Confessions of a benefits manager: Candid justifies pay increases


There is always a commotion about something, and this month it is salary increases in India. There has generally been a lot of noise about salary increases globally, but it has really kicked off about India.

We have got a new executive in charge of procurement and, like many of our Higher Beings, Dirk’s opinion extends way beyond his actual knowledge. For some reason, he has taken a dislike to the team in India, and they have really put his back up by asking for a pay rise in line with the local budget. Now, he has been banging on to the other Higher Beings, criticising the reward team for setting over-inflated budgets and creating unrealistic expectations. Thanks.

It is true that India is about the only place in the world still looking at pay increases in double digits, but the reward team didn’t just make that up because we like India. We participated in all kinds of market data surveys, and paid handsomely to both Smarmy Consulting and Hugely Expensive Consulting for the results. So, it was based on hard data. Well, as hard as market data gets, which isn’t all that hard really.

Planning pay increases

Every year, reward specialists like me are asked to stick their finger in the air and say what pay increases they might be likely to give next year. Their answer is a rather unsteady prophecy based on last year, tempered by how the organisation’s finances are going. In the following year, we all set our budgets based on the collective guess, which so becomes a self-fulfilling prophecy. It is a wonder we haven’t got together at a secret conference to determine that reward specialists are the new hot talent, requiring double-digit increases to keep up with market demand. Perhaps we are too honourable for that. Or we know we would get called out. Let’s face it; no one gets het up about attrition in HR.

We have planned a 10% increase in India, because that is what everyone else has planned. I suspect Dirk has a fear of being paid less. This is rife among the Higher Beings. Only the Swiss sales director is exempt because he is paid more than any of them in their own currency. Every so often someone in the US who does not understand local currencies and markets notices this and gets all emotional. Who is this guy, they ask, and why is he paid more than the president? I have spent hours pointing to local market data and reassuring everyone that we are paying him appropriately.

Now, I think that Dirk has seen his local department budget, out of which will come his own increase, and it has pay increases at a paltry 3%. So a buyer in India could get a bigger increase than their manager here. He is quite red in the face with indignation about that. I wonder if he has looked at the actual salaries in India. After all, a 10% increase on a tiny salary is not exactly going to fund a new lifestyle. And, although pay increases in India have remained higher than Europe for quite a few years, they still have a long way to catch up.

Gathering global market data

Big Bad Boss has asked me to prepare a report on pay increases globally. I need to show the absolute latest data for pay increases around the world. The pay increase budgets are based on latest data, I insist. That was last year, so get some new data, he demands.

There is only one problem: new 2020 data does not exist. Survey data gets collected in the spring and results are available late summer. Like us, most organisations have not even decided pay increases for this year yet. Their budgets will be the same as they submitted last year. I can’t exactly make numbers up.

I find the reports we did in preparation for the budget. I have a nice spreadsheet summarising all the survey results by country and employee category. It shows 2019 actual increases and survey data for 2020 forecast. All I do is to change the heading that says ‘2020 forecast’, to ‘2020 latest data’ and I have delivered, quite truthfully, what has been asked.

Pay rises for high performers

Dirk is particularly upset about the merit matrix, which allows managers to plan for two times the average pay rise for higher performers. In India, that means they could get up to 20% while the best in his local team could get only 6%. How can that be right, he almost shouts. Yep. Just as I thought: definitely a case of fear of being paid less.

I am actually on board with him on this point, but for different reasons. In reward, we spend our time trying to make sure that people are paid fairly and consistently and then, during merit planning, biased managers recreate inequities by settling merit increases on their buddies. Those increases in pay continue year after year, accruing more pension and life insurance, whether or not the person continues to perform. Plus, HR and management waste ridiculous amounts of time during the planning process, arguing over who should get what within budget. In most cases, the difference to an individual is so small it is hardly worth the effort. Far better to give a bonus, I say.

I add a recommendation to the ‘new’ pay increase report to merge the merit and ordinary pay increases to a single non-adjustable pay change for each country. If we round overall pay increases down to the nearest percentage, we can create a small saving to fund an additional bonus for the Higher Beings to distribute. I have proposed this before and got nowhere, but I’ve got a feeling this could be a receptive moment. Sure enough, the Higher Beings, including Big Bad Boss, agree. I suspect it is only to keep Dirk quiet.

Next time… Candid considers tax.