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The annual salary conundrum

time sheet, pay, wageThere is an annual expectation that salaries will be reviewed and an annual hope that this will mean an increase. If performance has been good, the increase will be good. If performance is mediocre, at least a CPI increase is expected. And if performance is poor – well, at least the salary won’t go down.

But what happens when a staff member reaches a stage when they are pretty much earning as much as the job can pay? This often happens in the middle of a career – typically when the person is in their late thirties or early forties. Take Peter, a competent merchandise planner who had been doing this job for many years. He was regularly asking for an increase. The fact of the matter was that he was replaceable at a lower salary. He just could not command any more money.

And then there was Scott. He was a skilled buyer and didn’t want to do anything else – but he wanted more money each year. Both these people were in the 40-ish age bracket and this scenario poses a real challenge for retailers.

There is a solution to this potential conflict and that is the example offered by one of the large banks. Staff are divided into two categories – management and non-management. Non-management staff receive an increase each year that is identical to the CPI.

Management staff receive no increase at all. The only way that management can earn more is to apply for a bigger job within the organisation. In other words, the job they are in has a value and that value doesn’t change merely because another year has elapsed.

Under these circumstances, it is feasible to publish a list of every job together with its salary. Everyone then knows exactly what everyone else is earning. With this total transparency, assumptions that a fellow employee is earning more or less are removed, together with any relating resentment.

From the company’s point of view, salary expense planning becomes a doddle. The organisation knows exactly where it stands.

Questions abound. Is this system motivational? Does it encourage people to go the extra mile? How do you reward outstanding performance? Or don’t you? Is it more suited to administrative roles? Does it breed mediocrity? Does the cut and thrust of retail dictate a more lively and competitive environment? Is there a midway solution?

Salary bands are an attempt at a solution so that everyone knows the lower and higher limits. As one’s career progresses and as one reaches the upper limit, maybe it’s time to look for a bigger job.

Stuart Bennie is a retail consultant at Impact Retailing www.impactretailing.com.au and can be contacted at stuart@impactretailing.com.au or 0414 631 702

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