Seven Tips for Managing Pay in 2016

The Wage Price Index rose 2.3% last year, but for WA private business the increase was only 1.6% according to the Australian Bureau of Statistics. 

WA also bucked the trend for unemployment, with our unemployment rate hitting a 13 year high of 6.4%, whilst nationally the rate is 5.9%.

 So, how are you going to respond if employees are asking for a pay rise? 

Here are my top 7 tips for managing pay and reward in 2016.

  1. Make sure you are compliant with minimum rates in the relevant Modern Award. You may need to take into account: are your employees contracted to work more than 38 hours a week, or evenings or weekends?  Have employees moved up a classification level? Do you wrap Leave Loading into the total hourly rate?
  2. Has an employee’s responsibilities or output changed? It’s a good idea to make sure employees understand that any pay rise above CPI must be justified based on productivity or increased responsibilities.
  3. What is the total reward package. Employees often forget some of the benefits they receive such as car allowance, laptop, phone.  If you offer employees development based training that can be more valuable than a pay rise.  Do you offer a bonus either as a Thank You or linked to profit or performance?
  4. If employees are requesting pay increases, it is good practice to have an annual review. This could be at the start of the calendar or financial year, and is often around Performance Review time.  Having a set time to review pay ensures that some staff are not treated more favourably than others and stops an endless succession to your door!
  5. If you are reviewing pay, a good place to start is to look at the internal relativities between employees. Simply plotting all pay rates on a chart will give you an indication whether the pay and reward is fair.  Everyone on the same level should be earning within a 10% range.  The next level up should be around 20-25% higher.
  6. Building a bonus into the pay and reward package can be good practice. That way the fixed earnings may only increase by CPI, but the bonus earnings will increase if the business is more profitable.  If you are looking at a bonus scheme, you need to ensure that you are measuring and rewarding the areas that are of most value to the  business objectives, and ensure that this is clearly communicated in advance to staff.
  7. You may also want to do a review of the external market to see how you are paying compared to others. This can be a “quick and dirty” review, or more in depth linking into commercial pay surveys.  If you (or your staff) compare with jobs advertised on Seek for example, be aware that the size of your company, location, levels of responsibility and how recent is the data can make a big difference to the results.

Today’s labour market in WA is very different to the boom of the past few years, and that is bringing a welcome downward pressure on wages.  But the old adage still rings true, if you pay peanuts expect to get monkeys!