First Step Marketing

Gone are the days when you could automatically pass on cost increases to your customers through your product selling price. So it is essential that all increases in wages and salaries are justifiable, properly controlled and if possible self- financing.

Account for the total increase in your wages and salaries bill from one year to another

Many companies find that the total wage bill can increase in a year by an amount far greater than the rate increase warrants. It would be wise to find out why there is such a discrepancy. Of course there are plenty of good reasons for wage drift but you should know what they are and then act to control the situation. The additional cost should be analysed into increases in rates, numbers employed, overtime worked, bonus earnings, changes in labour mix etc by age, grade and so on.

Monitor ‘automatic’ increases

Increases in respect of age, length of service etc are usually cost but nevertheless need controlling. Establish the of such increases and review the policy as necessary.

Manage the annual review

An ‘across the board‘ increase is usually the most straightforward method of dealing with the annual pay round. Apart from the argument over the actual sums, it can be applied with the minimum of effort and fuss. However, a percentage increase on a rate of pay also affects holiday pay, overtime pay, pensions, national insurance etc so, although a simple method, the ‘across the board‘ increase can be very expensive.

Be discerning with the annual review

The annual review tends to ignore the fact that some employees deserve more and some less than others. High performers can in effect be penalised because of low performers who are given the same increase. To compensate for this apparent unfairness, merit rises can be given selectively but the result is that the total cost of the annual review is much higher.

Relate the annual increase to a generally higher performance

Performance related increases are the most cost-effective. If a pay increase stimulates improved productivity and is self- financing you will be more competitive and improve your profit margins.

Assess employee performance

Some company departments contain staff who, being slightly less self-motivated than others, tend steadily to pursue their allotted task without too much enthusiasm and initiative. Unfortunately the manager turns a blind eye and everyone becomes too contented. Nobody recognises the plight of the individual, who gives up trying. So look around — you may have latent talent that just needs encouragement. Convert more of your staff into high performance employees, give them more work and watch them lap it up — they’ll begin to feel important again. Talk to your staff; jointly assess their performance and determine how they can be more effective.

Review incentive schemes

Payment by results methods of remuneration are often open to a little manipulation and, as methods of production change, the ‘incentive‘ aspect of the payments scheme diminishes. So take a look at your scheme: if it has been in use for some time it’s probably long overdue for a change.

Staff participation in the profits of the company

Whereas the sales staff and production workers are rewarded according to their efforts, other staff are often excluded from any incentive or profit sharing scheme. Some form of profit share can be an excellent motivation.

Maintain a fair pay structure

So often we find people in junior and middle management earning less than, say, a production worker on an incentive scheme or a commission earning sales person. Overtime pay for hourly paid staff but not for the salaried production engineering staff or foremen also creates serious injustices which can demoralise someone who has made what is possibly a greater contribution to the company’s results.

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This entry was posted on Wednesday, July 9th, 2008 at 2:22 am and is filed under Business Management, Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.