The cost of living in Australia has been steadily increasing over the past few years, and this trend has only continued into 2023. This has seen the costs of housing, food, transportation, and healthcare increase significantly, and has left many Australians finding it difficult to keep up. Coupled with the Reserve Bank of Australia’s recent decision to hand down the ninth-straight interest rate hike and lift the nation’s cash rate to 3.35%, there is now even more pressure on households that are already enduring a cost-of-living crisis, particularly those households with a mortgage.
With the rising cost of living, a compressed job market and interest rate rise uncertainty, businesses need to be prepared for the inevitable pay review conversation. This can be a difficult and daunting conversation, but it does not need to be. How you respond, anticipate, lead, or led by this, will be the greatest contributing factors to the outcome. Just because an employee asks, does not mean they get. However, be informed, be enabled and be considerate to what outcomes you are seeking.
Having the conversation and creating a positive and respectful outcome for all parties is the goal. To be able to do that well, there are 7 key steps to always being ready for the request “can I please catch up with you as I would like to discuss my salary.”
1.Undertake salary budget forecasting
Salary budget forecasting is essential to help your organisation plan its finances more effectively and allocate resources accordingly. By forecasting salary budgets, your organisation can determine the potential costs of staffing levels and adjust with the intent to stay within budget, meaning that your organisation is better equipped to make informed decisions about workforce planning, including hiring, salary packages, promotions, and other employment related expenses (including development).
2. Review your remuneration structure: To be competitive in this compressed candidate market, it is vital that your organisation’s remuneration structure is in line with industry standards and your employees are fairly compensated for the work that they do.
3. Conduct market research and salary benchmarking: Gather data on industry standards for distinct positions in your company. This will help you determine a fair salary range for each role.
4. Evaluate employee performance: have a fair and transparent way of measuring your employee’s performance. Give them feedback, regularly, and help them understand how they are going and how this aligns with changes to salary.
5. Consider internal factors: Your organisation’s ability to pay, impact on culture and critical retention for business operations are all important considerations to help inform what you do.
6. What is your complete Employee Value Proposition (EVP) (both monetary and non-monetary) and how does it stack up: do you know what your EVP is? Often all the ‘trimmings’ in place, that employers are not obligated to do, are lost in the value equation. Not everyone is going to value what you provide equally, however, when you marry critical roles or hard to recruit roles against what is most important to them, it allows you to make fully informed decisions around any changes. Sometimes, an external pair of eyes can provide insight and clarity around what you could consider.
7. Have a mechanism for review: nothing in life, including business, is static. Make it part of your Talent strategy to periodically stress test your remuneration structure. Does it support your business strategy? Is it competitive? Does it meet the expectations of your workforce mix?
The reality is that you will be unlikely to meet every person’s ideal want, but can we meet what is fair. That is the question to be confident in your answer to and the only way to be confident, is to know your people and know the market.
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