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This podcast is for small to medium business owners. You've got a lot to gain, a lot to lose, and business is tough; there's a lot at stake. Business acumen is what every business owner needs, it will make a profound difference to your business.
This podcast will cover marketing, positioning, branding, lead generation, selling, negotiating, customer service, managing staff, managing finances and accounts and much more.
https://www.businessveteran.com.au/
mark@businessveteran.com.au
Pay reviews - are you prepared?
It's that time of year when you might be thinking about pay reviews. We're coming up to the end of the financial year and is it is not uncommon to align your budgeting with the tax financial year. You can see the benefits, it's a good time to align the timing of any changes to your prices to your clients and your pay to your employees when setting your budget for the next 12 months.
Now pay reviews are not to be confused with performance reviews. Ask yourself this, if I paid my employee twice as much, would they achieve twice as much? I suspect not, and research shows that the best employees outperformed the worst by a factor of 10, whereas the average pay difference is only about 10%. By all means pay your employees far more if you want to, but the danger is that you will become uncompetitive.
Before you meet with your employees, it might be a good idea to talk about common employee beliefs and behaviours.
There are those employees who negotiate (and some will negotiate hard), and those who won't say anything at all. For the ones that are negotiating hard, my tip to you is: don't take it personally. After all they are only looking after themselves which they have every right to do.
For the ones that don't ask at all - beware - if you don't give them a pay review they will eventually leave, or worse, stay with a bad attitude. You don’t want grumbles about pay in the team, it crushes morale and productivity.
Employees have some very strange beliefs about pay. I've come across quite a few including:
If I do my job right I'll get paid more. No we expect you to do your job right.
If my boss likes me I'll keep my job and get paid more. No, the boss doesn't need to like you, she just wants you to do your job well.
If I have large living expenses for example a large mortgage I can use that as a reason to be paid more in my negotiations. Once again no, your lifestyle is not your employer's problem - it's yours alone.
If I'm adding significant value to the business I should be paid more proportionate to the value I'm adding. No you are in a position to add large value because of the businesses structure, strategy and positioning in the market, not because of your own efforts (there are exceptions such as sales roles).
Alright so you've been warned, the employees are going to come in with some strange ideas, let them down gently, or not as you see fit.
OK now for the rules of pay:
Pay for particular role and skill set in a particular industry and location is, a band which had a top and a bottom, typically about 10 to 15% apart
Employees get good pay, you expect good performance. You must not have to pay more just to get good performance. If you do, you're underpaying.
Bonuses must only be for great performance, must be discretionary and occasional.
As mentioned previously pay and performance are not related so don't discuss them in the same meeting. Having said that if the employee is not performing they could be given that feedback prior to any pay negotiations. It will set scene for the negotiation.
Employees are competing with other employees in a market for their skills. That sets their pay range, not anything else. It is well worth reminding employees of this.
You must get pay off the table- the employee must be satisfied with the pay review otherwise you'll have a disgruntled employee which is worse than no employee.
Employees cannot be relied on to keep their pay confidential - you must assume that they share with each other, even if they have signed the contract to keep it confidential.
Pay can't legally go down, so if an employee wants to act in a more senior position for a period, consider using a bonus instead of a pay rise.
There is no law insisting you give pay rises to keep pace with inflation (despite what some employees think). If the business simply can't afford it, or the economy is shrinking, or the employee is not performing, their pay doesn't have to go up.
If you could employ someone else to do the same job for less pay you are paying too much.
And finally, don’t pay below the Award, if there is one. Don’t even think about it. Apart from being unethical, there are now laws against wage theft that could put you in jail. I don’t think there's a danger to listeners of this podcast, but it's worth mentioning for completeness.
So it is well worth educating your employees about pay for a far more constructive pay negotiation. Some talking points I suggest to consider are:
You are in a market competing with other people with a similar skill set - that sets your pay band. If you want to be paid more, then gain skills and/or take on more responsibility which can give you a different or more senior role which commands a higher pay in the market.
We pay you well, we expect good performance. Performance is not optional and not related to pay.
If you find your employee negotiating particularly hard and you feel they are being utterly unreasonable you could say "If the business can employ someone else for less pay, why shouldn't it?" That may reset some of their expectations. Point out that the business is competing in a market for customers. If it pays above market rates for employees, it won't be able to compete, we all go home.
And finally: "Once we've negotiated your pay review, you need to be happy and I don't want to discuss it again for another year. So that's where we need to get to in this review."
So there you have it, hopefully you have some ideas and inspiration to get your pay reviews done. You may feel that they are difficult conversations, but they are necessary and once you've done it a few times, relatively easy. As ever, make contact if you'd like to chat.