Compensation Is About Fairness and Respect
Money often serves as a proxy for other issues that may be happening in a work environment. That’s why so many people ask for more of it when they feel short-changed in other areas. It’s sort of a “They don’t pay me enough to put up with _________.” (Fill in the blank.)
When people can’t put their finger on other aspects of the work environment that are troubling them, they will often look to pay increases as a short term fix to make up for it. This impact never lasts very long and pretty soon you’re back to your same levels of dissatisfaction.
If you want to create a compensation plan that works for most people, be sure to address these needs identified by authors David Sirota, Louis Mischkind, and Michael Meltzer in their book The Enthusiastic Employee. People want—and expect:
- A decent wage that allows them to live the lifestyle they feel they deserve
- A fair return for the work they provide
- A signal from the organization that it values them
Just a little bit above the prevailing rate does the job
The good news according to the authors is that people are generally reasonable when it comes to pay and do not expect compensation wildly beyond what others receive for comparable work. You only need to pay a little bit above the prevailing wage to create high levels of satisfaction with pay. A small premium above perceived prevailing rates will do wonders for attracting better candidates, keeping the good people you already have, and encouraging people to live up to their above average pay scales.
At all costs, what you want to avoid is the perception that your organization pays slightly below the prevailing rates. When that occurs, you are sending the wrong message to your employees. Now it looks like you are trying to obtain their services at a discount, and are putting your needs over theirs. Don’t be a cheapskate when it comes to compensation. People always have the ability to dial down their work performance to the level they feel is commensurate with the pay they are receiving. You don’t want below average performance. Don’t insult people with below average pay.
What if you are paying above average rates, but nobody thinks so?
First, remember that reality is in the mind of the perceiver. If you are paying slightly above prevailing rates and employees don’t perceive it that way, take a moment to see what you can do to help employees accurately understand the total value of their compensation package. Sometimes employees will compare base pay rates without taking into account the value of other compensation elements such as medical, dental, 401(k)s, etc. Help employees understand how your total compensation package measures up against other companies in your industry and in your area. Make sure that employees understand the total value of the package you are offering. Show people the numbers, and respectfully challenge the misconception that you are paying below industry averages.
Get compensation right and then move on
Finally, once you’ve made sure that you’re slightly above industry averages with your total compensation and that you’ve done a good job communicating it to employees, do everything you can to put the issue to bed and get on with other things. Money should not be the primary reason people come to work. It needs to be a foundation, but it shouldn’t be an incentive in most cases. Pay people fairly and then move on to some of the other items that make a motivating work environment. Remember that compensation is just one of the factors that people look into when evaluating a work environment. Don’t make it the sole focus.