Tuesday 7 April 2015

Rationalize Salary Formation

Authored by Fahad Amjad

If your company conducts Employee Surveys, the one question you are sure to get a low score on would be about satisfaction with your income. One reason for this is because employees probably feel that it may encourage you to increase their pay. Another could be that you are not very transparent about your structure and processes. An important element in the compensation space is communicating the total rewards your company offers. Too often, employees see only the monthly pay slip, forgetting about the other benefits that go into your employee value proposition. Accept that staff will compare themselves with each other and with colleagues across industries. This is what makes Internal and External Equity so important. However, if you clearly define your Comparable Pool then the comparisons should be less painful. The makeup of the pool is critical.

Similar industry/size/HR offerings but also who you compete with for talent. The next critical elements is where do you position yourself in this pool - top, middle or bottom. Of course, there are a number of steps to be taken to ensure internal/external equity: Updated job descriptions and Job Evaluations, bench marking with companies in the pool and qualifying the allowances and benefits you provide. Since this is a costly and time consuming effort, your target frequency might be every two years. However, as Pakistan is a high-inflation country, the survey should be done annually so as to ensure you do not slip out of alignment with your desired positioning.Ultimately, even if employees are not satisfied with the ‘amount of pay, they should be comfortable that the company has been fair and transparent.