Article: Small Business Pays

Making and communicating good pay decisions

All employers have the same need to make and communicate good pay decisions. These are answers to questions such as: how to define, size and price jobs; how to structure pay; and how to reward performance.

A case in point
Consider the example of civil engineering firm with 10 staff. This is a firm of engineers, senior engineers, office manager, and administration roles. The firm is considering the following questions;

  • Does the office manager job need a degree?
  • Is the office manager role smaller than the engineer role? 
  • Do you pay private sector or general market for the administration roles?
  • What is the median value of base salary and fixed benefits (i.e. fixed remuneration) for the senior engineer job? Or better yet – what do these terms even mean?
  • Do you give the engineers the same annual increase if one performs better than the other?

Important for small business  

There are also added reasons why small business need to make and communicate good pay decisions:

  • Pay is likely to be a very large expenditure item proportionately
  • Everyone knows everyone and what everyone does – so employees are more likely to know what each other earn
  • There is less distance between the people making and communicating pay decisions and the people affected
  • One unhappy employee, or one vacant role, can represent a large unproductive proportion of the workforce

Small business solution

Scale, complexity and resource considerations mean that large business solutions are entirely inadequate in a small business setting. For instance, small business will have no HR department.

The solution for small business can be elegantly simple. It can be as easy as using a benchmark job survey.

A benchmark job survey is a ready reference. For instance:

  • Jobs are sized by job matching. Job matching is the process where an employer’s jobs are matched with benchmark jobs by comparing job code title and description
  • Pricing data is available by quartile, sector, industry, function, revenue, staff numbers and region
  • Base salary, fixed remuneration and total remuneration pricing data, together with benefits analysis, is provided as a guide to structuring pay

Strategic Pay has a number of benchmark reports amongst its offer of over 30 annual reports from a database of more than 160,000 jobs / employees from over 1100 employers from every sector. Strategic Pay’s New Zealand Benchmark Report, for instance, contains detailed information of around 450 different jobs.

A case in point
The pay structure and policy at our engineering firm example might simply be

  • Using this survey and job matching to size and price jobs
  • Comparing with private sector for technical roles and general market for the administration
  • Compare with market median and fixed remuneration (i.e. base salary plus benefits) for each job
  • Subject to affordability, they will endeavour to pay around that mid-point for competent performance, with those new to the role or developing below and those exceeding expectations above

This will enable them to do the following:

  • Talk with the office manager about relative job size
  • Justify the decision to use general market rather than private sector data for the administration  roles
  • Talk with the senior engineers about the value of their “overall package” rather than base salary alone
  • Compare what each of the engineers is currently paid relative to the mid-point for their job

Small business partner

As you can see, pay structure and policy is not only important for large business. Small business has the same need as every business to make and communicate good pay decisions and can less afford to get it wrong. At Strategic Pay we can assist small business with solutions tailored to your needs. Contact us today for a complimentary remuneration audit, or for more information.

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