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Myths About Employee Pay Practices

Topics: Comp Strategy
Not True! 4 Common Myths About Paying EmployeesBy Staff WriterIn HR, as in all professions, there are rules of the road and basic bits of wisdom that most practitioners follow. For human resources professionals, a lot of this wisdom has to do with how people are paid and what motivates them.

Not True! 4 Common Myths About Paying Employees

By Staff WriterIn HR, as in all professions, there are rules of the road and basic bits of wisdom that most practitioners follow. For human resources professionals, a lot of this wisdom has to do with how people are paid and what motivates them.

How do you communicate your compensation plan to your employees? Learn how to simplify your approach in four easy steps by downloading PayScale's whitepaper: "4 Tips for Communicating Your Compensation Plan to Your Employees"

Expert Stacey Carroll recently listed some common tenets of HR practice then explained why she thinks they are untrue. See her collection of myths about employee pay practices below and see if you agree.

From Ms. Carroll:

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1. People work for money. If you’ve worked in HR for more than a year, you’ve heard this idea. It’s false. Money will never attract or retain talent on its own. That being said, how does compensation help with employee retention? Well, first you need to have good systems in place to support your work culture and create a good work place. People don’t leave to earn more money, though it’s often what they will tell you when they are walking out the door. Often times, there is some trouble that is more fundamental and then money becomes an issue later on. As you know, if you’ve worked in HR, it’s usually the employee’s relationship with their manager that is causing them to leave.

2. Pay is going down in the recession. We’ve all heard that. It leads some HR managers to believe that they don’t need compensation tools that keep them up-to-date with the market. But, if you think about it, how can pay go down? We’re not taking money away from people, usually. That’s a pretty dramatic measure. Most companies don’t go there.

The fact is, pay is not going down. The market is moving. We can tell you from PayScale’s compensation data that there are a handful of positions where pay is going down. These are jobs like investment banking, jobs where there are lots of incentives, or jobs in mortgage lending or construction. Those types of jobs are seeing a drop in pay.

By contrast, a lot of jobs have either held steady in pay or are moving up a bit. There are numerous types of jobs in our database where we are seeing pay move dramatically, as in 11 or 12 percent increases. These are mostly healthcare jobs or jobs in certain geographies, like Alberta, Canada and some places in the U.S. The market is moving. If you have frozen pay in the last two years, the market has moved and you have fallen behind. Period. End of story. You may not like that message and you maybe didn’t have anything to do with freezing pay, but that is what happened. If you were online with your compensation strategy before, you are now behind.

3. Employees will never be satisfied with their pay. You hear this myth a lot. “You can never make an employee happy about their pay.” It’s true to some degree. But, you can improve employee satisfaction with their pay by doing two things. And, neither one is to pay them more money.

First, communicate with them. When you communicate about pay with employees, about what decisions are made and how, it drives satisfaction level, even though you have done nothing to change how competitive the pay is. And, that’s the truth. The communication has to be done well and done effectively. But, it is true that good communication drives satisfaction level.

Second, design a pay structure that is fair. The problem that employees have with pay decisions is when they seem arbitrary or subjective, employees do not like it, especially top performers. If there is a pay structure in place and it is based on factors that employees consider fair (and I would consider performance a very fair measure) then employees are going to be more satisfied than having a system where everyone makes individual decisions and no one is really sure how those decisions are made.

4. Access to pay information is limited. I heard a quote recently that said, “Access to information is not a privilege. Nearly everyone in the world now has access to information.” We can no longer pretend that employees don’t know what other employees are paid. The information is out there. They can find it. They know it. So, believing in a strategy where you do what you want to do, and hope that employees don’t find out, is not going to work. Employees know their worth.

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Stacey Carroll
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