4 Common Salary Review Mistakes (and How to Avoid Them)April 22, 2021
Suppose you are a manager or HR specialist who has been conducting the same annual salary review process year after year but don't seem to be getting measurable results.
What are you doing wrong? There could be a combination of factors influencing your results; firstly, you may be using a method that doesn't suit your business model. Or you could be using a software platform that doesn't work for your goals, or maybe you're just making some of our top 4 salary review mistakes.
An effective employee salary review process can help you attract, motivate, and retain top talent. To have a practical approach, your process should be fair, competitive, and performance-driven. The following are some top mistakes to avoid when critiquing employees and conducting salary reviews:
4 Common Salary Review Mistakes
We already know that making critical mistakes in salary reviews can be both time-consuming and costly. This often results in the need to spend more money on recruiting and postponing essential projects, causing top-performing employees to become overworked and burned out. The expense of having open positions sit vacant for a long time can be very detrimental to business operations, so employee retention is crucial to keep business flowing.
You can start by drawing awareness of the traditional downfalls common in your average employee performance review process. Employee reviews were created to increase productivity, engagement, and motivation as part of a performance management process. Still, traditional performance reviews aren't exactly hitting any of those marks, and here's why:
So, what are the biggest salary review mistakes?
1. Failing to prepare throughout the year
One of the most prevalent mistakes managers make is not preparing enough and treating the review more casually. A useful review should provide helpful feedback, encourage open discussion, communicate the expectations of an employee, and put in place future goals.
Of the American Productivity and Quality Center (APQC), Elissa Tucker claims the secret to useful end-of-year reviews is to "lay the groundwork throughout the year."
Preparing for an effective salary review means clearly defining your employee's performance goals, scheduling routine check-ins to update performance goals, and having informal conversations with employees as often as possible to recognize small accomplishments and open the door for questions. Only after preparing in this manner would it be appropriate to increase or decrease the employee's compensation as you'll have a good understanding of their work and their work ethic.
2. Not being transparent
Tieing into the previous point about being prepared, being transparent is the key to a successful salary review. The employee will most likely want to understand why their compensation is changing, and as a manager, you will need to bring evidence to back up your decisions.
A salary review process should be transparent and well-documented. A study conducted at the London School of Economics and Political Science found a fair degree of consistency between individuals when judged on different factors from one appraisal to another. However, when asked to rank factors by importance, answers often varied, with most managers having difficulty explaining their approach to others.
3. Not measuring the critical factors
Perpetuating an annual salary review process that lacks substance is the worst and most common mistake managers and HR tend to make. If your evaluation method isn't producing visible and measurable results, it needs to be changed. A meaningful and quantifiable review process is the difference between having engaged employees deliver a high quality of work rather than a workforce just going through the motions.
Heartpace's Salary Review Module can help you get the tools to manage salary reviews for your entire organization. You will be able to keep your payroll budgeting under control and work flexibly: distribute predefined budget, work with percentage or use a Heartpace algorithm that will suggest a new remuneration based on data.
4. Being vague
No matter what compensation model you have in place, it should be clear to employees and managers what impact reviews will play on them individually. Managers and employees should go into reviews knowing if they will or will not be discussing compensation and how those decisions are made.
You can avoid all these critical salary review mistakes with a unique tool, find out more information at Heartpace and upgrade your salary review process this year.
How to avoid making salary review mistakes
Not only do low-performance reviews make you look like you don't care, but they can also undermine staff efforts and decrease employee engagement which could make your business run a lot less smoothly. Here's how to avoid making these top 3 salary review mistakes.
• Gather your information in advance
A lot of senior executives consider salary review preparation a significant burden. As I mentioned earlier, underprepared managers and team leaders often create short and inaccurate reports as they complete them in a hurry and don't offer the employee a proper resolution.
• Focus on the positive
Nobody is perfect, and it is natural to notice some shortcomings in the work of your employees. You need to put it in your report and discuss it face-to-face with your colleagues. However, it would be wrong to emphasize only the worst details of their work. Instead, it would be best if you highlighted their positive attributes while giving them an insight into how they can work better to improve their work and increase their compensation.
• Always ask for employee feedback
A review is a two-way process in which you are supposed to talk to your workers and see what should be done better. If you don't ask your subordinates for feedback after salary reviews, chances are you will undermine their work enthusiasm and discourage open and honest communication in the team.
Annual salary reviews are a great way to understand employee needs, but some managers don't take it seriously and make all sorts of mistakes. If you want to avoid this issue in your company, you need to prepare well and understand these evaluations' whole idea.
This article showed you 4 mistakes that you have to avoid when giving annual performance reviews. Keep them in mind and get in touch with Heartpace to find out how our software can help you get the most out of your salary reviews.