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Reviewing pay and reward
I have been the head of HR for a PR agency for nearly a year. In this new
role I have concentrated on building a systematic and professional approach to
HR. Improved recruitment, appraisal, training and grievance procedures have all
been implemented for the 750 staff and I have defined an HR strategy that
supports our strong employee-orientated culture.
While initially treated with amusement, people are now beginning to accept
that greater clarity is helpful in an organisation that has grown rapidly. But
there is now growing discontent with our pay systems. Despite a culture of open
decision-making, and egalitarian benefits, such as the staff gym and private
medical cover for all, pay levels were set on a personal and confidential
I have analysed the payroll and there appear to be anomalies between the pay
rates for similar roles. And although the annual increase was agreed with the
staff council in prior years, it is obvious some staff have been awarded more.
Similar situations seem to exist with the annual profit-share scheme and the
allocation of company shares.
I raised the issue with the managing director, but to no avail. Now though,
with the downturn meaning that the staff council’s pay expectations are
unlikely to be met, I have got to tackle this issue. How should I proceed?
By Dilys Winn, an HR Director for Gloucestershire County Council
You are right to see the need to tackle the pay arrangements in your company
even though, as all HR professionals know, this is an area with many pitfalls
into which the unwary can fall. Numerous staff surveys suggest that fair pay
and reward arrangements are of primary importance to staff and you have an HR
strategy which is employee-orientated. This suggests the need to bite the
In your brief you do not describe how your HR strategy will support the
agency’s business aims nor do you make reference to the employment market in
which you are operating. However, the market driven nature of your business,
the need to combine creativity with customer focus together with a tight market
for the sort of talent you need to attract will influence the options available
I would suggest that you consider taking the following five steps:
Step 1 Build your business case for taking action, demonstrating how
it contributes to the HR Strategy (and therefore business objectives) and set
out the risk of not taking action. This must include the need to comply with
equal pay legislation as well as demonstrating the negative impact that the
current situation will have on morale and, subsequently, retention rates.
Step 2 Since you are likely to need to fall back onto a job
evaluation scheme, do your homework. Schemes vary and some are better than
others at reflecting job flexibility.
Step 3 Conduct a full review of your pay and non-pay rewards. Develop
a set of arrangements which once you have built a secure, equitable pay
structure will allow you to promote the right business environment by providing
opportunities to match market rates and pay for added value and performance.
Avoid reaching for a traditional performance-related pay scheme until you have
explored all the options. Finally, make sure that you are getting the most from
the non-pay benefits you outline in your brief.
Step 4 Make sure the work you have done so far, particularly on
appraisal, supports your proposals.
Step 5 Don’t overlook the process you use to undertake the review and
do introduce new arrangements. Make sure the process reflects the culture of
your organisation, giving opportunities for managers and staff to be involved
in the early stages.
By Duncan Brown is Assistant Director General for CIPD
This company is at a crucial stage. It needs a more strategic, organised
management and reward approach. Yet unthinkingly importing ‘big company’
systems would damage the informal, engaged culture at the heart of its
Step 1 Convince the managing director and management team to
undertake a low-key rewards review. Highlight the risks to the business – of
pay inequities, loss of key staff, absorption of management time – if these
issues are not ‘nipped-in-the-bud’.
Step 2 Work with the members of the management team to define reward
goals and priorities. What is the reward ‘deal’ they provide to staff? Where do
they want to sit in the external market? What emphasis do they want on
collective versus individual performance? Are shares available and what’s the
best means of using them? There are bound to be individual differences, but
work to develop a shared view of what’s best for the business.
Step 3 Assess the extent to which these goals are being achieved.
Review reward effectiveness from three perspectives. First, what is the
business impact – what are the risks and costs, say, of an equal value claim?
Second, how do you compare with reward levels and practices in relevant
organisations externally? Third, what do the staff think? Run some focus groups
and discuss the current strengths and weaknesses with the staff council.
Step 4 Consider alternatives and develop schemes to better meet the
strategic goals. Some form of simple job comparison, loose pay structuring and
defined bonus scheme may well now be required. Reinforce the strengths of the
current egalitarian approach to benefits. Discuss the pros and cons of changes
with the management team, and keep involving the staff council as you finalise
the reward strategy.
Step 5 Allow plenty of time to detail, test, communicate and
implement the new arrangements. Ensure managers are trained to practice them as
intended and give them the support they need. Put some form of review mechanism
in place, so that you can assess success and ensure rewards continue to be flexible
in line with changes in the organisation.
How the forum works
The HR Strategy Forum, which is
supported by some of the industry’s most experienced people (see below), is
Personnel Today’s major new initiative to help readers become more strategic in
their day-to-day operations.
Over the coming months, Personnel Today will give a unique,
developmental opportunity to hone your strategic skills using a wide range of
HR scenarios submitted by senior HR professionals. Each week, our panel of
experienced practitioners and consultants will provide solutions to a typical
strategic HR dilemma. You can get involved by sending in your own problems,
marked ‘strategic dilemmas’, to email@example.com
Duncan Brown, Assistant director general, CIPD
Paul Kearns, Director, PWL
Jim Matthewma,n Worldwide partner,
Mercer Human Resource Consulting
Andrew Mayo, Director,MLI
Louise Allen, Director, LAPartners
Penny Davis, Head of HR operations,
Marie Gill, Head of organisational
Neil Roden, HR director, Royal Bank
Ralph Tribe, Vice-president of HR,
Dilys Winn, HR director,
Gloucestershire County Council
Margaret Savage, Head of HR strategy,