Performance-related pay imposed at Yahoo

Human resources (HR) staff at Yahoo have been told to reduce employee pay expectations as the internet search engine giant focuses on rewarding only its best staff while recession looms.

Rahim Rajan, head of reward at Yahoo Europe, told Personnel Today that many workers will get no rise at all when the 2008 pay settlement is announced in April.

“We are in the middle of a pay review, but a significant proportion will get zero,” he said. “We will reward performance more than normal.

“It is important for HR to bring home the message about performance-related pay, so there is no expectation of us linking pay with inflation.”

Rajan said that although the global economic conditions had not yet led to lower salary budgets, it had focused the company on rewarding its best performers.

Yahoo’s HR team face a challenge dampening pay expectations, as staff have a keen sense of their worth, he added. “I have never worked in any other organisation where it is expected that one in two employees will ask for a salary increase in any year,” said Rajan.

The company has introduced ‘forced rankings’, where managers have to identify who their best and worst performers are.

“The challenge for HR is getting employees to take accountability for their own performance, and managers to differentiate between their relatively strong and relatively weak performers,” said Rajan.

Research released last week by the CIPD found that only a third of the 600 organisations polled had a reward strategy.

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