Some companies determine pay rates for new employees on an ad hoc basis. For example, the ideal candidate you want to hire wants $3000 more than another employee performing the same job. You capitulate because you need the expertise. Over time, inequities like this multiply, creating an extremely haphazard and unfair salary structure. The costs of such a situation are critical to your company’s competitiveness. For example:
- Competitors are always looking for good people. If you are underpaying an employee, you risk losing their skills to a competitor.
- Employees can be more sensitive about pay than any other work issue. If they find out that a co-worker is making more for the same work, the problem is serious. It is manifested through gossip, infighting, lower productivity, de-motivation, resentment, vindictive behaviour and turnover.
- There is a high risk for pay equity grievances under the Human Rights Act, which can result in legal costs, penalties and damage awards.
A good salary administration system is central to the corporate health of the company. Objectives and benefits of a good salary administration program are:
- It protects your company from complaints of unfair wages and internal strife
- It also improves employee performance, motivation and job satisfaction
- Employees are more likely to be motivated to achieve organizational objectives
- Attract and acquire qualified employees
- Retain present employees
- Ensure internal and external equity
- Control costs of the labour force
- Compliance with government regulations and human rights legislation
If you are concerned about your organization’s retention practices, an equitable and fair Salary Administration program is essential. Valuable employees are drawn and stay with organizations that recognize and reward employee's contributions.