We all know there are constant disparities in the response to this question. Ask your manager or whoever looks after your budget, they’ll say yes. Ask your team, and nine times out of ten, the answer will be no.
It’s a tough decision to make when the time comes for annual salary reviews, especially if you’re the one that is all too aware of the magical glowing budget figure sitting above your head, ticking down with every employment contract renegotiated.
There are a number of crucial factors to take into account when trying to make your way across the minefield of salary benchmarking:
What else has my team or company got going for it?
Does your company offer shares at certain lengths of service? A higher super or discounted health insurance? Do you have yoga classes or free healthy snacks? Even things such as parking, childcare and good location (we’re talking the CBD or nearby to decent public transport here by the way, not a nice view of the beach hiding somewhere in the middle of nowhere). You need to determine your ‘Compensation Philosophy’ - outline the framework of the ‘why’ around your salaries. If you choose to pay below the market rate, for example, but know your company is an attractive brand, in the middle of the CBD and has loads of freebies and goodies to make its employees happy, then you have more of a justified leg to stand on.
How hard is it to find good candidates for my team?
If you have one of a kind skill sets, employees who have come from top tier practices and world class training, or need to have a specific understanding of systems, technology, processes or industry standards - chances are you’re going to need to pay more when those requirements all stack up in one person. The more complicated the position description, the more you’ll probably have to pay to find the right person. And remember, each role should be assessed on individual merit. What does this one person in this one role mean to my team, to my business? How vital is this skill set and how hard would it be to get another one?
If the thought of trying to find a magical unicorn in the market, should the one in your team decide to go elsewhere for more money, fills you with a cold dread - you should probably offer a pay rise.
Am I benchmarking from inside or outside the company?
If you’re benchmarking from the inside, you’d better be sure that you’re already aligned with the top 25% of the market. Benchmarking from the inside can be exceptionally dangerous if your salary reviews aren’t consistently matching the market and it can often leave you blindsided to any changes in the past 12 months. The Australian economy at the moment is particularly volatile and many other employers are starting to review their salary policies to bring themselves to the game and try to retain or attract the best talent.
WHAT am I basing their worth on?
Is it their personality, their soft skills, their technical skills? Is it the fact that (like with some IT support staff) the entire company would fall apart without them? Take a look at the holistic view of each person in your team and understand that sometimes paying by a rigid job description isn’t enough to decide whether they deserve the money they’re currently on. Take 360 surveys on your team from their fellow team mates, dotted line reports, others they interact with around the business. Understand the value that they provide and how the business benefits from them, and factor that into your decisions.
Top tips for figuring out if you’re paying your people right:
- Do your research - gather salary guides, go on the job boards and look at salary bands from your competitors, talk to recruiters, get a broad idea of what you’re up against
- Remember that paying a premium can ensure premium quality people and can actually reduce your total wage costs over time
- Compensation is about motivating your people, not just retaining them
- Don’t just focus on the dollars - understand what your employees want and tailor your compensation packages around elements other than money
You can download our 2018 Salary Guide to assist you with these tough decisions, and if you have any questions around salary banding, compensation strategies or Finance recruitment initiatives please contact me on the details below.