What is the importance of salary evaluations?
There are plenty of reasons for why you should conduct regular salary reviews, but the most important is that it shows your employees you care. Many employees are used to companies where salary is a topic they need to proactively bring to their bosses to discuss, so you have the opportunity to do things differently by implementing regular salary reviews.
Money matters
Employees who genuinely love their work will still tell you that compensation is extremely important to them. Deriving purpose from work is great, and something everyone should strive for. Nevertheless, a sense of purpose doesn’t pay the rent or put food on the table. That’s why your company should never overlook appropriate compensation. However, it’s also worth remembering that some people seek other forms of compensation to supplement their income, such as training or other opportunities for advancement.
Given the dramatic increase in the cost of living, many employees may feel that their pay hasn’t risen accordingly and, as a result, they may have trouble sustaining their standard of living. This creates stress and can have a negative effect on productivity and job satisfaction. It can also put a dampener on employee morale, which is hard to course-correct once it starts trending downward. Competitive pay is therefore non-negotiable for a lot of employees.
Determining compensation
To determine fair compensation for your employees, you must first undertake a market analysis of what the position in question pays elsewhere in your area. Indeed has published salary guides you can reference, or you can find average pay information from government sources, such as your provincial Ministry of Labour. It’s a good idea to consider compensation as part of a much larger discussion about how much of your company’s revenue you want to dedicate to payroll. Making compensation decisions on a case-by-case basis is dangerous as it doesn’t give you a holistic picture of whether or not you can actually afford to pay the salaries you want.
If your company has a human resources department, it’s a good idea to leave these decisions in their hands. They are specialists that know the labour market and have a broader sense of who does what at your company. Unless you pay your employees minimum wage, or operate within a federally regulated industry, there’s a good chance you aren’t familiar with the specifics of your jurisdiction’s labour laws. This is where human resources become invaluable. Their jobs largely revolve around protecting your company from risk, and few things are riskier than illegally underpaying your people.
Compensation goes beyond salary
There may be times when your company’s budget is tight, and salary evaluations are impractical. Maybe you are waiting for the completion of a large project or for payment from a vendor, and you have enough to maintain payroll, but not enough to give raises. To be clear, this doesn’t absolve you of your duties to review compensation. After all, compensation goes beyond just a dollar amount.
Many junior employees would jump at the chance to take skills training. If you can remember how hard it seemed to get ahead when you were just starting out in the industry, you’ll probably understand why. Skills training can make your employees much better at what they do, which can result in more opportunities being afforded to them, which can result in more money. Upskilling your employees shows your willingness to invest in them and enhances their sense of job security. Senior employees, on the other hand, might be a little harder to appease with training opportunities in lieu of salary increases. They could be offered additional vacation days, or perhaps they could be given the chance to work with people higher up in the company than them. Offering these opportunities can be valuable if they aspire to get promotions.
Implementing salary evaluations
There are plenty of ways to implement salary evaluations as a formal part of your company’s retention strategy, but the easiest and most effective is to stick to a schedule based on employees’ current earnings. Those at your company who earn under a certain threshold should have their salaries evaluated more frequently than those at your company who earn more. In the interest of fairness, you should pick a date on which this evaluation should take place (perhaps the anniversary of the employee’s first day) and proactively schedule check-ins on this date. You should also bake this policy into your company’s rules and regulations, so it is in writing, you are bound by it and your employees are all aware of when they are entitled to have their pay reviewed.
You should also strive to take a proactive approach to salary evaluations as a whole. Don’t put the onus of starting these conversations squarely on employees. There will always be high performers who feel they deserve more, and odds are they will let you know about it. These are not the ones you should be worried about. Rather, consider junior employees who may feel uncomfortable with initiating such conversations. They may have little or no experience with negotiating salary in the workplace and shouldn’t have to suffer because of it. This is why having a clearly defined policy around pay reviews is so important.
How to evaluate salary
Begin by revisiting the last time your employee’s salary was changed and explaining why it changed. Was it because of years of service? High performance? Maybe they went above and beyond on a specific project or initiative and proved their worth. Whatever the reason, grounding the conversation in the positive is always a good way to begin. Next, you’re going to want to ask the employee how they feel they have performed since the last time they had a performance review or salary adjustment. Most of the time, they will say they’ve been doing an excellent job, but others may be honest and upfront about challenges they are facing. You can then work on improving performance and setting benchmarks to hit in order to get a raise. If the employee has been doing a great job and is worthy of a salary increase, share the good news and make it clear that it comes as a result of the work they’ve been doing. Getting a raise is great news, but it’s even better when it’s accompanied by praise and assurance that everything they’ve been doing hasn’t gone unnoticed. Be sure to document the conversation, and when the time comes for another salary review, you’ll have a good starting point for your discussion.
Related Articles: Employee Performance Review Sample
Salary isn’t everything, but it’s very important, and as a result, you should strive to make sure your employees are paid fairly. Nobody likes grinding away at their job for years without a raise or the prospect of a raise. By consistently revisiting salaries and making it a part of your ongoing retention strategy, you can ensure your people are paid fairly now and for years to come.
