Start planning for salary reviews now!

Contents

• With this in mind, to retain skilled employees employers need to start planning for salary reviews earlier than usual.
• How frequently should salary reviews be carried out?
• What other factors should be considered when carrying out salary reviews?

June 2021 economic data indicates that the New Zealand and Australian economies are performing at least as well as pre-pandemic levels, and far better than expected.

The better-than-forecast figures can be largely attributed to both countries keeping Covid-19 in check as well as the large and timely monetary and fiscal stimulus from the Government. As a result, both countries have been able to reopen their domestic economies before other advanced nations, boosting employment and consumer spending.

Newshub reports that Australian recruiters are traveling to New Zealand to poach Kiwi employees, and due to skill shortages in Australia, are offering salaries that are double on present earnings in some cases.

It seems Aussie firms are willing to pay high salaries to fill their labour shortages and it is not just lawyers and other professionals they want – they are reportedly also targeting people with skills in other industries e.g. construction and engineering.

With this in mind, to retain skilled employees employers need to start planning for salary reviews earlier than usual.

According to the Hays Salary Guide FY21/22 while 50% of employers surveyed kept salaries steady in 2020, 67% were planning to increase salaries in their next review, with 12% expecting to award increases of 3% or more. But, 67% of employees who were surveyed said they thought a raise of 3% or more would better reflect their, individual performance, so, there is quite a considerable difference in expectations between employee and their managers who were surveyed. Employers will need to carefully manage expectations if they wish to attract and retain employees in the current skills short market.

How frequently should salary reviews be carried out?

Because of the fast-changing environment in which businesses are operating today, employers would be wise to consider carrying out twice-yearly salary reviews to make sure salaries remain competitive with the market, as well as keeping up with internal changes.

Although a salary review does not always result in an increase, it does ensure that the business keeps up to date with its competitors and that employees remain motivated because they know they are being fairly compensated. Conducting a regular, structured salary review for all positions ensures that employees are appropriately paid and understand the logic and opportunity of the wage range assigned to their position. It also gives the employer the opportunity to adjust for changes in responsibility or duties that should be reflected in a salary change, as well as making adjustments for external factors such as changes in the cost of living or changes in industry standards.

Currently, disruptions to markets from Covid-19 are far from over and salary budgets remain tight. Therefore, it remains as important as ever for employers to ensure they are paying the right amount, which can be achieved by knowing what jobs are worth in the (external) job market, as well as the value internally. Although many employers kept salaries steady in 2020, some had to reduce salaries and hours, and these cases should be revisited as soon as possible.

In terms of external comparison, salary benchmarking is a process by which you match internal jobs and their descriptions to similar jobs and descriptions in a salary survey or other source of market pay data, so that you can identify a range that the market is paying for each position. Below are some examples of when a company may benefit from this information:

• To provide data for the regular salary review process
• An individual has been promoted into a newly created role or transferred
• Ensuring top performers are satisfied with their remuneration and not a potential flight risk
• A merger or company sale/acquisition has taken place
• A restructure
• Pay equity checks
• Hot skills/geographic pay differentials

What other factors should be considered when carrying out salary reviews?

• Remuneration strategies must be aligned with your organisational culture e.g. if you talk about the importance of being a team player and of achieving quality standards, but you assess performance based only on individual quantitative results, you can’t expect the remuneration to support these goals.
• Total rewards – don’t forget that people are motivated by more than money and that rewards from work include both tangible (monetary) rewards as well as intangible (nonmonetary) rewards such as training, career development opportunities, work culture, flexible working hours and a biggie is recognition.
• NZ minimum wage – are you aware there are three different types of minimum wage rates i.e., adult, starting out and training? And do you know when a person on the starting out wage or training wage needs to progress to the adult minimum wage? These rates can be found on Employment New Zealand’s website.

There are no silver bullets for a successful compensation programme, however at ConsultingHQ we believe that the key to a successful programme doesn’t have to be complicated and is more about making sure that it fits with your company’s business strategy and work culture and makes sense to your people.

We can assist you with all remuneration related matters e.g. the review process, job descriptions (so that you can get an accurate analysis of market comparison data), review spreadsheet templates, incentive plan structures, and advice on some of those tricky compensation challenges, such as:

• You have high-performing employees who are currently paid above the market. You would like to give them an increase, but you are aware that you should slow down their pay increases.
• How do you manage this situation without demotivating them?
• You only have a small percentage salary review budget this year, say 2%, how can you differentiate pay and performance with such a small budget?
• A team member has given me salary data from a recruiter or the internet that suggests they are underpaid – how do I manage this?
• We are currently recruiting and find that candidates are asking for a higher level of pay than people who are proven performers in the same job are getting – what should we do about this?

Extrinsic and intrinsic rewards – and how they affect employee Engagement

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• Do you know what rewards motivate your employees and make them want to not only remain employed in your business – but to inspire them to achieve higher levels of customer satisfaction and excellence?
• What role do rewards play in influencing employee engagement and motivation?
• Intrinsic rewards (or intangible rewards) are psychological rewards that employees get from doing meaningful work and performing it well
• Is the power of intrinsic rewards under rated?
• What intrinsic rewards can we provide to our employees?

Do you know what rewards motivate your employees and make them want to not only remain employed in your business – but to inspire them to achieve higher levels of customer satisfaction and excellence?

Of course, this is not a simple or easy question to answer – as your workforce will be made up of an extremely diverse group of people who have differing wants and needs and discovering and instilling that one undiscovered factor that will excite and motivate each person to get to work and perform to their potential can often feel like a type of magic that you do not have the spell or wand for.

What role do rewards play in influencing employee engagement and motivation?

There are numerous surveys and studies that have looked at the question of why people work. It is too easy to say money as we all know money is not the main reason people spend most of their waking hours furthering the aims of their employing entity. However, we do know that people want to find meaning in the work they do and want to see opportunities for personal and professional growth and development. They also want to be satisfied that they are being rewarded fairly and that their rewards are aligned with the organisational culture.

This discussion looks at two primary categories for rewards and recognition and their impact on employee engagement and motivation.
Extrinsic rewards are usually financial or tangible rewards given to employees, such as pay increases, bonuses, and benefits. They are rewards to which an objective dollar value can be assigned. They are extrinsic because they are external to completing the work itself and are controlled by people other than the employee.

Extrinsic rewards usually have a limited impact over time if they are not increased. Therefore, when they are used to increase employee engagement or motivation the effects can be short-lived for most people.

Intrinsic rewards (or intangible rewards) are psychological rewards that employees get from doing meaningful work and performing it well

They are intrinsic because they are internal to the work being done and achieving them largely depends on the employee’s own efforts. They are essential to sustained behaviour change and can be created by allowing employees to do more self-managing and adding value to their work by innovating, problem-solving and improvising. When someone achieves an intrinsic reward, there is a positive emotional reaction.

Is the power of intrinsic rewards under rated?

Given intrinsic rewards or intangible rewards are the reasons employees choose to work at a particular place of employment over another when both employers offer the same tangible rewards, indeed intrinsic rewards are critically important to the business’s ability to attract, retain and motivate employees. It is a mistake to view them as incidental.

What intrinsic rewards can we provide to our employees?

There are a multitude of ways your business can establish, promote and foster intrinsic rewards:

• Autonomy – employees want more autonomy, so allow them to take responsibility for their job and tasks and ditch that micromanagement approach. Empowered employees will take ownership and pride in their work and see to it that projects are completed to a higher level of excellence.
• Let them make a difference – people want to make a difference, therefore develop an authentic culture of purpose that your employees can believe in. Encourage your people to find meaning in the work they do and show them the good that came of their specific efforts and accomplishments.
• Promote social interaction – employees want to connect with their colleagues and with other teams. Encourage them to take a break and take them out of the work environment to do something fun together so that they can connect, interact, get to know and understand each other.
• Provide opportunities for advancement – employees want to progress and achieve. Human beings – not just employees – do more and produce better work when they are making progress on something they care about. So, when trying to motivate employees, be clear about how their work is developing their career path and let them stretch themselves and demonstrate their skill set. Of course, through it all, be sure to recognise their efforts and achievements.
• Invest in your employee’s learning, development and well-being – employees are increasingly responsible for managing their own careers and they know that their futures depend on improving their skills. If they are not expanding their capabilities, they risk compromising their employability – there is no standing still in this world. Accordingly, opportunities for growth and development are the most consistent predictors of employee commitment. Through coaching and regular feedback, managers can help employees identify development needs and enhance their skills.
• Sharing company information – by entrusting employees with vital information about the organisation’s financial and operational health, business leaders send a message that they consider every worker to be a valued partner and stakeholder in their enterprises. Research shows employees who believe they are trusted by their managers can better see the bigger picture and tend to be more loyal and productive, or in other words, more engaged.
• Provide recognition – numerous studies conducted over time have suggested that non-monetary rewards and recognition can be much more effective motivators than cash. Surprisingly, many employee surveys have suggested that too few organisations take advantage of the motivational power of non-monetary rewards. It is not that money does not matter – if employees feel that they are significantly underpaid – that their pay does not reflect their contributions to the organisation, their motivation is likely to suffer. But when it comes to encouraging employees to put in discretionary effort into their work and to deliver superior performance, the chance to make a difference and be recognised for it is likely to provide a very strong incentive. Employee efforts that get recognised also get repeated.

Finally, while we will never say that keeping employees engaged and committed to your initiatives is easy – especially in today’s distracted workplace – you can certainly turn things around, pick up the momentum, and sustain a healthy, flourishing, engaged culture by tapping into your population’s intrinsic motivators.

Reward and recognition – it’s not just a feel-good

Contents

• Remuneration and recognition are best seen as two aspects of employee reward.
• What does it really cost to replace a key staff member?
• Let’s break down the financial aspect of salary reviews.
• Why do salary reviews?
• How do I know what to offer?

Very often people move jobs because they feel they deserve more recognition for their hard work. Surprisingly, often this does not mean increased remuneration.

Remuneration and recognition are best seen as two aspects of employee reward.

The way in which individuals prefer to be rewarded and recognised varies, it could be as simple as a pat on the back to a more structured salary review process.

The single most important thing is that your employees feel valued and know that they are recognised for their contribution to your business. Employers often are concerned only with the outgoing of the salary or wage, rather than the essence of what motivates the individuals – being part of the success.

Both aspects are worth consideration at the time of reviews. Often an incident or exchange in the working environment can cause people to look around. Happy employees are productive employees.

What does it really cost to replace a key staff member?

Let’s look at the cost of replacing a key person in your business – aside from recruiting cost and time spent interviewing that could well be spent on other important considerations.

If there is a gap after one person leaves before the new person is appointed, how much productivity could be lost, and how much strain will be placed on other team members – and what might the future cost of this be in real terms if any of them start to look around the market as a result of that added pressure.

How much of your time and time from other key employees will be required for correct induction of this new employee, and how much time post induction will be taken to bring the new replacement up to speed to the level you require for him or her to work independently.

How much will those learning curve errors cost you in time and money – much less stress, and how much will your culture be changed by a new energy coming in.

This is the reality of key staff changes.

Let’s break down the financial aspect of salary reviews.

Say someone warrants a $5,000 annual increase in salary. That feels like a lot, but let’s do the maths:

$5000/52 weeks= $96.15 per week extra to retain an experienced, motivated person – who will now be super motivated due to the outstandingly generous pay rise he or she is enjoying – for less than $100 per week.

In my opinion, that is a small price to pay to retain a valuable team member.

This quarter the team at ConsultingHQ are running annual performance reviews and salary reviews with all of our clients.

The outcome of this is to identify which team members have gone above and beyond, are constantly improving and also to identify those that either need performance management or coaching.

Why do salary reviews?

You can keep your salary review and annual performance review separate but it does make sense to bring the two together and allows you to reward your high performing staff. If you are managing both processes it is best practice for the salary review to happen immediately after the performance reviews.

In general, salary reviews are about two things:

1. How the employee performs their job
2. Where that employee fits relative to the external job market.

How do I know what to offer?

We work closely with the RecruitNZ team, who have access to a variety of data-sets that are able to be broken down by industry and geographically. This enables you to confidently assess what you are paying versus what is in the market. CPI and general economic trends are also taken into account.

Importantly, because we work across a number of businesses, and we specialise in innovative business solutions, we can also discuss with you ways of increasing that intangible non-pay related aspect of retaining staff. People will stay with you because of the working environment, the systems & processes, for future security of being in a well-run professional business, and because you pay attention to their contribution and pay them what they are worth in the market

Next step: a FREE 30-minute consultation

If you’d like to find out more about how we can help you reward and recognise your existing team, contact us to request a FREE 30-minute GTM or skype. We’ll discuss your unique situation with the decision makers in your business and recommend a solution that would work for you.

Call 0800 HRHOTLINE (0800 474 685 463) or email info@consultinghq.co.nz – we’re looking forward to hearing from you!