As Human Resources professionals and Managers, we go to so much trouble to investigate and agree upon how much we should pay our employees. Where should they fall in relation to the market? Who are our key talent and are they being duly rewarded? Who are the outliers?
Did you know that pay levels themselves are not the only, or even the main, factor leading to the positive perception of pay in your organisation?
There are many other factors that come into play that influence the ultimate success of your organisation’s remuneration structure.
At Aon Hewitt, we believe that as long as you are paying within a reasonable proximity to the competitive market, other pay considerations become more important than the pay itself.
“So where should we better spend our time on pay issues? Is there a way to get greater bang for one of our organisation’s main expenses – the (remuneration) buck?”
The potential benefit is obvious and we believe that Human Resources and Managers are in the driver’s seat for this strategic business intervention. Aon Hewitt’s Best Employers program allows us to study the people practices of organisations that deliver outstanding business results through a highly engaged workforce.
This, and our other research, suggests that you can significantly impact your organisation’s pay outcomes by taking a few clear steps.
3 steps to improve your organisation’s pay success
1. Get strategic about total rewards
Our research shows that leading organisations are twice as likely as others to have a clearly defined strategy and that organisations are achieving better outcomes – revenue, innovation and employee engagement – through effective total reward programs that focus on ‘best fit’ to their organisations, and not just market practice.
2. Clearly differentiate pay outcomes for high and low performers
Best Employers use performance and reward differentiation to send clear signals to their people about performance expectations and their contribution to overall organisational success. Organisations with highly engaged workforces strongly differentiate pay (fixed and variable) according to performance. They are commonly paying an exceptional performer at least two times the bonus payment or salary increase of an average worker. They also differentiate heavily in the reverse – with poor performers more likely to receive a token or even zero pay increase or incentive award.
3. Focus on communicating rewards effectively
The best way to dramatically increase your employee’s perception of pay can be done without changing anything about your pay structure. Simply talking about pay in a different way can have a significant impact.
Aon Hewitt’s Best Employers research shows that there is a strong link between employees’ understanding of how pay works within their organisation and feeling positive about it. The research even expands to confirm that the level of capability and confidence felt by people leaders in relation to communicating on reward translates directly into how positive their employees rate their rewards.
It has been proven that if you communicate the positive components of the employment package, it improves the perception of fairness of rewards, which will potentially feed through to improved engagement and business performance.
Aon Hewitt believes that by following these three simple steps, you can have a clear impact on the positive perception of pay in your organisation:
- Ensure that you have a clear remuneration framework that differentiates individual outcomes and is linked to performance
- Link rewards to organisational strategy and success, and ensure that employees understand this link
- Ensure your managers, in particular, are fully up-skilled so they feel confident in having authentic, fact-based conversations about reward
For more information on remuneration frameworks or to evaluate your organisation’s total rewards program, contact Emma Le Grice on +64 9 362 9291 or email@example.com.
This is an abridged version of an article that appears in the April/May issue of Employment Today. The full article including illustrative graphs is available here.