January 2013

Are You Only Paying What You Can Get Away With?



Dear Reader,

I hate to break this to you – the reason why most of your people are working for you is not that they love your organisation or products. It's the salary that you pay them. The right approach to paying people can put you on the road to building a high performance team. Get it wrong and you could find yourself on the path to poor performance, high employee turnover, low morale and declining business performance ...!

In this issue of Pep Talk, we'll look at the problems that can arise from only paying your people what you think you can get away with.

I’ve joined the newly formed ODN Europe, the European chapter of the Organisation Development Network and am looking forward discussing issues such as pay at their conference in April 2013.

 

Best wishes

 

Michelle Prescott


Are You Only Paying What You Can Get Away With?


If your pay strategy is to pay what you can get away with, you're on a slippery slope to trouble in the future. This strategy can save you money initially but it will catch up with you. Will you actually get the skills you need or will you have to settle for appointing people with little experience? If you don’t recruit the skills you need, as the boss, you may well end up doing a lot of the work that your inexperienced staff should be doing. Your time is worth more than theirs, so doing the work yourself will cost you more in the long run.

When someone is less experienced, you may also regularly find yourself putting right their mistakes. What will this cost you? If you're getting less quality and quantity from your employees, you'll spend more on training and resolving issues. Are you really saving yourself that much by paying less, or is it a false economy?

As well as hidden costs and poor performance, a far greater risk can come from legal and operational issues. These could erupt if an employee finds out that they're being paid less than the person next to them, who is doing the same job. Don't fall into the trap of thinking that people don't talk about money or won't ask each other what they earn. I know from experience that they do. You can try to insist on secrecy about pay but if you do, it is pretty much guaranteed to back fire on you.


Same job different pay?

If you're paying different rates of pay to people who do the same job, you could find yourself with two major problems.

  1. You'll probably lose the respect and trust of your employees. Ultimately you'll also lose their services, when they decide that they will be treated more fairly by another employer. As an aggrieved employee is likely to tell other members of the team, then the seeds of mistrust and anger will spread; more people will talk amongst themselves about what you pay them.
  2. If the individuals are of a different gender or race, one has a disability or one is significantly younger than the other, you could find yourself at the wrong end of a discrimination or equal pay claim. This can cost you far more in legal and time costs than it would have cost to pay a market rate salary in the first place.

As well as being emotionally costly and disruptive to your team or organisation, a 'what you can get away with' pay strategy can hit your performance and bottom line. Time and money will be quickly lost – from the cost of recruiting a replacement up to the worst case scenario of the stress and legal bills that come from having to defend or settle a discrimination or equal pay claim. Think carefully before you embark on such a strategy!




How Much Should You Pay Your Staff?


In a future issue of Pep Talk I'll talk more about how to work out what to pay your staff for the best results. For now, if you need more information, you could speak to your professional body, which should be able to give you advice related to pay in your industry. Some of the internet job sites also show salary information, and the larger internet recruitment websites publish salary surveys. The Incomes Data Service website is packed full of useful information on pay in different sectors – go to www.IncomesData.co.uk.




www.personapm.co.uk
michelle.prescott@personapm.co.uk