Using our heads to solve your Reward challenges.
It is that time of year again, and after the National Minimum Wage announcement at the end of November combined with employer National Insurance increases implemented last April, pay review feels like it is causing concern for clients this year. Whilst the National Living Wage did not go up quite as much as feared, the increases for those under 21 were substantive.
Between the Reward Heads team, we have run lots of pay reviews (and have the grey hairs to prove it!) both back in our in-house days and for our clients. So we've put our heads together to think through what our top tips would be. Of course, if you are strapped for resource or don't have the specialist knowledge that we do, we would love to help, so please reach out on rewardsolutions@rewardheads.co.uk
For most organisations, reward spend is typically the biggest cost and base pay is the biggest portion of the overall reward spend. It is therefore essential that this cost is utilised in a way that ensures you can attract the best people and retain them once they are with you.
So, whilst Pay Review is often seen as a dreaded resource hungry and sometimes painful process, it is an essential activity on the reward calendar with a number of purposes and opportunities.
Budgets are being stretched and expected to do more than they have in the past, meaning it is crucial to review where you are now and what you want to achieve out of this year's pay review. There is no one size fits all solution to setting and deciding how to distribute your pay budget, or to help identify how to make the best of the budget for your business.
However, we've previously outlined our 5-point plan to having an effective pay review, this article looks at each of those tips again and what difference they can make in the delivery of an effective pay review.
1. Be sure to have robust insight Gathering insight is a crucial step to inform the budget process and enable you to make conscious decisions about spending your budget most effectively and in the right places. You will need to review a variety of external and internal sources to understand the full picture and any gaps that you may need to address.
Key information from external sources are; benchmark data, how the market has moved, and inflation. Internal insight covers information about affordability, retention, “Hot spots” which are any roles you are struggling to recruit that have key skills, or where there is even an evident premium in the market - so perhaps there isn't a large pool of candidates to recruit from, and your people may be at risk of poaching.
You will also need insights on identifying any risks from an internal relativity perspective too. Your reward principles should detail how you proactively identify and address any inequities in pay, along with how pay is set and increased fairly.
Equal Pay reviews and Gender Pay Gap Reporting are not just for pay review, but there are good opportunities to review and address any issues during this process. Ensuring you have robust insight enables you to identify whether you need to use your budget to address internal or external pay gaps, or to determine if you'll be applying a flat increase across the board, or differentiating pay awards based on individual performance, or any skill-based criteria you may have. The increased NLW will be another external factor that plays a huge part in this process, not just from a cost perspective of those employees affected, but also understanding the impact on differentials and any changes that need to be made as a result. “Having a full picture around the market and internal insight can make sure pay awards are focused in the right areas, which in turn has a positive impact on retention issues, out of cycle pay requests, equal pay and colleague engagement.”
2. Ensure that your internal data is accurate and available We know it's not the most glamorous or exciting job, but there is enormous benefit in investing sufficient time to ensure all data is accurate and any exceptions or anomalies are captured before the pay review process is underway.
This may include you co-ordinating this effort with the wider business or relevant HR team.
Whether your process is managed in a complex matrix of excel spreadsheets or you have the luxury of an online tool, the data is always the part that can cause the biggest headache. Whilst technology can certainly help the process, it will still require the base data to be accurate, otherwise the benefit of the technology is lost, along with valuable time.
And ultimately of course, if you are not checking your data is correct you may well find that your conclusions and action plan may not actually be the correct course of action for your organisation.
3. Plan, plan, plan A detailed project plan is pivotal for a successful pay review process. Starting with the end in mind, and mapping out all the key milestones, and when you need input from other people and teams.
Share this plan, make it available to all of those involved in contributing to the plan, and when delivering the plan use it as a reference to keep everyone updated on where you are.
Make sure that those contributing to the process understand exactly what is wanted, in what format and by when - you may struggle to find the time to explain when you are on a burning platform of delivery timescales.
Pay particular attention to those that will need to approve or sign off on a phase of the plan - are they available, is it in their calendar, do they know that this is a time critical process?
Make sure, from the very start, that time and resource are built in for; modelling, data accuracy validation, time for approvals, resolving queries, and not forgetting the importance of communication and allowing sufficient time for this.
Communication is vital, but often planned as an afterthought, and attempted at a time of peak workload, and therefore often rushed. This can result in the message landing incorrectly, or a lost opportunity for reminding employees of the organisational strategy and goals, as well as other elements of the Total Reward Package.
Also don't forget to make the communication as simple as possible, you may be totally focussed on delivering this process, but it is just a part of others workloads. Jargon and overly complex written documents can be real barriers to the message landing well.
If you can, get a non-Reward or non-HR person to review it and see if it makes sense.
Think about all stages of communication in the project plan, and the steps for ensuring Line Managers have what they need to be able to have a conversation around performance and reward with the colleague in advance. This means that the physical communication is confirmation of that conversation.
Lastly, check with your comms team, or other areas of HR and operations - are there any other big messages likely to be communicated at the same time? These can drown out your communication, so you may need a different time line.
4. Give yourself as much time as possible “I have not yet been part of a pay review where the washup didn't include the mention: timescales were too tight.” There is often a very small window of time between the budget signoff and the payroll cut off for applying the pay awards. Plan ahead and start early. For many organisations the announcement of the Living Wage rates is used as the start of their planning process.
Working on data in the background can start you on the front foot to get going more smoothly when budget decisions have been made, or even drafting communications for various scenarios so you are ready to drop in the detail when known. The project plan will show how small your window is for certain activities, where there are dependencies, and what can be done early.
5. Engage with all the relevant stakeholders The hard work of making pay review happen often involves multiple people across multiple teams and line managers/leaders, who often have other competing priorities at the same time of year. Engage all stakeholders before the beginning, involve them in the project planning to ensure everyone understands their responsibility and the criticality of keeping to the timeframes, and the potential consequences if they don't. “One consistent theme that has run through the businesses where I have supported on pay reviews that have been successful is that it is seen as a great team effort across all the relevant departments. With stakeholders all fully engaged in the process and aware of their own accountabilities and a joint desire to ensure the colleague is the recipient of a 'right first time' experience.”
Sometimes your stakeholders will disagree, be clear and confirm and communicate who has the ultimate and final decision.
How can Reward Heads help?
A pay review process can be overwhelming, but you are not alone. We have a team full of Reward experts, people who have completed many, many pay reviews at a variety of companies and there are number of ways in which we can support you in relation to pay reviews: Implementing or reviewing a job levelling framework; Benchmarking all roles against relevant market data to identify any focus areas for those furthest from market; Review pay ranges; Equal pay audits; Review of differential impacts based on NMW/NLW; Gender Pay Pap reporting and action planning; Reward Governance; Short term Interim reward support; Reward coaching modules to help build reward knowledge for your team: Coaching
Please reach out on rewardsolutions@rewardheads.co.ukto talk to us about how we can help.