For Human Resource departments, the end of the year signals the time for performance reviews and salary planning for the New Year. This can be a challenging time, when the HR team and payroll managers must coordinate their efforts to produce a compensation strategy that helps make the company profitable in the coming quarter.
Salary and pay for performance plans can get a real beating at times, when compared to the earnings produced by employees in the previous 12 months. However, there are some ways to improve your pay for performance strategy going in so that your organization doesn’t have to make any hard choices.
Getting Ready for the Annual Performance and Salary Reviews
A lot of work goes into designing and delivering annual performance reviews that will ultimately lead to manageable salary increases for employees. The key is preparing in advance with a program to roll out each step with management and employee buy-in. Here are some tips to get started:
Tip #1 – Document and Update Current Employee Salaries
Make sure your current salaries position your business for successful recruitment and retention of high performance candidates. Use salary survey data to document and update your salary rates for starting, mid-level, and senior employees.
Tip #2 – Launch an Employee Survey
Gather information from your employees well in advance of any performance reviews with a 360 Degree Survey so that you can gain a better understanding of your salary increase needs. Some employees will be vocal about their opinion on current salary ranges and other perks of being employed with your company.
Tip #3 – Roll out Employee Performance Reviews
Your annual performance reviews can now be rolled out to employees by your management team. Use a simple system for rating employees based on job-relevant criteria and soft skills.
Making Improvements to the Company Pay for Performance Program
Once you have accomplished the above elements, you will be more able to identify the employees who are eligible for performance based salary increases and merit raises. Additionally, your pay for performance strategy should include:
- Measurable goals for employees
A performance system is only as good as employees’ ability to achieve their goals in a reasonable amount of time. You will want to create a performance program that includes goals that relate to the nature of each employee assignment as they align with the organizational objectives.
- Industry standardized salary and benefits
Your pay for performance strategy needs a foundation from which to build productivity and motivation in employees. Therefore, your HR team needs a way to offer compensation that is following current industry norms to avoid losing people to competitors. PayScale.com offers access to current salary and compensation reports
- Meaningful incentives for reaching goals
Pay for performance can only provide value to your company if employees actually buy in to your incentives and compensation schedules. Make the benefits tangible and meaningful for employees, in a mix of cash and non-cash bonuses they will most desire. This could include percentile salary increases, promotions, title changes, business perks, and work environment improvements.
By using the above approaches to your pay for performance plan, your organization can better highlight the best features of working for you. This can increase employee morale and boost innovation because the workforce will be better compensated for their efforts.