By Claudine Kapel
Reports from several consulting firms indicate the projected 2012 budgets for salary increases will be around three per cent. Actual budgets may end up being smaller in the face of renewed concerns about the economy.
Such modest figures can lead some to wonder whether annual merit increases even matter. Do employees give much thought to their yearly bump in pay?
A recent study indicates that not only are employees paying attention, they also have a lot of concerns about the fairness of their pay increases. The study, entitled Reward Fairness: Slippery Slope or Manageable Terrain, was conducted by WorldatWork, Hay Group and Dow Scott, a professor from Loyola University.
The global study asked reward professionals to report on how frequently employees express concern about the internal fairness or market competitiveness of various reward elements.
Merit increases represented employees’ second highest area of concern with respect to reward fairness, after career development. Employees also express more concerns about the total amount they are paid and the recognition they receive than they do about other reward elements.
The reward professionals reported that employees express the most concern about reward elements that involve managers “making individual judgments about the level of rewards that employees receive.”
To that end, almost 50 per cent of the responding organizations reported employees seldom or never express fairness concerns with respect to variable pay. The study report suggested this is because employees may regard this as a reward element over which the supervisor has little control.
So regardless of what percentage you’re budgeting for pay increases, the process used to allocate such increases can have a significant impact on employee trust. The process itself – including whether it is perceived as fair – can influence how employees feel about their own compensation, their supervisor, and potentially the organization itself.
It can be helpful to review the tools and processes used in your organization to determine how much each employee should receive in terms of a pay increase and how such decisions are communicated.
Does your organization have a clear and consistent process for evaluating performance? Are there tools in place to ensure consistent criteria are used when determining pay increases – such as performance ratings and salary range positioning?
Are managers and supervisors provided with training and coaching to help them manage conversations about pay and pay increases in an effective manner? In the end, there is value to focusing on not just the value of increases, but the delivery mechanism as well.
Because ultimately, pay increases are about a lot more than just giving someone another three per cent. The process itself communicates about the organization, its integrity and its values.
As Marshall McLuhan once said, the medium is the message.
Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.