Top 10 Tips for Conducting Pay Reviews
Any organisation that wishes to retain its competitive edge and reward its hard-working and dedicated staff, will need to conduct regular pay reviews. Increasing focus on fair pay and the gender pay gap has meant that pay reviews have attracted an increasing level of media attention in recent years. Following Reward Connected’s simple steps can help ensure your organisation implements equitable pay reviews and focus the HR resource required in the right areas.
The pay review is likely to require the input of various people. Putting a detailed plan in place, will ensure that the scope and timescales are clear and the roles and responsibilities of everyone involved in delivering the pay review (HR, Finance, Senior Leadership) are understood.
2. Know your market
Before you start, gather and analyse information on factors relevant to the pay award such as inflation, market rates, skills shortages, recruitment data/retention rates, or comparable pay awards in similar organisations and prevailing economic conditions (find out how to use inflation statistics in setting pay here). Affordability is likely to be the biggest concern for your organisation, and could even mean that a pay review results in no pay increase for some or all staff.
3. Agree the budget
Work with colleagues in Finance to agree on the budget for pay increases, and model several scenarios to ensure its affordability.
4. Determine the basis for pay award
There are many ways that organisations can choose to apply their pay awards, including:
• a cost-of-living increase for all employees
• a flat-rate pay rise (where the same pay increase in cash terms is awarded to all employees, enabling more of the available pay pot to be given to lower-paid staff)
• individual increases based on performance, market rates or progression.
If pay increases are based on performance, you’ll need to ensure there is a robust method of assessing employee performance and managers have been trained in assessing their teams and recommending awards. You’ll also need to provide employees with details of how their performance is assessed and how their pay rise is decided.
5. Check pay award is not discriminatory
Where anything other than an across-the-board pay increase is made, the risks of discrimination are greater. You’ll need to ensure that you are not unlawfully discriminating on protected grounds (such as sex, race, sexual orientation, disability, religion or belief or age), by reviewing the outcome of the pay award and monitoring the decisions of individual managers. Fixed-term and Part-time staff should not be treated less favourably in a pay review than comparable permanent or full-time employees. Even where an across-the-board increase is made, it is advisable to check that the pay review is not perpetuating areas of inequality.
6. Are there any other elements of the pay and benefits package that need review?
Consider whether there are other elements of pay which should be increased as part of the annual pay review, and whether increases will be in line with any across-the-board percentage increase to basic pay. Examples include location allowances, on-call payments or shift premia.
If your organisation recognises one or more trade unions for collective bargaining purposes, you’ll need to agree on the basis for pay awards with the union(s). Check the collective bargaining arrangements that have been agreed. Regular contact throughout the process can help avoid surprises.
Employees need to understand the pay review process, particularly if there are varying pay increases for different staff groups or if this involves an assessment of performance.
9. Ensure the process is as transparent as possible
Employees are likely to understand and support pay review decisions if there is transparency around the basis and evidence on which they were made. Without this, employees are likely to mistrust the process and/or believe it to be unfair. Remember though that it is important to ensure the information that is disclosed is appropriate, particularly in the case of performance-based reviews.
10. Review the pay review process so it can be improved next year
The next pay review will come round quickly – a review of the process as soon as it is complete will help improve it for next year.
Need more help?
Reward Connected is an independent reward consultancy and we can help conduct an end to end pay review for your organistion or provide advice on some of the elements listed above. If you have questions or would like advice on how to access to pay market data, contact us today. We look forward to helping you.