HR needs processes to make sure that our remuneration is fair, competitive, and right. Therefore, the function must understand every job within the company: what are our different jobs within the company by looking at them separately. But not only jobs, the function must understand the employees who are performing these jobs. Nonetheless, their place within the market.
It is the golden triangle of reward: Jobs, People and Market, which can help HR to enhance the performance of employees and maintain an edge to attract the right talent and keep them motivated not by money but by providing the right platform for them to grow.
Whilst HR must make sure that money must be fair and also competitive, we consider money as a hygiene factor. If the payment is unfair, employees become demotivated. But if the payment is right, employees are neutral, they do not become positively motivated but instead they focus on 6 other major factors.
These factors are: who is your immediate boss is the biggest motivator, followed by: do you love your job? Do you have tangible career opportunities within the next 24 months? Recognition from management? appreciation from your colleagues, do you enjoy a good professional reputation? Money comes number 7.
To understand if money is an issue at your company, you need to measure the percentage of employees who have voluntarily resigned in the past 12 months. If the number of employees who have resigned, divided by headcount, is bigger than 12%, that’s a big red warning flag, that’s a clear indicator that you’re probably paying too low. If the resignation is less than 5% that’s an indicator that you are paying too much and people are trapped.
But if your voluntary resignation is less than 5% and you are still hearing complaints about money, they are not actually about money but they are more about the manager, the boss, the environment, the company. If you’re getting things right, then your voluntary resignation rate should be between 7 to 10% window. That is a very healthy measure.
It goes without saying that top performers will get paid more and new recruits will be paid less. Therefore, not only should we know about each job but also the people who are doing the job and know more about each person’s skills. A good performance appraisal system in which 70% of the appraisal is on what a person has done, and 30% is on how they have done it can help us understand people’s behavior. Do they have the right behaviors? Have they shown the right competencies.
This relationship between jobs and people is often called internal equity: are we treating the people doing similar jobs in a fair and equitable way? Jobs are internal within the company and people and their performance are also internal within the company. But we also have to look externally which is our third factor in the golden triangle. e have got to look outside the company at the external market. We must ask our questions such as: what are my competitors paying for similar jobs? What are other organisations in Saudi Arabia paying for the type of people that I need to retain and hold on to? How profitable is my company? Can I afford to pay the same as other companies? Maybe I can afford to pay a little bit more. or maybe my profits are tight and I have to pay slightly less.
Upon asking yourself the right questions and understanding the three factors of the triangle, you can then come up with a pay strategy that can ensure you are paying fairly and keep the performance of your employees high. So make sure, you analyze and understand and ensure that people are moving in the hierarchy of learning.