It is time to start on the pay increase budgets for next year. I have not been involved for a while, but we are short-staffed, so once again it is down to me. The first thing I do is check in with the providers on when their survey results will come out. While I wait, I start to run some pre-analysis on positions within range to see how much pay equity budget we might need to bring outliers up to the minimum. I also run some gender pay gap analysis. Inevitably, there are bigger gaps there than we could ever afford to fix, but I can at least include those in the lowest quartile in the equity budget as a step in the right direction (as it happens most of them are women).
Smarmy Consultants is the first to produce data. It always intrigues me how this is presented: anticipated increases by country including zeros, anticipated increases by country excluding zeros, inflation, and most intriguing of all: anticipated pay range increases. I need to decide which of the first two is most relevant to use to support my proposed pay budgets. In my mind, those companies with zeros are likely to have some financial difficulties influencing that decision so, really, they do not represent the market as such. I plump for excluding zeros. Still, it irritates me that Smarmy includes this data so each year I must think it through. Surely, the other data set is irrelevant for everyone?
Increased pay budgets
We do look at inflation, but we do not look that hard. The only places where that gets proper attention are countries with hyperinflation, because we know they will be demanding higher-than-average pay budgets. Not that they will necessarily get it, but they might get an allowance if we can get approval. The other weird one is anticipated pay range increases. Again, this seems potentially influenced by so many organisation-specific factors, I do not understand why anyone would use that data. I do know my counterparts in the US base their pay range movements on just that.
I need to get the pay increase budgets signed off by the Higher Beings, our executive management team, before we can go any further. Money is tight this year and I know they will probably limit the amounts. With all the extra we need to spend on equity, we are going to need every penny we can get. As such, I am thinking of putting forward a case to move away from performance-based increases. It would be fine if we had extra budget to pay for the high performers, or at least enough poor performers to pay for them, but those increases end up being funded by the on-target performers.
I put in a call to Oily Oliver from Smarmy Consultants to see if they have any market intelligence that I can use to support my argument. Smarmy produces lots of white papers and special studies on the future of reward, but I have not seen anything recently on this. Indeed, Oliver is not able to help. I am curious to ask him about a general move towards cash compensation in general. Surely, in these times of higher cost-of-living and focus on mortgages, employees must be favouring hard cash over potential pay-for-performance and fancy benefits. Oliver looks horrified. No, he says, if anything incentives and benefit programmes are becoming ever more bespoke and sophisticated. Well, I think, he would say that, wouldn’t he? Where are the consultant fees in hard cash?
Solving equity issues
I will have to rely on our own numbers to support the case. Luckily, Big Bad Boss is also in favour of simplified annual increases because it will reduce our workload considerably. Instead of spending hours helping to distribute a few pounds among the teams, we can focus on making sure as many equity issues as possible get resolved in this next pay round. That, I realise is another case to make to the Higher Beings. After all, all layers of management spend a good two weeks messing about with the numbers before the annual pay review gets signed off. Better use of time and money might be to give some extra budget to the Higher Beings to distribute to a few key players as a special year-end bonus if justified by extraordinary results. That way, they still get to look after their perceived great and good without having to get involved with the pay reviews at all levels. This also works for us because we can make sure that everyone gets the same unless at the top of their pay range, plus some extra to resolve equity issues at the bottom of the pay range.
Of course, there are two other advantages of rewarding performance through incentives rather than cash compensation. Firstly, if someone only performs in one year, the impact is also only in one year, whereas a pay increase has an ongoing year after year impact. Secondly, there is a small saving as any increase in cash has a related increase in cost of benefits such as pension and life assurance. These points are also highlighted in my presentation, though I am not convinced all the Higher Beings will have the mental capacity to take it all in. Harsh to say, but they are only get interested in the impact on their own reward and that of their special friends.
Still, Big Bad Boss goes in with my presentation and he must have done a good job of selling it because we get approval. Now we just have to convince the US to do the same or at least Europe to be different. The conversation will no doubt continue.
Next time…Candid works on more redundancies.
