Among the many subjects that are discussed in a normal day at the office, there is always one that is almost taboo – salary. Colleagues will talk about their work, what they had for tea the night before, where they plan to go on holiday, but very rarely will the subject of pay ever be brought up and, if it does, it creates an awkward and uneasy atmosphere.
Mostly, the reason that an awkward atmosphere is created because it comes to light that there is a disparity between what two workers are paid, even though they do exactly the same job. In an ideal world, everyone would be paid exactly the same, but in the real world it’s simply not the case.
So, what differentiates what one employee earns from the next?
Experience is arguably the most important variable when it comes to working out a salary scale. An employee with 10 years’ experience, one would suspect, would have a higher salary than another employee who has only been in the job for two years.
Some HR professionals compile audits to ensure as equal pay as possible, in an attempt to ensure that there is no disparity between pay between employees. In the modern day, it has also become more important to ensure that there appears to be no unfair segregation, such as sexism, racism or ageism.
While one employee may have more years of experience than another, they may have only recently joined the company. Would they have grounds to expect a higher salary than another employee who has demonstrated years of loyalty to the business?
It is commonplace for businesses to offer loyalty schemes for employees, offering rewards such as pay raises and bonuses, when they reach milestones. Even with this, though, that may not see them match up to the contract that a new, yet more experienced, employee has been brought in on.
It is up to the manager to decide whether experience or loyalty is more important, or whether they are equally as important to the position.
Where experience and loyalty are certainly a key factor in the makeup of what an employee is worth, performance is the main basis for working out a return on investment. For example, if a company has a salesperson on £50,000 a week with 15 years of experience, all of which has been at the same company, but constantly misses targets – are they worth the salary?
The answer is no, because the employee is not performing. If, in contrast, a less experienced salesperson on half the salary is constantly hitting their targets and more, they are certainly worth the investment. Although it is obviously easier to offer a salary raise to the second salesperson, as opposed to dropping the first salesperson’s pay, it does raise an important question – how often should businesses review their pay structure?
Performance should be rewarded, otherwise the company runs a risk of having an employee that feels undervalued that may look elsewhere. This could then leave the business with underperforming employees that have gotten comfortable and lack motivation and ambition.
There are many factors that dictate an employee’s expected salary, and that is before you consider variables such as location, the size of the business and other responsibilities/job titles. Whether you are a business owner or manager that is directly responsible for employees’ salary; it is in your interest to strike the right balance between paying what an employee is worth, while also getting the best deal for the business, thus maximising the return on investment.