REMUNERATION No Single “Ideal Salary” – But five ideas to help create one

Salary packages must be bespoke; tailored carefully to the individual executive’s motivational and aspirational needs.
Last year Management magazine teamed up with Auckland-based remuneration consultants Higbee-Schäffler to survey executives in range of industries and career stages to see if we could find an “ideal salary structure”. More than 500, mostly managers and senior executives, responded.
The responses highlighted both the variety of remuneration practices in New Zealand and the diversity of opinion about what constitutes an “ideal salary”. The research clearly shows that no one salary structure will effectively motivate all employees and support the organisation’s strategy. For some, cash is king. For others, the status symbols of benefits such as cars are the key to turning people on to their job.
The survey, conducted through Management magazine over the 2004 year, questioned reader attitudes toward company cars, incentives, annual leave, performance pay and non-monetary rewards.
The detail that came from respondents allowed Higbee-Schäffler to suggest the approach employers should take when formulating remuneration packages. There are, says director Helene Higbee, five key steps to ensuring an organisation gets the greatest return on its salary bill:
1 Tailor your approach to remuneration and rewards to meet both the organisation’s and the employee’s needs. One size does not fit all! Policies, systems and practices should flow from your remuneration philosophy which supports or reinforces the organisation’s raison d’être. This may include remunerating different employee groups through different means depending on what you are trying to achieve.
Use remuneration as support mechanism to reinforce the organisation’s goals and achievements. While pay does not provide the complete picture on reward and recognition, it definitely sends message as to what is important.
2 Review the structure/components of your remuneration packages. Are the benefits provided valued by staff? Do they reinforce the culture that you are trying to create? What role does variable pay (incentives/bonuses) play in your organisation?
One of the biggest shifts in the structure of remuneration is the cashing up of some or all benefits. Depending on your organisation’s culture and employee demographics, benefits may no longer provide the ‘value’ they once held. Security and guaranteed income are being replaced by the flexibility of cash and performance-related rewards. As the cost of providing benefits continues to increase, it may be prudent to take look at those that are offered to determine whether they still support your business objectives.
In addition, it is worth reviewing the variable pay component of remuneration packages. Does incentive pay play key role? Are there opportunities to design and implement incentives in certain pockets of the organisation, or possibly across the entire organisation?
Review the mix of your remuneration components to ensure the most appropriate balance to support the business.
3 Eliminate those policies or practices that aren’t adding value. Do ‘across the board’ increases translate into better results? Are you getting value out of your job evaluation system?
Many organisations have used internal equity as basis for remuneration decisions. Supply and demand, and understanding the external value of jobs and people is fast becoming more valuable approach to underpinning individual pay decisions.
4 Link pay and performance. Pay for performance programmes are increasing in numbers because these programmes help to focus employee attention on what is important by articulating and rewarding the achievement of goals and/or the demonstration of desired behaviours. They assist in diminishing an ‘entitlement’ mentality and turn pay into ‘rewards’.
Performance-related pay can (and should) be used in both fixed and variable remuneration systems. Increases to salary that aren’t linked to performance or employee contribution rarely provide the organisation with any added value, only additional cost.
5 Communicate the true value of your employee’s remuneration packages. Too often, employees only focus on base salaries. But, the investment in the employee is much greater than just the base salary. Therefore, communicating all remuneration components is an effective way to express the full value of the package, especially when comparing to the external market.

For full details of Higbee-Schäffler/Management magazine Ideal Salary Survey 2004 visit www.management.co.nz or www.higbee-schaffler.co.nz

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