Yesterday’s Advisor presented several popular types of base pay programs from Cassandra Faurote and Karl Ahlrichs; today, they reveal the 10 common mistakes that employers make when determining how to pay their workers.
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Faurote, who is president of Total Reward Solutions, and Ahlrichs, a consultant and business developer for Gregory and Appel, shared their expertise on base pay programs in a recent webinar presented by BLR® and HR Hero®.
Top 10 Compensation Mistakes
10. Employers let employees scare them with data from the Internet. There’s a lot of free data on compensation out there, says Faurote, but that doesn’t mean it’s reliable—don’t let it be used against you. With free data you get what you pay for, adds Ahlrichs.
9. Employers don’t think pay makes a difference. High performers may care a lot about meaningful work and good culture, but equitable pay is what gets them in the door in the first place, says Ahlrichs.
8. Employers don’t tell employees how their pay compares to market. Faurote notes, if you don’t show them the facts, how do they know they’re not underpaid?
7. Employers use the “peanut butter” approach. Faurote clarifies this as meaning pay increases are spread evenly all across the business. For instance, everybody’s getting a 3 percent raise—let’s hope they are all happy with it.
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6. Employers don’t do a good job identifying top performers or top talent. A lot of research shows top performers expect an increase that is one and a half times that of an average performer, says Faurote.
5. Employers don’t use reward and recognition and think small increases are enough. If you think just a 2 or 3 percent regular increase will keep good talent around, it’ll bite you later, warns Ahlrichs.
4. Employers see compensation as an expense and not an investment. Employees are an investment, says Faurote—treat them that way!
3. Employers try to solve all management problems with compensation. Even if compensation is right, there can be other issues to deal with, Faurote points out.
2. Employers think people are not going anywhere. That’s been the case for several years, says Faurote … but that’s about to change.
1. Employers don’t do anything! Don’t expect compensation to take care of itself.
A Perfect Storm
Ahlrichs stresses the importance of avoiding these mistakes. There’s a perfect storm coming, he says, where your high performers are free to move and your managers have perhaps been spending too much time and attention on the low performers (Faurote adds, they also don’t need to depend on you for health insurance anymore). You’ve got to get your pay basics in order so your high performers will feel like they’re a part of a high-performing culture.
Setting an equitable and motivating pay structure—just one of the many challenges in the brave new world of HR. Are you prepared for changes that are unparalleled in scope and impact?
- Employees all over the world, many of whom you’ve never met in person
- Technological advances and big data
- Talent management challenges like Millennials managing Baby Boomers you once thought would have retired years ago
- Big data on everything from hiring strategies to retention predictions
- Sweeping regulatory changes in the areas of health care, immigration, and privacy that have necessitated massive changes in the way you do business
- And the new normal—doing more … with less
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