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ARE YOU READY FOR YEAR-END PAY REVIEWS?, PART 3

Posted on December 17, 2018 by Trinity HR

In Part 1, we looked at:

  • Pay increase projection for 2018 year-end/2019
  • Pay increase guidelines by performance level
  • Reviewing internal equity
  • The role of the market place

In Part 2, we addressed the importance of pay data related to the market place.

Here is Part 3, we’ll consider the importance of communications with employees about pay.

EMPLOYEE PERCEPTIONS

A recent survey revealed some interesting and problematic findings about employees’ perception about their pay.  Specifically, it focused on how employees perceived how they are paid compared to the market versus how their actual pay compares with market pay.

  • The percentages in red show the percentage of employees whose perception about their pay in comparison to the market is correct.
EMPLOYEE ACTUAL

PAY

 % BELIEF PAID ABOVE MARKET % BELIEF PAID

AT MARKET

 % PAID

BELOW MARKET
Paid Above Market 21% 44% 35%
Paid At Market 6% 30% 64%
Paid Below Market 3% 14% 83%

Only those employees paid below the market rate had a correct perception (83%)
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  • Of those paid above market, only 21% had the correct perception.
  • Of those paid at market, the correct perception was held by only 30%.

 

  • As a whole, companies are doing an extremely ineffective job of helping employees to correctly understand how their pay stacks up against the market place.
  • Making it even more troublesome, it that those employees companies are paying above market levels have the worse correct awareness!

CAUSES

From Trinity’s perspective, there are several factors contributing to this problem.

  • Many companies are either not letting employees know the basis for how individual pay is determined or are inadequately doing so.
  • Most companies are extremely hesitant to share with employees market data – even when they paying employees at or above what the market calls for.
  • If your company’s pay is at or above the market, why would you not want to let employees see that by sharing data? It’s clear from the survey that employees are filling in the blanks themselves – and filling in lower dollars than the actual ones.
  • If your pay is below the market, you should want employees to understand why that it the case. Or perhaps, evaluate the negative impact (including low morale, unwanted turnover and even potential unionization) of  paying lower than like companies versus the financial impact of getting pay to become competitive

 ACTIONS FOR YOU TO CONSIDER

1) Communicate your company’s pay philosophy to all employees.

  • We at Trinity have some strong views as to the “right” and “wrong” ways of communicating this information. We’ll freely discuss them with you so:

2) Educate your employees as to how the company determines individual pay.

3) Share market data with employees – “seeing is believing”

HOW TRINITY CAN HELP:

  • Trinity’s Team has a high level of expertise in all aspects of compensation design and management, as well as performance management systems.

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Posted in Compensation & Performance Management