Hypothetical Salary Compensation Situations

by on June 26, 2009 · 0 Comment POSTED IN: HR Info Center

How to deal with common salary compensation issues

Here are a few hypothetical salary compensation scenarios:

  • A 25-year old engineer who complains that he’s making only $40,000 when a 55-year old colleague makes twice that. “We do exactly the same job, why should he get more than me?”

    Well, first of all, you never have enough information to decide these kinds of things. So based on what you know, are they doing that exact same job? Maybe, maybe not. Very few people do exactly the same job. He may be older, he may be more experienced. And consequently his performance may be better. If that’s the case, there’s no harm in paying him more than the guy earning $40,000 a year. So it’s really based on performance. If differences in salary compensation equate to the differences in performance, we’re in good shape there.

  • Several employees have been talking among themselves and concluded that at this company, performance reviews are rigged. They are throwing a bunch of negative feedback just to justify low salary compensation increases.

    The company generally has, you know, the company generally has a certain amount of money to spend on salary compensation. And no matter how much negative stuff is put on performance appraisal, they’re probably going to spend the same amount of money.

  • Several managers complain that it’s impossible to motivate and retain their staff unless they can offer bigger raises in salary compensation. This is despite the fact that several salary compensation surveys show that your company is paying employees slightly higher than industry average.

    Well, is this true and is it for these particular jobs that they have in question? The number one thing to look at for turnover is fit with organization. 50% of the turnover rates out there are due to a mismatch between the individual hired and the company and/or the manager. That’s why 50% of the turnover occurs within the first 12 months after hire. So maybe there’s some problems with how we’re staffing in this particular company.

  • A 30 year old marketing manager making $54,000 a year is angry because he only got a $2,700 raise. He’d been hired at age 26 for $30,000. After a stellar first year, he received $10,000 which is 33%. After second year, he got $8,000 which is 20%. After three years, he got $6,000. So every year, his increase is actually going down.

    In these kinds of situations all managers should look at ending salary rather than percentages. Who would you rather be? An employee earning $70,000 getting a 3% raise or somebody earning $50,000 getting a 10% raise? You’re smart people. You picked the $70,000 person getting a 3% raise. You’re really have to focus on what the take home pay is.

  • Edited Remarks from “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Olivieri

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