Analyzing and increasing employee pay structure
HR and employee benefits expert Lauren Winans walks you through the challenge of when and how to increase employee pay structure.
In the past few years, employee pay has been front and center in the news. Most people agree that, by and large, pay rates have not kept up with the cost of living. The federal minimum wage has stayed stagnant at $7.25 an hour while the cost of food, housing, and education has skyrocketed in the past decade. Workers from fast-food restaurants, factories, and other businesses have taken to the picket line to demand higher wages. The topic of how much money people make and pay structures at various companies has become a social and political talking point that brings about a myriad of opinions and emotions.
When the pandemic happened and the work configuration changed for many, companies used that as a motivation to address pay structures that may not have worked for a significant shift towards remote work. Whatever the impetus for a pay structure review or change, it’s imperative that companies review their employee pay structures regularly.
A part of doing business
Outside of any political, emotional, or social drive to review employee pay structure, it should be a standard part of operating any business with employees. As a general rule of thumb, companies should review their pay structure every three years. The emphasis should be on structure, not necessarily specific individuals’ salary amounts. Think of a pay structure as a system of guidelines composed of several factors that determines how much employees are to be paid.
A regular review of an organization’s pay structure is necessary to catch any issues before they become detrimental to the running of the business. As we have seen from the effects of the pandemic on business, things can change rapidly. Leaders should examine their pay structure to determine if it still meets the needs of the business, fits with a company’s vision, and meets the company’s goals for talent acquisition. Ensuring pay equity and identifying pay disparities due to race, gender, or disability are essential drivers in maintaining a consistent schedule for pay structure review.
The meteoric rise in remote work has added an extra level of complication for companies wanting to have the best, most comprehensive structures for their employees. Businesses that have not had remote work as an option before may question how to incorporate remote work into their organizational process, communication streams, and pay structure.
Companies should revisit pay structure on a regular, predetermined schedule or when circumstances demand it, much like all changes wrought by the COVID-19 pandemic.
All hands on deck
While top leaders will ultimately put the pay structure into place, it is an “all hands on deck” situation while discussing or changing a system. Functional department heads should be brought in during the analysis process. The analysis stage is typically the “what’s working, what’s not working” stage of revisiting the pay structure.
Key managers are typically “boots on the ground” people and have a direct link to employees. They hear the feedback regarding pay structure from those it greatly affects, and have a sense of the caliber of talent working within the current structure versus the kind of talent they wish to pursue. The input of department heads and managers is integral to forming a functional and well-received pay structure.
Communication matters
Companies analyzing their pay structure for possible updates and changes should bring all employees along on this journey through open communication. For example, sending out a general announcement to everyone letting them know that the pay structure is being reviewed is a good way to remain transparent and prepare employees for possible changes.
If your company chooses to use a third-party compensation consultant for the pay structure review, it is ideal to communicate this to employees and management. Often, it can make employees feel more confident in the review process if an outside consulting firm is analyzing the current structure without bias.
If amid the review, it shows that upcoming changes may greatly impact some employees, those changes should be communicated to those people or groups privately and prior to any mass announcements.
Once the final structure is communicated, human resources should be on hand to help managers answer any questions or handle any pushback or negative feedback that may occur. When making decisions that affect large groups of people, it’s typical that feedback will vary. Businesses can have a successful pay structure change roll-out with open communication and preparation.
Analyzing and adjusting the pay structure can be a considerable undertaking, but necessary for organizations. A solid and equitable pay structure is critical for running a business to grow, best serve the employees, and stay competitive in a wildly changed, post-COVID workspace.
