Standing Out as an Employer
How you can manage talent from different segment groups Remuneration specialist Dianne Auld talks to Isabella Chan how to approach the area of compensation for talent from particular segment groups, who to look to when benchmarking pay rates and key compensation trends to look out for this year.
By Dianne Auld
|Jan 2011 | Research has consistently shown that recognition is a major factor in the retention and engagement of employees, so I am always delighted when I see organisations putting in great recognition programmes.
One of my clients, the RCS Group, implemented an excellent recognition programme this year. Every month they solicit nominations for awards in each department, and once a month they have a recognition road show, where they do a noisy and fun tour round the offices, most of which are open plan.
They take round with them a treasure chest on wheels, full of presents and citations for each winner. In each department, the tour group parks the treasure chest, they ring a bell, everyone gathers round, the manager of the winner reads the citation, and the award winner can choose a gift from the lovely array of items in the chest and pin the citation on their office wall. For more significant awards, the employee can choose any gift to a certain amount, and this will be purchased for them. There are also other types of awards – the overall winner of the month gets a designated parking spot right near the entrance, and a meal named after them for the month.
I love the creativity of this programme, and it has greatly increased employee motivation and engagement in a largely administrative and call centre environment. I had the pleasure of joining in a recognition road show last month, and could see firsthand the positive impact on employees.
Dealing with talent from particular segment groups
a) Using one overall pay structure for all jobs in the organisation – this works well if the organisation is based in one geographical area, and there aren’t large functional differences in pay;
b) Separate pay structures for different geographical areas – this is necessary if the areas in which the organisation operates differ significantly in terms of pay, and is often appropriate in large countries, such as the United States and China, where pay differs greatly between the major cities and other areas. If an organisation operates across different countries, it is essential that they use at least one pay structure per country, as pay differs significantly from one country to another; and
c) Separate functional pay structures – this works well if there are major differences in pay between different functions in the organisation, e.g. administrative and technical.
In addition to the above, organisations may also use separate pay scales for hourly paid and salaried staff, or unionised and non unionised jobs, or executives and other staff. Whichever structure is used, the organisation would also need to examine whether there are certain positions, e.g. Engineers or IT Specialists, who need to be paid above the normal pay scales because of scarcity of skills. The organisation can do this in several ways.
Firstly, they could develop separate pay scales for these positions. Secondly, they could pay a percentage premium on top of the normal pay scale for these positions. Thirdly, they could pay these positions an allowance or provide additional benefits to ensure that their total reward package is higher. Or they could pay attraction or retention bonuses to these positions. All four of these options are used, but the first two are the most common approaches.
I would also recommend managing Sales staff separately from the normal pay scales, as they need to have a lower base pay and a higher variably pay component to their salaries. Sales staff are often paid a fixed amount of base pay and then given commission based on sales. So it is a good idea to have a separate pay structure for sales positions.
When benchmarking pay rates, look to…
When choosing a salary survey, I would use the following criteria:
a) Ensure that the survey is representative of your target market. Your target market is where you draw employees from or lose them to. This could differ by level and function, and could be a specific industry or geographic location.
b) Ensure that the sample size is large enough, that the companies in the survey are companies you wish to compare to, and that the survey can break data down by industry, area, job, grade or however you require the data.
c) Ensure that the survey company is reputable, and that they are using a sound methodology to collect information, validate data and value compensation packages. If benefits are an important part of the reward offering in your country, ensure that benefit information is collected, and that benefits are valued as part of the package.
d) Ensure that the data is uploaded electronically, and can be downloaded electronically into Excel spreadsheets. Manual data and pdf files are a nightmare to work with, as they have to be manually re-captured for analysis.
e) Ensure that the survey is run on a regular basis, at least once a year, so that the data is reasonably current. Ensure that the survey provides pay increase projections so that the salary data can be aged to the required date.
Three key compensation trends to be on the lookout for 2011
Trend 2 – driving variable pay schemes to lower levels in the business and substituting merit increases, which are ineffective at differentiation in low inflation environments (you can’t vary increases much with a 3% merit budget), with individual performance linked variable pay plans.
Trend 3 – offering more flexibility in terms of pay, benefits and working hours – for example, allowing employees to choose where they want to allocate their compensation package to, allowing choice of retirement fund vehicles or health fund coverage, allowing employees to work compressed work weeks, work from home or work flexible hours.
When monitoring pay for effectiveness and efficiency, keep in mind that …
Finally, you must also focus on the total reward offering and ensure that you are getting the whole reward offering right in terms of pay, benefits, performance and recognition, work life balance and career and development opportunities, as different aspects of the reward offering will appeal more to different employees.
A pay for performance system is the best system to employ
Fundamentals to adhere to, when designing variable pay and the structure of the plan
Dianne Auld was born and educated in Zimbabwe, where she obtained a BSc Psychology Honours degree. She spent a year in Malawi, teaching English and Maths before moving to South Africa. Dianne has held a number of remuneration positions, with Richards Bay Minerals, Unilever and Old Mutual and currently works part time for Pick n Pay, where she advises on remuneration policies and practices. In 1999 Dianne started up her own remuneration consulting practice, Auld Compensation Consulting, operating out of Cape Town. She consults in all areas of compensation to a wide range of organizations across Africa and the Middle East, runs a number of her own training courses, and trains the Worldatwork Global Remuneration Professional courses both locally and on line.
Since November 2008 Dianne has been writing a weekly column for the Worldatwork Compensation Newsletter on Excel Tips for Compensation Practitioners. In October this year Dianne received an honorary life membership of the South African Reward Association for her outstanding contribution in fostering the aims of the association.
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