by Rob Sheppard
[Approx 4 min read]
With the growth of large-scale enterprises in the late 18th and 19th centuries, it became evident that large scale [and standardised] practices were needed to help manage ‘human resources’.
One of these practices was a dedicated approach to setting wages and conditions – which also helped mirror the economic landscapes of the business world at the time.
In a post Covid business world, a well-designed remuneration strategy goes beyond simply setting wages and conditions – and now includes broader issues such as work life balance or the impact of the geographic locations of work.
Regardless of your size, remuneration remains a key link to how you compensate performance, foster a culture of fairness – and how you link to your overall ‘people’ objectives such as flexible / remote work and rewards based on shorter term goals.
It starts with knowing you have ‘Job Bands’.
Identifying Job Bands within your organisation offer several advantages for SMEs.
It helps with:
- Fairness and transparency: Ensures employees performing similar roles are compensated competitively.
- Cost control: Provides a framework for *budgeting* and managing payroll expenses.
- Attracting & retaining talent: Competitive salaries within a band make your business more attractive to potential hires and current employees (or at least ‘hygienic’ to the market rates).
Job bands help identify salary ranges for roles that have similar levels of difficulty and responsibility.
The ‘three pillars’ to Job Bands
There are three common components to consider when establishing remuneration bands for your SME business.
- Market rates: Often the average salaries for similar positions in your geographic location and industry.
- Internal Equity: Considering internal factors like experience, qualifications and performance within the company.
- Job Evaluation: Analysing the specific role’s demands, responsibilities and required skills.
Market rates
Large business rely on paid remuneration reports to ensure accuracy, up-to-date data, industry specific data, detailed analysis and trending insights.
If you’re an SME business though, chances are you’re not contributing to or buying these comparatively expensive remuneration reports.
With some assumptions and an awareness of the limitations of the free data however, this doesn’t mean you can’t find some *free* information as the basis for comparing your remuneration.
For example:
- Utilise free salary survey reports from reputable recruitment agencies or industry associations.
- Leverage online job boards to see advertised salaries for similar roles in your area.
- Accessing Australian Bureau of Statistics data
Internal equity
When considering a role’s worth to the business, you should also consider it’s worth compared to other roles within your business.
The last thing you want to do is compare one role to the market and find that this causes a disparity within the organisation as a whole.
The risks of this include:
- Undermining fairness and morale
- Decreasing retention
- Exposing the business to legal issues (especially around gender pay equity in Australia)
- Damaging the overall company ‘brand’.
A simple first step is to look at the salaries of everyone in the organisation and try to broadly group them into your own ‘Job Bands’. Is there a clear grouping of roles according to remuneration that can help you form an opinion on what is a fair salary range?
‘compare a role’s worth to others in the organisation’
Job evaluation
Job evaluation is analysing a specific role using a standardised set of criteria – which in turn creates a quantifiable value that can be compared to other roles within the organsation.
Here are a few of the common job evaluation criteria that will explain this further:
- Knowledge & skills (Technical & Soft): the required level of expertise for the job (e.g. coding for a developer, communication for a customer service representative etc etc).
- Experience: Number of years needed to perform the role effectively.
- Problem solving: Level of independent problem-solving required.
- Decision making: Impact and scope of decisions made in the role.
- Supervision: Level of responsibility for managing or overseeing others.
- Accuracy: Importance of precision and focus in the role.
- Physical demands: Physical exertion or specific conditions required (e.g., lifting heavy objects for a warehouse worker).
- Working conditions: Stressful or challenging aspects of the work environment.
- Influence: Impact the role has on the organisation’s success.
- Output & productivity: Expected volume and complexity of work completed.
A secret last thought – the impact of Covid [still]
A part of designing how you will pay your people should include remembering we’re in a ‘new normal’ that includes cost-of-living pressures and the ways people want to work.
For example, in some industries, we see that remuneration is not as important compared to the work life balance needs of the average employee.
Consider if you are meeting these needs more than your competitors and does this offset not being the highest salary in your industry?
How you communicate that is the next step (and is another article for another day).
And if it’s all still confusing?
Contact one of our team who will be happy to help you navigate these changes- simply click the link below and reach out to us now.