Compensation & PerksSalary Advice

6+ Salary Issues and How to Address Them

Wages and salaries are considered part of the employee’s remuneration. Wages are frequently regarded as the cost of labor paid to employees in exchange for services provided to the company that employs them. Salary is the term for the payment when the quantity of services performed is impossible to quantify. Typically, payments provided to employees are referred to as wages, and compensation regularly received to people whose production cannot be assessed, like administrative, managerial, and supervisory staff, is referred to as salary. Many variables affect the salary, and most of them are beyond our control.

Ignoring pay concerns at your company can result in disgruntled employees, low morale, lost productivity, and more turnover. To maintain a happy workforce, your Human Resources and/or Salary & Benefits departments must ensure the compensation you provide to your employees is desirable. So how can you find and address salary issues? Let’s find out in this article.

Content list 

  • Internal Equity
  • External Equity
  • Perceived Equity 
  • Executive Compensation
  • Geographic differentials 
  • Rewarding niche jobs 
  • Salary growth

Internal Equity

Internal equity is crucial to the success of your business. Without it, you run the danger of firing staff and being sued. Internal pay equity refers to paying individuals in your firm who hold equivalent roles or possess comparable talents fairly. These covers pay and any additional perks or bonuses with the position. Equal compensation for equal work is a legal obligation in most nations. Equal pay sums up internal equity. Employees with comparable job titles or skill sets are compensated similarly under internal pay equity. Equal compensation may result in a higher salary or even additional job advantages. 

Based on The Equal Pay Act of 1963, you have a legal obligation to treat all your employees fairly and equally. The law made it unlawful to pay men and women employees of the same company different compensation for the same tasks or obligations. Additionally, the statute applies to additional pay and perks, like bonuses.

External Equity

What other companies are ready to pay for the same skill is known as external equity. Therefore, you must consider the overall market and industry when developing your payment arrangements. Paying below market prices will cause you to lose current employees and be unable to recruit new ones. External equity examines how your pay and benefits compare to others in the industry, while internal equity focuses on fairness within the organization. 

External equity contrasts the remuneration in your company with the outside market. You may examine what the external market is paying for comparable jobs in your industry by using external equity. For instance, you can compare your company’s willingness to pay to that of a rival by looking at external equity. Examining external equity can assist you in creating more appealing job offers, pay scales, and wage changes. Not to mention that it can aid in luring in and keeping top talent.

Perceived Equity

It is crucial to consider how employees view internal and external equity levels. Although they may be paid fairly and in line with the market, they may feel underpaid. They might become displeased and less involved as a result of this. 

It differs from person to person how each team member evaluates if their pay and benefits are fair. But typically, these judgments are based on comparing peers in the same profession and sector. So that your staff experiences a deeper sense of connection and loyalty to the company, your HR department must manage employee expectations around compensation.

Executive Compensation

Executive compensation, often known as executive pay, refers to compensation plans created especially for a company’s senior executives, business leaders, and executive-level staff. Benefits, including salary, perks, incentives, insurance, etc., are all included in executive compensation.

Senior management employees and executives are critical to your business because they develop your strategic vision and make key choices. It’s crucial to create the appropriate total pay plan for them to keep them happy at your business. Building executive compensation packages that are fair and satisfy executives and shareholders can be challenging, though. This kind of pay is flexible between the employer and prospective executive and can contradict organizational standards for ordinary employee pay.

Geographic differentials

Geographical differentials are variations in remuneration for comparable jobs based on various geographic areas. Cities, states, regions or territories, countries, etc., are the most common geographic definitions employed. A portion of the base income is frequently added as a supplement to meet the higher cost of living in large, pricey locations like London.

Imagine that some of the team members for your company are located in other locations or even nations. In that situation, incomes ought to be adjusted to reflect the cost of living in various places. This is particularly pertinent given the ongoing discussion on remote labor. Should you consider your employees’ locations when determining their compensation? Why, if so, and why not, if not? How will you explain the differences to your applicants and staff members?

Rewarding niche jobs

It might be difficult for businesses to find acceptable wage ranges for newly developing or highly specialized positions. For instance, how accurately will you measure the value of these jobs without a lot of information? And how will that affect the salary of other employees in the same team or department?

When considering a career route, it’s crucial to consider how enjoyable the work will be for you. There are a few things that most people take into account when assessing whether a role is satisfactory, even though what constitutes a work as rewarding is fairly subjective.

Salary growth

We are in a candidate-driven market where job candidates have significant negotiating power over terms of employment and compensation. Candidate-driven markets arise for a variety of reasons. Still, they result from the increased demand for talent across businesses, particularly those experiencing unexpected profits. 

This market results in big salary gains for job seekers, but it can also be problematic for current employees who experience slower wage growth. As a result, your team will need to decide how frequently and how much to raise staff salaries. Along with ensuring that pay is comparable to that of new hires, you must adjust your salary to account for rising inflation rates.

Conclusion

This article has studied some salary issues and how we can address them. Ignoring pay issues at your company can negatively influence your employees, productivity, and overall earnings. If you don’t offer equal compensation for equivalent work, you could face legal repercussions and a high employee turnover rate if competing companies make more alluring offers. Therefore, you must take action to find and address any compensation issues in your company if you want to maintain the happiness of your team.

FAQs

1. What can you do if the employer is not providing salary or wages?

According to section 2(j) of the Act, an employee who has not received their salary or wages and who is otherwise covered by the Industrial Disputes Act may bring a lawsuit under section 33(c) of the Act in the proper court to recover any money owed to them by the employer.

2. What is pay equity, and why is it Important?

The fundamental tenet of pay equity is that if two people perform equally valuable labor, they should be compensated equally. That implies that the work and skill required for the various roles is equivalent. In the case of a corporation that employs both male and female clerical assistants, for instance, both should be paid equally unless there is a valid cause for a difference. Ability, tenure, qualifications, etc., could all be valid explanations for salary discrepancies. It’s crucial to distinguish between pay equity as a value your organization seeks and pay equity as it is legally defined in the country where you do business.

3. Can feedback helps to resolve salary issues?

Ans. Yes, employee feedback can help identify and resolve some of the salary issues.

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