. Generally, we find leadership does not intentionally create inconsistencies in pay approaches, but it happens as a result of moving quickly and not establishing a set of salary administration guidelines.
What are Salary Administration Guidelines?
Salary Administration Guidelines align organizational goals and provide clear and concise compensation-related guidance to Human Resources and managers who have the ability to impact pay. They help to make consistent compensation decisions across the company and at each stage in the employee life cycle.
If developed well, they are built around the organization’s compensation philosophy and the desired approach to administering and making compensation decisions. Ultimately, they support the foundation of compensation practices by providing a thorough and comprehensive approach to managing and administering employee pay.
My team and I also help leaders by conducting a pay equity analysis to review the internal equity and/or a market analysis to review the external competitiveness. We often say that understanding your organization’s jobs and how to pay for that work is a foundational piece to your people strategy and organizational success. Paired with Salary Administration Guidelines, these are great tools to help leaders communicate to employees how and why they are currently compensated. We know there is a strong correlation between employees knowing the information that goes into the organization’s pay decisions and the perception that they are paid fairly. It's a trickle-down effect, for instance, you will then be able to provide:
- pay-impacting managers with promotion salary increase guidelines
- hiring managers and recruiters with a recruitment salary guide
- and clear guidance to HR
This will also enable your team to make sure the salary offers, promotional and mobility decisions are fair and equitable while also empowering them with the flexibility to make exceptions when necessary. Overall, salary guidelines help to ensure the organization is able to capture key talent to meets its strategic goals in a competitive talent market.
Many leaders will agree that people are their most valuable asset and for most businesses, payroll is one of the largest line items on their balance sheet. If people are the most important and most expensive cost to the business, why not slow down and be intentional about your compensation practices?If you would like to explore how we can help your business make sound decisions and become prepared for the unexpected salary conversations proactively, we’d love to have a conversation with you. Reach out to schedule a call with us today.
