By Jean Roque, President, Trupp HR. Updated for 2019.

Navigating employee pay decisions without the guidance of a sound compensation strategy can feel frustrating. While finding the right solutions can be challenging to see, you can likely recognize the symptoms of an insufficient compensation strategy.

Employees believe they are not paid fairly.

When it comes to pay, employees want to feel like they are paid fairly, but what is fair? To your employees, it likely comes down to a few key areas.

  • Does their pay seem fair when compared to their coworkers? Yes, they usually know what you pay other employees!  
  • Does their pay seem consistent with what they can earn elsewhere? Yes, they are accessing this information on the internet!
  • Does it seem like their pay is fair based on how much they are contributing to the company? Yes, they are gauging the impact on their personal lives, development, and wellbeing!

You resort to cost of living adjustments (COLA).

Let’s face it; COLA increases feel like a trusted friend—predictably there when you need them. Unfortunately, extending pay increases without regard for employee performance or how those salaries compare to the market may impact your ability to attract and retain the best employees. Instead, make pay decisions based on factors that are relevant to the position and your company. This practice will make your pay decisions and allocations more meaningful.

Squeaky wheels are rewarded (and others are not).

It is concerning when your best employee is threatening to leave if she doesn’t receive a raise. Or, perhaps, your manager is saying he won’t be able to hire good employees unless he can offer higher pay. These points may be valid, but without a well-designed compensation strategy, you will find yourself with disgruntled employees and pay inequities. Instead, prioritize being intentional, consistent, and proactive when making pay decisions.

You pay more to hire the “right” people.

Once you’ve found the perfect candidate, you want to make sure they don’t slip through your fingers. Too often, this results in offering a higher salary than may be appropriate. Next time you’re extending a job offer, first equip yourself with the knowledge of what the market is paying (or your company’s approved salary range) and what would be considered equitable to other employees performing similar work. Also, don’t forget to highlight what makes your company a great place to work.

A compensation strategy equips your organization to steer clear of unnecessary risks and repercussions from ill-informed decisions. It also provides a reliable roadmap for making sound pay-related decisions that adhere to pay equity laws while also aligning with your company’s culture, budget, and business objectives.

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