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Whether you are in the process of researching pay structures or you are actively preparing to implement a new pay structure, there is much to consider before you begin to roll out a new pay system.

Here we outline the key considerations that will help you maximise the effectiveness of the pay structure you choose.

How effective is your current pay structure?

While not likely to apply to start-ups and new businesses, more established organisations would at least have the bones of an existing competitive pay structure in place that should be the starting point of a review. The first step is to decide if you need a new pay structure in the first place.

Conduct a review of your existing pay structure and analyse its effectiveness to determine if a change is currently necessary. Ensure you consider pay grade arrangements and how they measure up against the specific objectives that need to be met. This should also help you to spot any immediate changes needed or areas that should be addressed, which might be achieved either by tweaking the pay structure or by implementing a different approach.

Which pay structure is right for your business?

The best pay structures vary by organisation and industry, so it’s essential to choose one that will provide the most benefit to your business. Of course, once you have completed a review of your current pay structure, you may find that it is still the best option for your business. However, you may discover an alternative or modified version that would prove more beneficial.

Regular reviews of your pay structure are important, particularly if your business is experiencing a period of rapid growth or a large-scale shift in job roles. This is because HR, just like business, is a dynamic area, that is constantly evolving. It’s essential to ensure that you are always getting the best possible benefits for your employees and the company as a whole.

Many different factors will play a role in the final decision-making process, from the size of your business and the number of employees you have, through to your organisation’s structure and current HR systems. It’s best to make sure that you’re fully aware of the specifics of each different option before making a final decision.

At Paydata, we have extensive experience in the field, which enables us to share our knowledge with businesses across a range of different sectors. We have outlined some core points in our guide to the different types of pay structures, which should help you to reach a decision.

Initial planning stages

Once you have decided to implement a new pay structure and chosen the option providing the greatest benefit for the business, much of the legwork will occur in the initial planning stages.

The majority of the following points will be determined by your organisation’s specific policies, but as a general rule, the starting point should be to compile a project plan detailing each step required to achieve the changes that are needed.

Ensuring that the business has a valid, reliable job evaluation method in place enables you to effectively evaluate the comparative value of each employee’s role. It’s essential to make sure that every single job role fits into the new pay structure; otherwise, you may incur multiple issues during the implementation period.

Compiling this data may be a time-consuming task and you will need to assess each job role to determine where it should be placed in the new pay structure, but it will ensure that all roles are accurately captured so that you are ready for implementation. Make sure that you accurately and fairly set pay grade boundaries between each segment of the structure depending on employees’ job titles, regular duties, and roles within the company.

Whether you opt for a broad banding method or choose narrower pay ranges is also a variable that needs to be considered. We recommend basing your decisions on the data you uncover in the initial stages of the process, as there is no one-size-fits-all solution.

Reviewing existing pay structures presents an ideal opportunity to standardise pay structures and reward strategies across the business as a whole – particularly if it is a large organisation with multiple departments or offices all working in different ways. It may be a complex job, but the long-term payoff in terms of organisational culture, employee engagement and transparency around pay makes it worthwhile.

In addition, this is also the ideal time to discuss the new pay structure in detail with key personnel and iron out any initial queries or issues that may arise. It’s important to ensure that senior management is aware, happy and equipped to back the planned changes.

Salary benchmarking and career progression

Now that the initial planning stages are complete, it’s time to begin ironing out the finer details ready to implement the business’ new pay structure.

Salary benchmarking provides valuable insight into industry and competitor pay trends. This gives you the opportunity to offer fair, competitive salaries and benefits packages that are based on your business’ specific sector and comparative job roles.

Paydata’s salary benchmarking service helps you to allocate effective salary ranges to each pay grade or band of your new structure, giving you the tools necessary to reduce staff turnover while increasing employee engagement. Using our service will help you to compare pay and benefits packages within both your industry and the general market. You will be provided with a comprehensive breakdown of the analysis, allowing you to confidently attach competitive salary guidelines to each pay grade.

Another key point to consider is to determine how employees can progress through the pay structure as their careers advance. Setting clear and concise guidelines for this in advance will make sure the specifics of the structure are defined for employees, management teams, and HR personnel alike, ensuring that future transitions can be handled smoothly.

The implementation process

Although this will be largely dependent on factors like the size of the organisation, you will need to agree whether the new pay structure will be rolled out gradually or launched in one go.

Before implementation, it’s essential to outline the new pay structure and communicate changes with all employees. Ensure that everyone understands how and why the change is happening, as well as how it may affect their own salary or benefits package. Again, this will vary from business to business, but it may be sensible to include an appeals procedure for employees to query any specifics.

Regular reviews

As mentioned above, regular reviews and frequent evaluation is needed to ensure that the pay structure is working effectively and that any issues are swiftly resolved. It’s essential to make sure that the business’ pay structure remains fit for purpose, especially if the organisation has recently undergone a lot of changes or has a high staff turnover.

While many businesses employ a yearly pay review policy, there is no one-size-fits-all strategy to suit every workplace. When an employee knows that a pay review is forthcoming, rather than feeling they have to badger the management team to discuss financial matters (many employees would much rather seek new employment than bring this up), this serves as motivation to be seen to be hitting and exceeding targets and expectations.

Build a system to attract and retain

Implementing effective pay structures can prove to be a highly valuable addition to the business. A strong pay system will help you to retain employees, promote career development and boost performance. This can also provide a useful incentive for employees to work towards new targets and aspire to advance within the organisation as they seek to move into higher pay grades. Additionally, offering a fair, concise, and competitive pay structure and salary benchmarking process can help to recruit new talent.

A competitive pay structure will keep your members of staff motivated as they will feel valued by the business, which will reduce your employees’ desire to look elsewhere for other opportunities. When your staff are satisfied that they are being looked after and paid what they feel their job role and responsibility demands, they are more likely to remain loyal to the company. This will also help to attract the best talent to the business, as opposed to missing out to your competitors.

How we can help

Whatever stage of the process you are in, you may benefit from Paydata’s support and experience to ensure your chosen route is successful. Our experienced team can provide reliable advice and professional guidance for businesses planning to evaluate, design, and establish effective pay structures.

For more information about our services or to discuss how our team can help you, simply get in touch with us today.

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