2016 Resolution #8 – Ensure Base Pay is Predictable
Resolution #8 – Examine your base pay program from the perspective of employees, and ask yourself whether they can “predict” changes to their pay.
For the vast majority of jobs, hourly wages or annual salaries make up most of total cash compensation. While incentive compensation may be a motivator for some, base pay pays the bills – and it’s what lenders rely on when employees need a mortgage or new car loan. Employees deserve stability and predictability – they should know:
- How their wages or salaries are set;
- What they can do to increase their income; and
- Whether their pay is fair and equitable.
Prior to communicating information about your pay program (that’s resolution #10), carefully examine the program from the employee’s point of view. Ask yourself what employees know about the program, and how you would expect they would respond to it.
Straight-forward pay programs are predictable – not always fair, but predictable. Step increases allow an employee to see what their opportunities are at every step, but how often are the steps adjusted? Do employees know that? Are general increase programs predictable, or does it just come as a surprise at the end of the year?
The fairest programs – those that are performance-based, competitive and internally equitable – may be the hardest on employees, because employers don’t always communicate them well. So if you have a performance based pay program, ask yourself:
- Do employees know what the range of pay is for their job?
- Do they know why their pay is where it is in the range?
- Do employees know exactly what they have to do to increase their pay?
A performance-based pay program is supposed to put more control in the hands of employees; but if they don’t know how to predict what their performance will get them, your program may be doing more harm than good.