The several required factors for annual pay reviews are becoming more complex. How does an organisation balance fairness in the application of pay increases, whilst acknowledging the contribution and keeping pace with market salaries, whilst managing the pay spend? The purpose and approach of pay progression, alongside making the pay pot work, are important to ensuring the pay review provides a clear return on investment.
Pay review and annual bonus review are notorious for being the busiest and most pressured time for HR teams. Working through the pay review process, as well as keeping a company-wide perspective, can be a challenge.
HR will often work with CFOs and Finance Directors closely to identify the basis on which to make pay decisions and identify budgets. An organisation will need to balance factors such as inflation, trends, salary movement in the market, fairness, and affordability for the business. The swiftness and credibility of cost analysis and scenario modelling are important to ensure that an organisation can act with pace and not spend any more time than is needed in preparing for and approving the pay review.
A more strategic and planned approach will free up time to carry out wider analysis, checking for unintended consequences and that the application of pay is fair, consistent, and aligned to the organisations pay philosophy.
Typical steps for an effective pay review:
1. Building a credible business case
Build a picture of the external economic environment, gaining insight into the rate of inflation, cost of living, and GDP. Carry out and understand pay movement and typical pay awards within your sector or location. Doing this provides credible and relevant information for pay pot approval, but crucially it helps with building key messages for employee and line management communication.
2. Influencing the % Pay Pot needed
Ensure the pay review is on a strong footing, by carrying out effective financial analysis, modelling different options and scenarios before deciding on the organisation’s pay review principles. Ensure that any market adjustments or pay differentials are calculated for employee groups - this will enable clarity on the reward stance and pay progression ideals, and that any financial analysis is accurate and focused on the desired objectives.
3. The approval process
Ensure preparation time, be clear on your implementation timescales and approval process, and begin engaging with stakeholders early on. Advance allows user permissions to be set and depending upon the desired process, meaning CFOs can have direct access. Advance allows remodelling to be done quickly to rework figures, which builds credibility and gains immediate agreement.
4. Use Pay Review Insight
Review Advance’s powerful and relevant insights to help guide your decisions reinforce your business case and check for consistency, fairness, and unintended consequences.
5. Communications – never too soon to start
Start the communication programme early, pulling together a plan and identifying key messages. Anticipate questions, focusing on the types of challenges you might face with the pay review. This activity stream is critical but having a clear plan and drafting of any communications early will ensure that communication is accurate and timely and will support successful implementation.
6. Delivering the Annual Pay Review
Make it easy for your line manager to make the right decision and be clear around expectations, providing additional guidance if needed. Advance will provide all the insight and calculations to enable them to visually see the implications of the pay review. By having the tools to hand and clear and firm guidelines for managers, the annual pay review is much smoother, more cost-effective, and engaging.
Managed Annual Pay Review Benefits with Advance
Advance means no more excel spreadsheets, manage your pay review via a digital and collaborative platform:
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Completely configurable to ensure aligned to organisations pay strategy, the simplest to the most complex
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Carry out a variety of scenarios during the budgeting and planning stage
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Visibility to identify pay gaps and check for consistent application
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Leverage pay pot spend and configure to allow for pay distribution to be aligned to policy
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Engaging line managers in the process for approval and for decision if required
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Understand your pay distribution, both from a base pay & total cash perspective
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Ensures a level of rigor to ensure equity, consistency of pay application
Innecto knows what Advance users want from their system: a credible and effortless process that takes a user through a journey from starting to model desired pay review budgets, to running scenarios to understand the potential distribution and identify issues early on, to firming up the settings and budget to running it for real and applying it to an employee’s salary. If you would like a demo of Advance, please email me – sarah.lardner@innecto.com – to arrange.
