Over the past year employers have frozen salaries, reduced pay, cut back on benefits and administered RIFs.  But very recent surveys show that employers are back on track and rewarding employees accordingly.  A Mercer study showed that 67% of employers expect to increase base pay and salary budgets are projected to be 3.2% higher overall.   Different regions and industries have differing practices.  An interesting insight:  ”as a result of the economic downturn and current labor market conditions, organizations are moving away from pay based on market competitiveness, instead focusing on internal affordability”.    Good idea!

Organizations need to consider many, but four main, factors in determining their compensation levels and practices:  1.  Performance — of the individual, team and organization; 2.  Internal equity — people doing similar work with similar qualifications need similar pay (it’s the law!); — 3.  External competitiveness — don’t stray too far away from the market or you’ll have trouble recruiting and retaining; 4.  and, as the study discovered, the ability of the organization to pay.  

If the company is struggling, not profitable, or the market is squishy  – employers should not enter into long term contracts promising higher pay and expensive benefits. 

The successful employee pay formula:  1.   rewards performance, 2.  is fundamentally fair and immaculately legal, 3.  recognizes external market conditions and 4.  is prudent and practical based on their own ability to pay.

(The statistics from the Mercy study are from an article by Stephen Miller from SHRM.)

To get help setting up a Successful Pay Plan with the Four Square Legs — call Karla at Wright Consulting.       

This entry was posted on Tuesday, June 23rd, 2009 at 6:32 am. Please comment or trackback.