Salary management: beyond recession
Vicki Sanderson, HR consultant at software provider Agresso, looks at the issues facing firms when it comes to managing pay & reward, and how technology can make things simpler.
Vicki has worked for Agresso for four years as an HR & Payroll Consultant. Prior to this she worked for another software company where she was responsible for project and account management and training, and was head of HR for a construction firm.
The issues around pay rises and bonuses
The recession caught many companies by surprise, and as a result pay rises and bonuses have been the first thing to fall by the wayside. This is an issue that’s set to run-on, especially in the public sector where large savings may have to be made and many pay rises and bonuses may have to be frozen. The salary review process is a critical part of an organisation’s activity. If it is timely, fair and rewards good employees appropriately, then productivity and morale will be high. If it is late, unfair and inefficient or pay awards are too low, then good employees may leave, or industrial action may be instigated. This is especially true in a recession when companies need to ensure that they are performing to the best of their ability, so they can deliver competitive results. British Airways staff reacted angrily to management attempting to bring in pay freezes, so much so that ACAS had to be brought in to conciliate. This sort of stand-off creates bad-blood between management and staff and will noticeably impact on productivity. Breakdown in communication can be avoided through better use of technology solutions. If employees know that pay and bonus levels are being monitored correctly, then they will be more inclined to support their employer in turbulent times. The firm will also have an organisation-wide picture of salary levels, giving them the ability to develop more strategic responses to major cash-flow issues as a result of a recession and indeed on a day-to-day salary management basis.
Measuring salary requirements accurately
The Department for Business, Innovation and Skills released a report last week that found that more than 40% of smaller businesses have developed initiatives such as switching staff job roles, adjusting working hours and investing in staff training and motivation. The most interesting point is that the majority of firms making these changes (87%) have done so in-house and without employing a Consultant. This shows that changes can be made without excessive cost and organisational change. Choosing the right software can enable businesses to go about these changes quickly and efficiently. They have to bear in mind several guiding principles when it comes to ensuring performance is rewarded:
- Align salary increases with agreed employee performance targets
- Compare compensation packages across industry benchmarks
- Link compensation to qualifications and competences
- Ensure the process is completed as efficiencly as possible
Adhering to these principles will help to ensure staff retention, as employees will be rewarded fairly and by a standard procedure. This will ensure transparency and make it more likely that they will look at any temporary pay freezes or similar measures, in a co-operative light. For example ,Toyota negotiated with their staff and unions a 10 % salary reduction, on the basis that they would adhere to the principle that good performers would still be awarded bonuses accordingly.
Keeping in line with company goals
The Macleod review recently stressed the importance of actively engaging with employees, finding that it is essential to ensuring that businesses are open to new advantages. The report criticised SME’s for not developing this idea further. Of course it is easy to imagine why smaller companies may not see the value of developing such ideas simply because of their size. However, a key aspect of winning the hearts and minds of employees is through having a transparent system for dealing with salary reviews and maintaining and developing performance analysis. There are several goals that all companies must demonstrate regardless of size, and employing a centralised system that monitors stages of an employees career and points where a rise should be discussed will do the following:
- Provide visibility of the process at all levels in an organisation
- Help employers ensure that salary increases are fair
- Prove compliance to anti-discrimination legislation
Tracking salary rises and changes
Organisations need to be aware of the cost of tracking and maintaining records of salary rises and changes. These processes include managing any negotiation process between management and users and other stakeholders, informing staff of the outcome and providing visibility of review processes across the entire firm.
Many organizations are starting to join previously separate HR and payroll departments together, indicating that they are becoming more aware that HR software needs to be integrated and centralized in order to work at its optimum level. It's important to choose software tools that manage not only just pay levels but also monitor how minimum manual input and maximum efficiency can be achieved. This will ensure a well rounded picture of where and how salary budgets are being used. Savings that can easily be made in these areas may then be ploughed into ensuring that the most important assets of any company, the employees, are protected.
The changing face of HR
The role of HR is changing and becoming much more strategic in nature. Managing salary in a way that contextualises it, for example through comparison with other companies pay packages, will enable departments to see the bigger picture. Automatic pay cuts have been the result of panicking due to the economic downturn. Everybody realises that this is not the sort of action that can be sustained and better and more organised long-term monitoring is the optimal way to retain staff and keep them motivated while also keeping an eye on performance levels and the bottom line.
