COVID changed many things in our lives. Is it also forcing us to say goodbye to the annual pay rise?
In normal times, employees expect a pay rise annually. But with COVID this year, one cannot say which direction the pay will go. Will it increase? Stay the same? Can it reduce?
Most companies are feeling the effect of COVID. Costs increased, and the revenues fell. Many are staring at the prospect of losses. So, the management cannot spare any opportunity for cutting costs. Postponing salary increments, suspending bonuses and cutting the salary are ways to cut costs.
However, the employees do have some valid questions. ‘When the cost of living is increasing, how do you expect us to cope?’ They ask. ‘How come the other companies are managing to pay better?’
These are legitimate concerns.
The Pay Conundrum
A methodical pay determination should account for the internal and external equities. Internal equity means that, if two jobs add equal value to the company, their pay should be the same. So, the company should group similar jobs in the same pay-band.
You can determine external equity by studying market salaries. In simple terms, if the company pay for a position is nearly the same as what other companies pay, you can say that the company pay is externally equitable. A salary above the 75 th percentile of the market is considered ‘competitive.’
How Salary Survey Helps
When it comes to important issues such as pay, pep-talk cannot do. The decisions should be backed up by facts. Those decisions will impact company performance as the pay can influence attraction, retention and the motivation of employees.
Pandemics affect all companies. So, it makes sense to do a salary survey and find out what other companies in the market are paying. Employees will accept salary based on credible information on market trends.
Therefore, companies should conduct salary surveys for better employee morale and superior performance.
Note: The Board of Directors and shareholders will also find the pay recommendations based on the market rates very credible. So, a salary-survey report is a valuable tool for communicating with all stakeholders.
Future Options Consulting offers reward management solutions, including salary surveys and job evaluations. Please contact us at email@example.com for more information.