Remuneration Advice for EOFY 2022
Written by Nathan Morihovitis, HR Consultant at Melbourne HR
The month of June has arrived, meaning business owners and Australian workers alike have just one thing on their mind – the End of Financial Year (EOFY).
For employers, this is typically a time to focus on your finances. You might find your to-do list looks something like this:
Bookkeeping
New award rates (July 1st)
Tax returns
Cash flow statements
Planning for the new financial year
But once you have finalised your annual budget for the new financial year, what’s next? My recommendation is to review your remuneration strategy.
Today, I’ll take you through 4 of my top remuneration tips, including:
Importance of Salary Benchmarking
How to approach Employee Pay Rises
Performance Appraisals v Pay Reviews
How to incentivise your employees
SET YOUR BUSINESS UP FOR SUCCESS IN THE NEW FINANCIAL PERIOD
Book an EOFY Compliance Review with Melbourne HR
Remuneration Tip #1: Understand the Importance of Salary Benchmarking
A common mistake from business owners is under-appreciating the importance of salary benchmarking. So, what is this and why is it so important?
“Salary benchmarking is a method of comparing salaries to competitive companies to help business owners understand their job market and to establish competitive pay and benefits for their employees.”
When conducting your salary benchmarking report, some important factors to consider are:
Industry
Geographic location
Size of the company
Cost of living
With ongoing staff shortages and a lack of people applying for jobs, employees have all the power in the current labour market. And with this power, comes an expectation that your employees will research their worth and request pay rises/bonuses. Conducting a salary benchmarking report will ensure you are on the front foot of these conversations.
Benchmarking is not only important in relation to pay increases, but it also helps attract and retain talent. A competitive pay structure can ensure your top employees feel valued and aren’t tempted to stray elsewhere.
It is said that remuneration represents the largest financial investment that a small business will make yearly - it is crucial that you get it right. This EOFY, identify the salary benchmark for your employees and see where changes can be made. Remember, there is more than money at stake and undervaluing your employees can cost your business its top talent.
Renumeration Tip #2: How to approach Employee Pay Rises
I want to dive-in to two different approaches you can take when offering pay rises to your employees.
The first approach is a scheduled pay rise, which is offered over a specific time frame, i.e. every 6 or 12 months.
Whilst every employee’s situation is different, there are regular milestones in which you can schedule these pay rises. For instance, as an unwritten rule, it is common to give pay rises every new financial year. Other examples can include employee work anniversaries, or reaching quarterly, half-yearly or yearly KPS’s.
The second approach is an ad hoc strategy, which doesn’t rely on previous planning, demand, or scheduled time periods.
A common example of an Ad Hoc pay rise is performance. You notice an employee has been outperforming their colleagues for months, with exceptional improvement and progression. This is a perfect time for a discussion and ultimately an on-the-spot raise. Providing this immediate feedback provides positive reward for their hard work and keeps other employees on their toes.
Whichever approach you choose to take, the key element for success is consistency.
A lack of scheduled or ad hoc pay rises can leave employees feeling undervalued and overlooked for their work. Employees asking for a raise may not seem like a bad thing, however it could be an indicator that they are feeling overlooked for their work and might be considering leaving your business.
Stay on the front foot and ensure pay rises are something you are constantly reviewing and thinking about. A good start could be using this EOFY to conduct a company-wide analysis of your top performing employees, and proactively plan your pay rise approach.
EOFY: HR Checklist
Download your free copy and set your business up for the new financial year.
Remuneration Tip #3: Performance Appraisals vs Pay Reviews
For most people, EOFY marks the start of calculating and reassessing your employees’ salaries. This is generally conducted through a sit-down meeting with each employee, held annually, to assess their performance through ratings and short answers to determine their increase financially.
My opinion? This is not a good system.
A common question my clients have, is how performance appraisals can be decoupled from pay. If feedback is linked directly to pay, this can somewhat disgruntle the employee. An annual performance appraisal should be focused on professional development, rather than purely monetary rewards.
The answer? Separate the talk on performance and salary.
Feedback shouldn’t be restricted to just one meeting per year. Going into the new financial period, try separating your performance reviews into a quarterly or continuous approach (read more in our blog: HR Trends for 2022).
As for pay reviews, make sure your employees have a good understanding of how bonuses and raises are calculated and offer this incentive as it is earnt.
The importance of these two review processes are too critical to blend together and can lead to disgruntled employees and conflicting feedback. As you calculate your employee’s salary for the upcoming year, separate these two functions by at least a few weeks apart.
Remuneration Tip #4: How to incentivise your employees
As an employee myself, there is nothing better than receiving incentives from your boss (free lunches & shoutouts, what’s better than that!).
Incentives can come in the form of praise, recognition and/or some sort of compensation. And the benefits of these incentives are limitless, including overall motivation increase, higher morale and better functioning teamwork, just to name a few.
But where should you start? Is a monetary bonus always the best incentive?
The starting block and most important part of any incentive is to recognise employees for exceeding your expectations. What have they done well, how much improvement have they made? It’s important to let them know why they are receiving an incentive. Everything has a reason behind it.
In terms of what type of incentive to give, this is completely up to you. Remuneration rewards are the most common type and are generally well received by employees (particularly around the holiday period).
This doesn’t just refer to pay rises and bonuses, however. Extend your thinking and consider:
Gift card/hampers from their favourite store
Free parking (always a winner!)
Gym memberships or vouchers
Free lunch (my personal favourite)
Tuition reimbursement
Again, the most important part here is to ensure the employee knows exactly why they are receiving this reward. This EOFY, take the time to evaluate who has made the biggest contribution to your business, and how their performance can be rewarded through incentives.
EOFY is the perfect time to reset your HR and consider any changes to remuneration in your business. Whether that is handing out pay rises, preparing a benchmarking document or coordinating separate performance and salary review meetings for the upcoming financial year.
Don’t make the mistake of undervaluing your employees and the importance of remuneration, now is the time to set your business up for success.
You might also like to read:
Contact Melbourne HR
If you need help managing remuneration and performance management for your employees, contact Melbourne HR for a free consultation and quote.
Nathan Morihovitis is a HR Consultant with Melbourne HR.
Edited by Nicole Torrington, Marketing Manager at Melbourne HR.