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.

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.

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.

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

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.

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.