HR and employment law clinic: Using pay rises to succeed

As many of our clients have successfully grown their green shoots into real bottom-line growth, 2015 has seen a marked increase in the return of the pay review to the HR agenda.

By Tracey Murphy, Sarah Booth HR.

Whilst this is most certainly a positive step in the company’s development, the method for deciding who gets paid what can be a huge headache for business owners.

It’s little wonder that most go for an across the board approach as opposed to something more sophisticated.

Whilst the blanket percentage increase is simple to implement it can be incredibly demotivating particularly for those star performers. A recent survey that Sarah Booth HR conducted in one workplace revealed that most staff saw the past pay decisions as “rewarding failure” as many poorer performers were also rewarded.

I’m sure this is all starting to sound rather familiar and can be enough for a small business owner to bury their head in the sand and hope no-one mentions it!

At the same business we surveyed, the staff (notably the higher performers) were requesting that the company implemented performance-related pay.

Performance-related pay has received mixed press in the past, usually down to poorly executed processes, appraisals that represented a tick-box exercise and managers dis-engaged from the responsibility of raising the bar on their staff’s performance (if only I had a pound for every time I heard “that’s the job of HR isn’t it?”).

Providing the business designs a system that is suitable for the operating context they are in and it involves managers and staff in its design and rollout, performance-related pay systems can be an extremely rewarding motivational tool.

Sarah Booth HR has recently designed and launched a performance system that is linked specifically to the achievement of bonus payments and the rise in employee engagement in relation to the company’s performance against its sales target has improved dramatically and everyone is now very clear on how they can influence sales regardless of their role.

The steps to implement a performance-related pay system will require good HR expertise, to guide the business through the process of ensuring all roles are clearly defined; benchmarking the roles and salaries to the external market; agreeing appropriate pay scales and to roll out a simple system for agreeing individual and team key performance indicators and objectives to drive the performance levels upwards. These are all important components that make up the design of a robust performance-related pay system, yet the real success is in the implementation and the ongoing coaching/training of managers to help them to stay consistent. The challenge for HR and the business owner is to keep the system alive and relevant as the business grows and evolves.