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Do
Your Employee's Know "Why"
They Get Paid "What"
They Get Paid?
By
ERNIE LEBEL Vice President,
Human Resource Services
Let's face it: no one will ever admit to making nough
money, or at least its fair to say that everyone would like to
make more money. So to ask employees if they are satisfied with
their current pay the answer is likely to be, "its okay, but I
could make more". But if employers help employees
understand why they get paid what
they get paid, it will certainly help improve the issue of "pay"
with employees.
Assuming
every company has some methodology for determining pay rates,
or at least pay scales, how do they share that information with
employees to help them understand why they get paid what they
get paid?
Here are some simple steps to help accomplish this challenge:
Communicate
directly and openly with employees on the "why" of their pay rate
or range. Group meetings
work for informational purposes but individual discussions are needed
to help individuals grasp the concept. A study called "Knowledge
of Pay Survey 2002" conducted by The LeBlanc Group found that only
41% of employees understand why they get paid what they get paid,
and only 36% know how they compare with the market. So their assumptions
become their most valid data. Actively engage in dialogue with your
employees about how you establish pay scales and what effect things
like performance, seniority, market comparison and other criteria
play in pay matters. Be clear that this is not a negotiating session
but information sharing.
The immediate supervisor
- the same person who does the performance reviews and annual
pay adjustments is the best messenger, if properly trained. You
wouldn't turn your warehouse manager lose to talk to your banker
about complicated financial information, then why would you allow
an untrained manager to share information with the employee without
first making sure they are properly trained? A trained manager can
communicate effectively and help the employee understand the "business"
and how their pay is tied to personal performance and the company's
performance. A poorly trained manager may focus too much on the
individual and "defend" the pay position instead of explaining it.
Time and effort up front to train the manager will certainly improve
the discussion and go a long way to assuring a satisfactory result.
For some positions the pay scales are simply the market value of
the position. The individual's travel through the range is based
on performance, penetration in the pay range, the company's ability
to pay more, etc. For example in Portland the going rate for customer
service representatives has a range of $23,000 to about $30,000
with some variances depending on the industry and the individual's
experience. The employee's question is always about how they get
to $30,000, in this case the maximum of the pay range. This job
range has been established with a minimum of $23,000 based on market
studies, comparable positions within the organization and other
factors that should be clearly understood. The maximum is established
at about 130% of the minimum. So an employee receiving average or
above pay increases will reach the top in about 5 - 6 years. The
difficult discussion happens when the employee has been with the
company for 10+ years, has received regular pay adjustments and
is now at the top of the range.
Now the discussion is more about what to do with someone who is
above the range then it is about how the range is established. Individual
companies may have different practices regarding the employee who
has "maxed" out in the pay range. These discussions are more delicate
since they involve a senior employee who is probably effective in
his/her job. To not discuss pay with that employee is the worst
possible action - or non-action. Discuss it openly and directly
so the employee is treated fairly and as an adult. Whether it is
discussed or not, the individual understands he or she is not getting
the normal pay raise they've grown accustomed to and may feel slighted.
Sales positions typically have a national,
or at least regional influence and may not necessarily be influenced
by local trends. Car sales would certainly be based on
local comparisons, but recruiting a candidate for a sales position
selling to automotive manufacturers would be based on national comparisons.
Solid and reliable data helps the employee understand what the market
value is for the specific job he or she holds. Secrecy about pay
matters usually suggests an attempt by the employer to hide something.
And, if the employer is trying to hide something the first person
to know is the person affected by the dark secrets.
Pay is dependant upon a number of personal
qualifications. If the individual brings basic skills
they are likely to be near the bottom of the range - fully competent
individuals should be somewhere in the mid-range or higher, and
finally people in the position for over 5 years, fully competent
and with current skills should be at the top of the range. In the
age of technology and rapid change the emphasize might be on "current"
skills, and the individual who continuously upgrades their skills
deserves some additional pay considerations.
A company who really wants to be fair and equitable must develop
core competencies for the positions within the organization. Clearly
defined roles and responsibilities for each position helps clarify
and justify the "financial" (pay) value of the position. The pay
ranges are easily established and most importantly the difficult
questions regarding pay are easily explained if this process is
in place and utilized - for every position.
Surveys are only dependable if they are
current. Therefore, be certain surveys are done regularly.
When that information is shared with employees it should be done
factually. Do not guess at the numbers. You can survey informally
by talking to colleagues in the "business", by asking search firms
and by using formal surveys. Understand that employees will likely
know someone in a comparable position with a much higher pay scale.
Make sure your facts are correct. Compare your company's pay to
comparable businesses. If you make light bulbs to be sold to distributors
it doesn't make sense to compare your pay scales with a company
who builds battle ships for the government. Employees understand
that.
Be consistent in how you administer pay
in your organization. Exceptions should be exceptional
- not the norm. It is very difficult to explain wide differences
in pay and nearly impossible to make it appear fair. For those who
think pay matters are kept secret between employees I have office
front property in Arizona I would like to talk to you about. Information
gets around, and disparities in pay gets around faster than any
other information. To threaten employees with their jobs if they
tell others about pay arrangements only forces the information sharing
underground - it does not prevent it.
Sounds simple - depending on
where you are in your pay culture and the trust relationship with
your employees will make a big difference in how effective the discussion
about pay goes. Ignoring it is never a solution. An old mentor of
mine had a pay philosophy that was tried and true: "Over pay your
good people and don't worry about the rest." I do not think that
works in the current environment but an effectively communicated
and fair process does work. The amount of effort you put into it
will make a difference in the effectiveness of your communication
plan. Do not do it too frequently but do it frequently enough to
make it a "common" practice. Do not do it while doing performance
reviews - it may distract the employee from the real purpose of
a performance review. Well-trained managers will be more successful
in this communication endeavor, especially if they are well informed
in the company's pay practices. Pay
makes a real difference in impacting behaviors with employees -
make sure those behaviors are positive ones.
If you have questions about coaching you can contact Ernie Lebel
at elebel@dimihr.com or you
can call him at 207-772-2823
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