Running a good salary review process requires planning. But what steps should you take before you press go?
1. Set your reward strategy
A good salary review process will only happen if you have decided what you want to achieve. Where are you positioning yourself in the salary market? Do you want to pay median in the market (eg the average salary for the role) or do you have another strategy. Hard to recruit roles may require you to pitch yourself higher than median. Other industries with plentiful resources may go below median.
2. Benchmark where you are now
Next step in running a good salary review process is working out where you are now. You’ve decided where employees pay should be but where is it now? Using reliable salary surveys such as Willis Towers Watson or Hay can help here.
Once you’ve completed the benchmarking exercise, you can determine how much money it would take to move everyone to your desired pay structure. It may not be affordable in one go.
3. Running a good salary review process - what can you afford?
Next step is determining what is affordable. If you are in a cash rich sector with a reliable income stream, this may not be too difficult. However, most of us don’t operate in such a sector. Remember though, if you are losing staff due to poor pay, you should factor in the cost of replacing them when working out what you can afford. It’s a false economy to drive the salary review budget down if it increases your recruitment spend.
4. Running a good salary review process - cleanse your data
Nothing reduces the credibility of a salary review process than incorrect data. Wrong salaries. Wrong job titles. Incorrect line managers. All these damage the process. Get this fixed before you roll the salary review process out.
5. How will you administer it?
Do you buy in a system or do you use Excel? Excel can corrupt easily so its best to get some design time in to ensure its as robust as possible.
Once you’ve decided what tool you will use, train your managers in how it will be used and how the overall process will work.
6. Moderate and challenge
A good salary review process requires consistency. Where you have multiple managers, you will have inconsistencies. Each person interprets the rules differently. If you are using performance related pay then ensure people are rated consistently. One persons average performer is anothers star. Decide early on whether you are going to empower your managers to make decisions (however bad they may be) or whether you will moderate them. This will increase consistency but can lead to managers abdicating their responsibility. The ‘I gave you 5% but HR told me no’ response can follow. Managers need to own the eventual decision.
7. Ensure decisions are fair (and legal)
In a good salary review process, you’ll keep an eye on minimum wages and gender pay. Make sure people performing the same role are treated consistently and that any pay variation is objectively justified.
8. Stick to budget
I wouldn’t recommend going to the Finance Director or CEO with an overspend, unless it was agreed earlier in the process. It’s not much fun having to unravel a process at the end.
9. Communicate effectively
Finally, ensure employees know what they got (before payroll runs) and why. Letters should be handed over in a meeting, not just flung at a desk. This is a good opportunity to reinforce messages, both good and bad. Don’t miss it!
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Based in Manchester, we provide HR services across the UK. With experienced practitioners and transparent pricing, we can give you the support you need.