As businesses reopen and the economy restarts, many organizations are facing some tough decisions regarding how to manage pay going forward.
As a starting point, employers need to determine how they will address salary and wage increases next year. Will employees in your organization be getting pay increases in 2021? Has your budget for pay increases been reduced – or even eliminated? Are you planning for ad hoc increases to deliver additional dollars to a few people?
There are no one-size-fits-all answers to these questions. The key is to understand how your organization’s revenue has been affected by the current economic challenges, and to then find the best possible ways to balance affordability with the need to reward and retain critical talent.
If you find yourself with limited or no budget for formal pay increases, you may want to explore whether you can establish some sort of budget for ad hoc pay increases or recognition awards.
Every organization has its top performers. And you want to show your key contributors that their work and achievements are valued, even when dollars for additional compensation are limited or absent.
If revenues or budgets have been particularly hard hit, you may need to get creative with non-cash recognition. What can you realistically offer employees that consistently deliver, even during these difficult times? At a minimum, their contributions should be acknowledged. Then look for other ways to reward them as well.
Meaningful development opportunities, especially those that are career enhancing, are usually highly valued. Explore ideas related to special assignments, desirable training opportunities, on-the-job development, and new mentoring relationships among the possibilities. Many of these types of opportunities can also be supported virtually, which is important especially if some or all of your work force is still working from home.
On the flip side, resist the temptation to use a title change as a reward when an employee is still doing essentially the same job. Offering a fancier title instead of a pay increase may seem like a good idea because at first blush it appears that there is no cost for such a reward.
The truth, though, is that such actions can create a lot of unnecessary upheaval down the road. That’s because rewarding employees with a title that doesn’t align with the job they’re doing can prompt other employees to feel that they are not being treated fairly. This is especially true if you start to give out new and different titles to people doing essentially the same job.
Finally, when dollars for compensation and rewards are more limited, it is particularly important to do your homework and identify if you have any employees who are paid low to market. These may be among your flight risks and you may still need a plan to address gaps to market, even if it may take an extended period of time to close these gaps.
Some organizations already had issues brewing with their compensation programs before the tough economic times hit. Take a hard look at any issues you may be having with either your program designs or how employees are paid versus competitive market practice.
Were you grappling with any pain points prior to this period of turbulence? Are people paid fairly? Competitively? Are your pay programs meeting their objectives? Can you confidently explain why some people are paid more than others, especially in the same job or at the same pay grade?
You may not have a lot of dollars for corrective action right now, but you can still review your current state and define your go-forward spending priorities. A timely review can also help you fix issues with pay programs before they fuel more significant problems.
The current economic challenges will eventually end. And you want your compensation programs to be firing on all cylinders so they support organizational growth and renewal as the economy improves.