The Market Makes the Rules for Salary Administration

by on June 11, 2009 · 0 Comment POSTED IN: HR Info Center

Your Salary Administration must meet the demands of the market

The dose of reality regarding salary administration is the following. The market makes the rules. What happens when you try to pay your people below market? Well, the simple answer is your best people leave you. Not all your people. Just your best people. Your worst people don’t have the energy level to interview. And if they did, somebody will notice a giant L stamped on their forehead. Nobody hires your losers. But if your salary administration pays below market, it’ll be your best people that leave you. It costs you time and money to replace them. And here’s the punch line, you have to pay the market to the replacements.

So, you try to get a bargain. Hey, you know, when they interview, they said, they’d take this money now all of a sudden it’s not good enough for them. I gave them a 10% increase during the last salary administration. So, she should be happy with that. If you’re paying them 25% below the minimum, a 10% increase isn’t going to make anybody happy. They’re fools to stick with you.

And you’re fools to do it because you like them, but you’re going to have to replace them and pay their replacement market rate. And by the way, you’re going to have to spend weeks and months training them to try to get them to be half as good as the person that you just lost.

You need to know what the market is. And your salary administration needs to pay people fairly for what they do within that market.

Money may not be the most important thing. But it’s one important thing. And if you get the money wrong, they’re going to leave you. We pay you fairly for what you do. If you can say to your employees and back it up with salary ranges and do this kind of work adequately, I think that’s an adult to adult strategy philosophy for pay. We pay you fairly for what you do. It’s universal. I don’t care how big you are or how small you are. One size fits all. It’s not sexy but it’s comforting.

Companies had to adopt some kind of common-sense way of deciding what’s fair to pay people. And this is the basic strategy they used. It recognizes the necessity to pay the market with salary administration.

Edited Remarks from “How to Drain the Drama from Salary Reviews: A Conversation Roadmap” by Gary Markle

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