The what, how and why of pay

| November 14, 2016 | 0 Comments

By Bob Reynolds

You might find the following scenario familiar: you have your school’s latest ISASA salary survey results,1 and you realise you should be utilising this information to adjust the school budget for next year.

However, you recognise that, regarding your current approach to reward, all is not well, as:
• it does not contribute positively towards attracting staff to your school
• your current practice does not provide comfort and gratification to staff members
• it does not meet the employment equity requirements2 that guide management to remunerate work equally or differentiate fairly
• staff members do not understand how pay works.

Improving staff members’ level of satisfaction of pay

One cannot overlook the fundamental nature of pay in relation to motivation and employee attitudes about work. The bottom line is that:
• the employer costs of paying staff members represents, on average, 60–70% of the school’s financial budget
• the employee essentially works for that pay, and whether they are satisfied or dissatisfied with that pay is to view it as a function of answers to three questions asked by staff members: the what, how and why of pay.

The “what” of pay

The “What am I paid?” question can be answered by issuing total reward statements to employees, which detail the financial rewards. The issue becomes more complex when the question “Am I paid enough?” is raised, as the answer depends on a host of factors, many of which are outside an employer’s ability to control.

A given amount of pay is relative, dependent on staff members’ economic backgrounds, family situations, career aspirations, etc. However, staff members will engage in a constant process of seeking out reference points against which they can compare their pay. Essentially, to influence pay satisfaction, we must turn attention to education and communication to enhance staff members’ understanding of the pay strategies and processes that govern and determine pay. Employees will gain understanding and be assured of transparency and fairness.

The “how” of pay

What is required is a clear explanation of the basics of how the school pays staff members. It should be the right of each employee to understand how they are paid. Without a clear explanation of the “how” of pay, some staff members will naturally assume that the school is engaged in a less than equitable practice.

All employees need to be assured that pay is the result of a consistently followed process. The mechanics of this process will involve:
• Job evaluation methodology – this will answer the questions:
How are jobs valued in this organisation?
How does a job get placed into a particular pay band?
• Pay structure administration – this will answer the questions:
What is the job’s pay band?
How are the bands maintained or updated?

The “why” of pay

“Why am I paid what I’m paid?” is a question we can assume is on the mind of every staff member. This means communicating the rationale underlying the school’s reward practice. This begs a discussion of the school’s remuneration philosophy or strategy, an understanding of which is critical to achieve pay satisfaction.

The school’s remuneration philosophy or strategy will provide the framework to build a recommendation and support the school’s overall strategy. To do this, it is crucial to get proper support from all stakeholders. To this end, a reward task force must be created comprising opinion leaders from the board, leadership team, senior management and employment equity committee, and possibly alumni and parent bodies, as well as a reward specialist.

The goal in communicating remuneration strategies will be a better understanding by staff members when they ask questions regarding:
• Target market
How does our school intend to pay compared to the
market?
How does our school define the market for a given job?
• Balance between internal and external equity
Is our school purely market-driven in differentiating pay among jobs, or are internal factors considered as well?
• Role of various financial rewards
What is the role of guaranteed pay?
If variable pay is used, what message is it intended to send?
• Performance measurement
How is performance measured, and how does it influence pay?
What is the balance between individual, team and school-wide measures and rewards?

Even though staff members may not totally agree with the outcome (i.e. their current reward package), what is important is that they understand that this outcome is the result of a consistently applied strategy.

Formalising and communicating formal remuneration strategy clears the path for salary structure and/or budget recommendations.

Developing the salary structure

Once the remuneration strategy is understood, focus turns to the salary structure to identify if and how much of an adjustment is needed. This is the process of benchmarking your school’s current competitive position against the desired target market.

Salary structure adjustments are objective and typically do not require additional consideration above and beyond understanding the market data. The intended purpose of a salary structure is to assist in managing pay in a way that promotes internal equity and external competitiveness.

Implementing remuneration budget increases

Once the salary structure recommendation is completed, it becomes possible to determine what salary budget increases are needed to support the remuneration strategy and help achieve the new pay line or desired competitive position. However, salary budget recommendations can be influenced by a number of other variables. For instance, a school may need to budget more or less aggressively than market data suggests, to regain a competitive position if recovering from a salary freeze or needing to increase compa-ratios.3

Aim for pay satisfaction

The aim is to develop reward philosophies and not just salary scales. A reward philosophy, created and adopted at board level, will establish the goals of the school – whether these be to attract and retain exceptional teaching staff, or to provide for and encourage life-long learning on the part of the school’s teaching staff, etc. It would also establish the strategies to achieve those goals.

It is crucial to get a reward approach right for your school that is kept simple and clearly communicated to all. This will lead to a better level of understanding by all – which, ultimately, will lead to a higher level of pay satisfaction among staff members.

References:

1. To learn more about ISASA salary survey results, visit: www.isasa.org.
2. See, for example: http://www.labour.gov.za/DOL/downloads/documents/ useful-documents/employment-equity/EE%20pamphlet%20opt%20red.pdf.
3. See, for example: https://www.bc.edu/content/dam/files/offices/controller/pdf/ SalaryCompRatio.pdf.

Category: Summer 2016

About the Author ()

News posts added for Independent Education by Global Latitude DMA

Leave a Reply

Your email address will not be published. Required fields are marked *