Salary Planning in a Changing Economy – How to Manage Macroeconomic Challenges

The past two years have been a turbulent time. Given the changing economy and the coronavirus pandemic, it is relevant for HR and young leaders to understand how salary planning in their companies is affected.

In countries where economic downturns have occurred, employers have no choice but to cut employee wage levels. For example, during the pandemic, a Washington Post study found that workers were “twice as likely to take a pay cut now than they were during the Great Recession, according to analysis by the group. payroll processor data. ADP. Additionally, the pay cuts were spilling over into white-collar industries. Despite these negative statistics, it can be an added incentive to reclaim your company’s salary planning process. If properly managed, it can also help increase long-term productivity.

What are the different factors that determine employees’ salary decisions and how can the information be used to make better choices in this area?

Compensation is at the center of many recruitment and retention conversations. However, the process is not straightforward. Many factors must be taken into account when choosing company and employee salaries.

The first thing to consider is the market rates in your area. Next, establish your budget limits, examine competitors’ salaries, and determine the value of the business. In addition, situational variables such as inflation rates, corporate profitability and economic growth may also play a role. Second, on a more personal level, a company must ensure that a salary reflects the employee’s value and contribution to the company. Finally, decision-makers can break down these individual variables into several factors: skills, experience, work ethic, etc. When it comes to evaluating these unique variables, there is a lot of data available based on people’s skills. This data can help managers make informed decisions and ensure consistency in their salary planning. But, believe it or not, if CHOs and senior managers don’t know how to use it properly, it can be a bad thing. Additionally, some data points are skewed by different metrics within companies.

As a result, many businesses benefit from implementing an HCM system. Commenting on the benefits of HCM solutions, Sougat Charkartty says, “These systems enable visibility and workforce solutions. Managers have direct insight into where money and resources are being deployed, as well as productivity across all departments. »

How do you determine what salary is appropriate for a given position and how do you find the right balance between offering competitive salaries and meeting budget constraints?

Compensation data can be a valuable resource for HR managers, helping organizations benchmark their operations against competitors in the same industry and region. However, while salary surveys and studies are to supplement your internal compensation data, you need to have a clear idea of ​​your market rates to offer the right salary to potential candidates.

Finally, it is essential to ensure that there is no unfair gender or racial difference within your organization, as this opens the door to legal problems.

If you don’t have the budget to compete with larger organizations, you can still offer competitive salaries within your own company by identifying opportunities for cost savings and efficiencies. External software could also help identify these areas. For example, you will allocate more resources to salaries if you promote someone within the organization instead of hiring an outside candidate at standard rates.

Other ways to cut costs and “enhance the employee experience” are flexible work hours and more competitive benefits. These gifts can sometimes be more attractive than just a salary for a long-term employee and, in some cases, replace additional salaries. While HR professionals are often in the best position to identify areas for cost savings, employees can communicate ideas across the organization to inform managers of potential opportunities. One of our previous articles discusses in more depth the importance of an open communication channel for ideas.

What are some of the challenges in setting employee salaries and how can you overcome them using data-driven insights?

When setting employee salaries, HR and managers face several challenges to carefully evaluate the following factors:

• Level of experience – it is not fair to reward someone who has been with the company for years the same as someone a company has just hired.
• Performance gaps – when people try hard but don’t achieve their goals, they often deserve to be paid less than those who outdo themselves.

Using data-driven insights can help organizations better understand these challenges, ensuring that employee salaries match their skills and expertise. Companies can also offer performance management programs to help underperforming employees receive their deserved pay.

This support is possible because the data gives management valuable insight into the salary adjustments needed relative to the market rate. With regard to experience, the use of data-driven insights allows companies to compare the level of understanding between two or more employees with similar skills and different roles within the company. This information allows employers to make adjustments if necessary, so that everyone receives a fair salary based on their experience.

Assessing information against the correct criteria can also help determine if someone is underperforming and why. Employers can also see which employees are motivated by financial incentives and adjust salaries accordingly. This system helps ensure that all employees are paid fairly and work harder, efficiently and accurately.

How does your company insure its employees fairly and what role does data play in this process?

Unsurprisingly, employees want to know that they are being paid fairly, relative to others at your company and others in similar jobs elsewhere.

To combat this, employers can arrange employee compensation in a hierarchy that places higher-level roles at progressively higher pay levels to ensure internal pay equity. Establishing standardized compensation structures helps ensure fair compensation for similar or identical tasks within an organization. Gathering employee feedback on what they value also helps ensure that communication around salaries is clear and consistent across the organization. For example, employee surveys that measure job satisfaction or overall happiness with pay rates can provide insight into whether or not an employee feels they are being compensated appropriately compared to others. in the business. This information gives companies a better idea of ​​where companies should set wages [cio.com]

Are there other considerations when making salary decisions, such as benefits or bonuses, and how can the information help you as well?

Salary negotiations can be complex and involve several moving parts. However, competitive compensation is not always synonymous with funding. Additionally, in a new era of work, companies have shifted to a people-centric style of management – ​​“particularly post-pandemic, where employers have been forced to take a closer look at rewards. As such, there is great consideration for promoting the employee experience” [Sougat Chakravartty, Birlasoft]. This experience manifests itself in different ways in different companies. It could be stock options for long-time employees, health care, or anything a company can offer to promote a culture of wellness. “Companies are being cautious about compensation. Good working conditions, benefits and a strong company culture help combat the problems caused by a fluid economy, as compensation extends beyond salary.”

Finally, employees should be aware of the benefits that are granted to them. These can be offered through an HCM system or a full offer document when onboarded.

About Birlasoft

Birlasoft is a strategic implementation partner working with Oracle. With decades of experience, the team of specialists can help your business get the most out of Oracle HCM and its associated offerings. If you want to know more or make an appointment with one of our specialized experts, visit our website here.