Making sure that employees have the correct compensation remains one of the biggest challenges facing business managers.

With the rise of the information era, the millennial generation are better informed than any prior generation as to what constitutes their market rate and what is on offer elsewhere. Platforms such as Glassdoor mean they can not only see what a company pays existing employees, but also what kind of environment it is to work in.

At the same time, candidate shortages in skilled professional areas mean that wage growth will continue in certain areas while in others it will not, which has the potential for internal conflict if in mixed teams certain people are benefiting from significant pay rises and others aren’t.

Given the maxim that we can never make all of the people happy all of the time, to start with the priority for business managers should be to think more holistically than just in terms of compensation. Firstly, how do you assess employee engagement? What kind of company culture do you aspire to have and what is lacking at the moment? How diverse is your team and your management? Are the company directors all male WASPs? If so, how do the management compensate for that to ensure that all ethnicities feel their concerns will be heard? How seriously is work/life balance treated? For line managers, what external training are they given to help them manage people better? Are team members managed on the basis of inputs or outcomes? These are all questions to consider as they will be part of the way that your business will be analysed by employees. Finally, are you doing independent exit interviews to better understand from people who leave why they have left?

Studies show that when people change jobs, compensation is rarely the most important reason. Primary motivators include the relationship with line management, along with overall engagement within the business. However, business managers can be easily blind-sided. There are extensive studies showing that there is a direct relationship between how big pay rises are and the level of aggression used in salary reviews, i.e. those who lobby hardest get the biggest pay deals. The danger here is that the people who are most worthy of a pay raise and also the most loyal to the business are not rewarded correctly, while people who are more proactive in articulating their case are. Over time this can lead to resentment and disengagement, ultimately resulting in people leaving.

There is an easy solution for this though. Assuming your salary and compensation are reviewed annually, making sure you get external advice on what the latest market rates are for each role means you can be sure to set rates in line with what the market is prepared to offer, meaning you avoid being blind-sided. From there, have a three-tiered salary band for every role, on the basis of competency and attitude, where people on the top tier are always paid well. Done this way, the people in the top tier, who internally are your ambassadors, will be more loyal to you as they haven’t had to fight for their case but have been appreciated for the value they bring.

For a free consultation on how we can help with your growth planning, please do contact us.

Over the last ten years Vacancysoft has worked with recruitment firms of all sizes to help them map out market activity in order to identify changes in demand. For more information about how we can help, please contact us.


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