Five Tips - Planning Pay on a Tight Budget

"Show me the money!" When a towel-clad Cuba Gooding Jr. made this demand in Jerry Maguire, he wasn't talking about a 2.8 percent increase to a base salary. But it's all relative,right?

Federal Reserve Chairman Ben Bernanke has spoken and he says that the recession "is likely over." The surveys have spoken, too, and they're projecting merit increases around 3 percent. Both WorldatWork and Watson Wyatt are projecting overall merit increases of 2.8 percent for 2010.

As a self-admitted skeptic, I just want to point out that projected increases for 2009 started out at 3.5%. According to both Watson Wyatt and WorldatWork, actual increases for 2009 came in at 2.2 percent.

The economic tsunami may have lost most of its muscle, but the collateral damage is here for awhile. As a consumer, and a conservative, I'm ambivalent about what some would think are fairly basic, low risk decisions. Should my husband and I trade in his 12 year old gas-gobbling SUV and have two car payments? Or should we stall for a bit? After all, even with 165,000 miles, she still gets the job done.

The comparison may seem trite, but both consumers and businesses are reluctant. So if you have 2 or 3 percent to spend, how do you do it? Here's my shortlist of basic considerations and some simple approaches.

Consider your pay strategy. How does your approach to salary management support your organization and its goals? What do you want to pay for? Is your base pay competitive with the market? Get some competitive data. Can you find and keep the level of talent that you need? Do employees view annual salary adjustments as an entitlement - or do they view them in the context of the value of their role in the organization and the contribution it makes?

1. Identify your key players - these are the people you can't afford to lose. Who do you have to keep and develop in order to succeed? Determine if they're paid at least in line with the market. If not, get them as close as you can as fast as you can.

2. Take a look at your solid performers. If their base pay isn't competitive, consider a phased approach to adjusting their pay to where it needs to be.

3. Realize that pay adjustments aren't required. If you've got average performers whose base pay is in step with the market, the adjustment could be minimal. If you've got people whose performance falls short, why throw good money after bad? Forego any salary increases for employees whose pay is above market. If one of your high performers falls in this category,give them a lump sum.

4. If you have an incentive program in place, shift your pay mix. Put more opportunity in an incentive that pays out only if the organization meets some threshold based on specific measures.

5. Communicate! Help employees understand your approach and show them the value not only of their base pay but their total pay: salary and benefits. Even though they're not "tangible," benefits and other ancillary programs are meaningful to employees and are a critical part of the entire compensation package.

Authored by Sandy Turba

Everyone loves a Top Ten List

Everyone loves a Top Ten List. So imagine my delight when I came across "10 (or More) Things I Hate About Compensation Departments." Having been in the compensation field for the better part of the last ten years, I swallowed hard, took a larger than normal swill of my Starbuck's and prepared for the onslaught.

I won't rehash the list here, but I will repeat reason number 1: the allegation that compensation managers are unwilling to be accountable for anything, even though the combined employee compensation budget is generally the largest single variable corporate expense.
Okay, fair enough. Because when you read the remaining nine or so things that the good Dr. Sullivan hates (Dr. Sullivan is the author of the list), what I believe that he is really saying is what we all know to be true enough: that the compensation function alone can't, in a typical corporate structure, answer to all of challenges inherent in attraction, retention, development, and performance. I'm by no means condoning or condemning compensation departments across our fair country. But what I am saying is the same thing that I've been saying for the last ten years: that compensation isn't just a "science" and that it certainly can't be relegated to a silo.

When we work with our clients to help them understand if their employee pay is competitive, we look to build some business intelligence that reaches well beyond the raw numbers of a salary structure. In truth, the pay rates are the starting point. They represent the proverbial "stake in the ground." We can look at similar organizations in similar industries across the country and pretty quickly tell you if your pay is running with the pack. But really, does anybody want to finish the marathon in the middle of the pack?

Don't get me wrong. I'm not at all suggesting that outpacing your competitor's base pay is the way to win the gold medal. What I am saying is that we need to start looking at compensation as a total approach. How do you develop your people? How do you reward them? What's your compensation strategy? Is it what I like to call "the butts in seats" strategy? In other words, do you provide them with an increase simply for being employed? Are they rewarded more for innovation and risk than for mediocrity? Can your employees even articulate how pay decisions are made? Do they understand the value of their pay? Their benefits? Their career development opportunities? Do they believe they can really influence their opportunity to earn variable pay?

You may not have initially thought that all of these questions were related to compensation. But they are. And if you start asking them, and listening to the answers, I'm betting that you'll see what I believe is painfully apparent to many compensation professionals: that compensation isn't simply one core area of human resources. It is core to the culture of your organization.

Authored by Sandy Turba