How can HR software unlock the full potential of your people?
HR plays a pivotal role in being proactive and taking steps to optimise the skills of their people. PayReview is a pay and reward software that empowers decision-making. Here we have outlined five tried and tested elements of pay and reward that employers must get right to motivate employees.
Follow these five steps to ensure your people can work to the best of their ability and reach their full potential.
Overcome the pay hurdle
Pay can’t motivate in itself – but it can demotivate. This is critical because getting pay levels objectively right can give greater weight to the other elements of your compensation strategy. If staff feel they’re being paid fairly, this can directly impact the customer or client experience.
The customer and client experience are at the heart of a pay structure. Your people are your brand – they set the tone of the relationship, set the expectations for the quality of service to be expected, and ultimately determine how and to what extent you deliver on your vision. Benchmarking to ensure that pay is competitive in the market is essential. If it’s at the right level, the employee can focus on and value other elements of an employer’s reward strategy.
“It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.” Henry Ford
However, if it becomes known that you’re paying below the market rate or not meeting the standards expected and providing a minimum wage, this not only has vast reputational ramifications and penalties for your business; it also undermines staff morale. Not paying enough to ensure employees know they’re being recompensed fairly can actively drive down their engagement levels. This impacts their motivation at work, which can adversely affect the service or quality they provide on a day-to-day basis. If left unaddressed, this could also lead to recruitment and retention difficulties.
Align your pay organisation-wide
Parity of pay lies at the heart of fair pay structures. Whilst the Equalities Act 2010 built on the progress marked by the Equal Pay Act 1975, making different pay and treatment based on gender illegal, discrepancies can still occur, especially within vast organisations. Some may have grown organically over time, and a proliferation of job descriptions and terms and conditions may exist. Rationalising this can create a fair and transparent system which engenders greater trust on both sides of the employer-employee relationship, driving engagement.
The greater use of tracking and accountability regarding pay differences is expected to be widened from the current gender pay gap reporting to encompass ethnicity and broader demographics. The make-up of the workforce is crucial to diversity, equality and inclusion initiatives pursued by organisations. Not only can this drive greater performance, but candidates and tenders increasingly scrutinise a company’s track record.
Source: https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-wins-how-inclusion-matters
Therefore, having a system that tracks existing pay gaps can help to address the lack of pay equality. Visibility of your statistics can help you formulate concrete plans to close these gaps and create a diverse workforce. PayReview can monitor data around the demographics of your workforce, customised to the information you require. By understanding your track record and the key drivers behind any existing pay gaps, you can use the pay review software to monitor whether you are truly embedding a culture of inclusivity and establish the next steps you need to take.
COVID-19 has hit female-dominated sectors hardest, but the renewed commitment of many organisations to scrutinise their approach to equality, diversion and inclusion (EDI) may mean that recovery from the pandemic places equal opportunities and fairness at the heart of board-level strategies. The World Economic Forum has highlighted the limitations of current EDI strategies pursued by organisations, which are often rooted in current practice rather than proactively changing the status quo. They suggest reframing EDI, following instead the approach identified by Decolonize Design: ‘Belonging, Justice, and Dignity’ – using values to amplify the experience and voices of marginalised people. These can be incorporated into the performance reviews of those organisations that operate employee-balanced scorecards, determining pay levels.
Unlike DEI, BDJ is centred on the experiences and voices of hitherto marginalised people.
Source: https://www.weforum.org/agenda/2021/02/diversity-equity-inclusion-have-failed-belonging-dignity-justice/
Decolonize Design’s approach uses universal values to embed a collective consciousness of how we treat one another, creating a climate that enables everyone – regardless of their background – to reach their potential and thrive.
Fairness also impacts the lowest pay levels and the baseline’s impact on the rest of the pay structure. Living Wage Employers pledge to ensure their employees get a basic subsistence income. These increases mean upward pressure is created across the system of pay scales. The moral emphasis for this is that wage increases across the board generate living wages for employees and more disposable income. In theory, this does not impact profits as the market has a collective fluidity for people to spend more. However, it does mean that existing pay levels are pushed up across the board.
“You are paid in direct proportion to the difficulty of the problem you solve.” Elon Musk
Keeping differentiation throughout the pay structure is vital to managing the scope of each role and ensuring that pay reflects extra levels of responsibility. PayReview can help you benchmark and organise data across your organisation to ensure employees are paid to reflect their responsibilities and seniority, upholding employee morale. This avoids compression between pay levels, which does not attach adequate value and reward to roles with different remits and additional responsibilities.
Target high performers
In the wake of COVID-19, our sister company Paydata surveyed 204 employers, capturing practices affecting half a million employees in its UK Reward Management Report in autumn 2020. Results revealed that pay review projections are constrained for the year ahead, after 56 percent of employers had gone ahead with their usual salary reviews by the first lockdown in March 2020. With 24 percent operating pay freezes, rewarding top performers in lean economic times can help optimise limited pay budgets as we emerge from the third lockdown. Economists noted promising signs of a more buoyant labour market, as there was a 16 percent rise in job vacancies in March. This came amid hopes that the easing of restrictions would be mirrored by more spending, reflecting pent-up consumer demand.
Our pay review and compensation software focuses on the key factors that facilitate effective decisions. By streamlining methodologies and creating simplified but thorough processes that tackle the heart of the issue, we create a fair approach to determining different pay levels, which might be based on key performance indicators and targets assessed in performance management reviews. We help you objectively manage frameworks that create transparency throughout your business – with decisions determined based on the level of individual success. This way, key talent can be targeted with higher pay increases that are awarded in a manageable way, helping you to retain your top performers.
Differentiating top performers enables employers to retain key skills. Much recent debate has been about whether it is currently an employer’s market. The UK unemployment rate has fallen to 4.9 percent, and only one in five employers expect challenges recruiting and retaining people in the next six months – the lowest figures Paydata had captured since the financial crisis in 2008 / 2009. However, specific industries report difficulties recruiting particular skills, such as the UK life sciences sector struggling to tackle existing skills gaps, particularly for digital roles. Protecting your talent pipeline and minimising the cost of employee turnover to organisations is a business imperative. Keep high-performing individuals by rewarding them accordingly.
Bonuses can reflect parameters of success
Bonuses can be used to incentivise staff but can also be granted as additional performance recognition during difficult times. Overall, bonus schemes have remained conservative and stable in terms of the average number of employees receiving these and the size of the bonuses. According to Paydata’s UK Reward Management Survey, one quarter in November said it was too early to predict the impact on bonus schemes for the year, and one in three said it was too early to predict the size of bonuses. Whilst some organisations have rewarded front-line workers, others have targeted their bonuses to those who need financial support the most.
Overall, bonus schemes have remained conservative and stable in terms of the average number of employees receiving these and the size of the bonuses.
The Coronavirus Job Retention Scheme has been a lifeline for businesses during the pandemic when many could not operate to full capacity. Some, particularly firms in the legal sector, have recently unveiled plans to repay this financial support given their strong performance and have noted strong bonus payments to coincide with this. Irwin Mitchell will offer three percent of salary bonuses in addition to performance-related awards in November 2020. This is in recognition of the efforts of staff during the pandemic. Similarly, Big Tech has seen a surge in profits during the pandemic that is being shared in staff bonuses to mark their strong growth, with Google tying their bonuses to environmental, social and governance goals, furthering its key business objectives. Shell will also link their executive pay and bonus levels more closely to their climate performance, demonstrating the range of performance indicators that employers can use to determine bonus levels.
PayReview can help set important parameters that you define. Our software can be tailored in its design to help you calculate the proper levels of bonuses across your business. These can take into consideration key metrics and performance against group-wide targets to the more individual performance management conversations – making the process as bespoke as you want it to be.
Streamline your process
By taking pay off the table as an issue and enabling employees to focus on the wider value that their pay and benefits offer to them, PayReview can propel strategic HR projects throughout an organisation. Freeing up the time HR spends on repetitive and mundane tasks can allow HR to hone in on other critical elements of their strategy.
PayReview can propel strategic HR projects throughout an organisation.
Management recognition, leadership development or exciting new projects can provide greater job satisfaction – HR plays a pivotal role in shaping these strategies. When employers can easily point to the methodology that underpins how they provide a market-competitive rate, this can fuel operational efficiency. With the right HR tools, time is freed up to focus on more creative projects that can bolster the company’s culture and shape the customer experience - such as how to turn satisfied employees thriving at work into advocates on social media, increase brand awareness and deliver exceptional service or advice.
Line managers are often the gateway between your strategy and how this is delivered and achieved by your people. It’s commonly said that people don’t leave organisations – they leave their bosses. They must sing from the same hymn sheet to have effective performance management conversations. PayReview supports the mechanics behind the process but also gives line managers the tools to make objective pay decisions and justify the decision-making process. This supports more effective communication between teams who clearly understand what they need to deliver to secure pay increases. This transforms the role of HR in the pay review process from getting involved in the heavy lifting to being an effective supervisor – ensuring that the performance review is as effective as it can be and helping to define further training requirements across the business.
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It’s up to organisations to take an active role in making sure their employees know they are being treated fairly and rewarded accordingly. PayReview software can unlock the value of other elements of your reward strategy by taking pay off of the table as an issue.
PayReview software can help manage the pay review process most effectively – ensuring parity of pay and an objective system to organise income throughout an organisation. Once up and running, this frees HR to focus on more strategic projects critical to your culture and vision. Getting the question of pay ‘right’ throughout the organisation also means your employees can focus on other elements of their reward package beyond pay. This enables them to focus on various ways that employers are improving their work-life balance through flexible or hybrid working, wider benefits and wellbeing.
Contact us to arrange your free demo as we walk you through the software and how PayReview can transform a time-consuming task into an opportunity to build a fair, robust, and transparent system.