Developing a pay strategy will:

clearly articulate what value is required,

define how value will be generated and will be shared among those who contribute to its creation,

highlight misalignments in expectations among incumbent and prospective employees,

and help address issues proactively.

Address remuneration with acumen and consistency

By way of illustration, remuneration strategies that drive client acquisition differ from strategies intended to drive better service or expedite product innovation. Too often leadership simply reacts to the challenges, implementing initiatives that they might later regret. The annual bonus, for example, could later result in a sense of entitlement among employees who discount the relevance of effectuation.

Developing a structure removes ambiguity

VisionLink, an organisation that “helps mid-market companies transform employee execution through pay-for-performance strategies” encourages businesses to:

consider how value-sharing plans will be financed,

find a balance between guaranteed and performance-related pay,

review how to address merit- vs. cost of living increases,

and determine what emphasis to place on short- vs long-term value sharing.

How performance translates into rewards should be clear to your employees. What they’re being rewarded for and how success is measured should be transparent. Consider the timing of rewards, a more immediate response to performance promotes sustained effort from employees on every level. A structure removes the ambiguity surrounding pay decisions which often leaves employees feeling undervalued and demoralised. You might offer different benefits to different employees based on their needs (often dependent on life stage), competitive offers in the market as well as objectives and resultant behaviours that you would like to drive.

Find out what the market is paying.

Use multiple sources to validate your conclusions. Consider where your company stands in comparison to the rest of the market. Information from published surveys by government and consulting firms will offer a clearer picture of what’s out there. PayScale is an online platform which offers self-reported salary information from people who work in varying industries in different parts of the country. Powered by PricewaterhouseCoopers (PwC), Remchannel’s internet-based remuneration survey caters for “the complexities of various remuneration practices.” Such resources will empower you to develop equitable salary ranges and devise competitive offers to attract and retain top talent.

What else to consider when developing a remuneration policy

Those who set the remuneration framework should be skilled to do so, and additionally boast business acumen. Ansie Ramalho, the chief executive officer of the Institute of Directors South Africa (IoDSA), stresses the importance of those setting the policy possessing the appropriate skills to do so. “They need to understand the dynamics surrounding the performance of the company – not just the financial metrics,” says Ramahlo.

Develop a remuneration framework with an all-encompassing view of the benefits you have in place and the varying options that you have available for employee cohorts. As it provides an overall view of your entire value proposition and allows you to track the impact of changes, you should continually evolve it while maintaining consistency and fairness.