An employee’s wages are more than simple economics. Amy B. Lyman, a 19th-century religious leader stated, “Paying people a fair wage is a sign of respect and acknowledgment of the value of people’s contribution to the business. When people are treated fairly and with respect, they will provide unparalleled levels of support and commitment inside the business and to clients and customers.” There may be signs that it is time to re-examine your pay structure to improve the outcomes of your compensation practices.
What Are Pay Structures
Pay structures are defined as the hierarchal grouping of jobs and salary ranges in each organization. That includes job grades or pay grades that are reflective of the value of each job in the market and each job’s value in the organization. By establishing a smart salary structure, a company can pay competitively in the market and fairly within the organization. A salary structure helps management control salary costs and simplify the payroll process.
9 Signs It’s Time to Re-examine Your Pay Structure
Consider these signs that it’s time to re-examine your pay structure:
- The company is experiencing increasingly poor performance and absenteeism. This may be company-wide or may be seen in certain pay groupings. When employees are unhappy in their jobs or with their compensation, they will tend to work less hard, may be sloppy in their work habits, and may have higher rates of absenteeism.
- The company is getting a significant amount of negative feedback from employees regarding their salaries and benefits.
- It becomes evident that retention rates for entry to mid-level employees are declining. This indicates that the enterprise is not paying employees what they feel they are worth, so employees shop around and then go where “the grass is greener.”
- You have difficulty hiring to fill your positions.
- You have outdated, ineffective, or complicated employee performance review processes that make it difficult to make wise compensation decisions.
- The compensation system does not define a clear relationship between employee performance and acceptable pay scales. This reduces the incentive value of a good pay structure.
- There is inequity in the salaries for similar jobs in other parts of an organization, or in other geographies.
- You are not aware of appropriate market wages for the positions you have in your organization.
- A new competitor in the market may generate the need to re-examine your pay structure to avoid losing employees if the competitor “raises the compensation and benefits bar.”
The Benefits of a Good Pay Structure
When you re-examine your pay structure and create a more positive structure, you can experience the benefits of greater employee engagement and motivation, a more open and trusted environment about pay and benefits, a better way to treat all employees more fairly, and a better way to manage payroll budgets.
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