How to Connect Work Performance to Salary ReviewApril 27, 2020
Connecting work performance to salary review sounds like a no-brainer. Of course, how else are you going to correctly evaluate your employees concerning pay?
But many organizations struggle with this concept. The process of connecting work performance to salary review is not always transparent. It can also get easily muddled with unconscious bias and bad management habits.
Here, we want to give you helpful information on how to make the salary review process more transparent, why that transparency is so important, and the tools you can use to help you achieve fair salary reviews.
Why connect salary review to work performance?
Work performance and salary review should be connected because you need accurate data from work performance to correctly (and fairly) calculate salary review.
Doing this manually can be a bit of a headache—especially when information and data are stored in multiple places. Performance reviews factor heavily into transfers, promotions, and salary review so it makes sense to connect salary review to work performance in your organization.
To connect salary review to work performance though, it is imperative to ensure you get the performance evaluation part right. Here are some articles to help with that:
- The Performance Management Cycle in 2020
- The Balanced Scorecard: Advantages and Disadvantages
- What is the Future of Performance Management
- Why Your Performance Management Program Needs 360 Feedback
At the end of the day, connecting salary reviews to work performance makes pay processes more simplified and easy within your organization. It also helps to have a system that works and doesn’t require extra cumbersome data finding.
Should performance and salary reviews be transparent?
Both performance reviews and salary reviews should be more transparent. It not only helps employees understand the reasoning and calculation behind their salary results, but it also makes processes and data more visible across the organization. Here are ways to make this process more transparent:
Communicate to employees
One mistake managers make often is assuming employees inherently know why they were given specific results in their compensation. Even if there have been previous conversations with the employee in a 1 to 1 talk, it’s still necessary to have a targeted conversation with them about why they received certain compensation results.
For example, maybe an employee performed well and achieved great results in the organization, but their hard work wasn’t reflected in their salary review. This is because the organization, despite the employees’ performance, suffered some substantial losses and couldn’t fit it in the budget to increase the salary. It’s important to discuss this so the employee knows it was not because of their hard work. A transparent conversation about pay also reduces the risk of the employee becoming disengaged at work.
It is always better to over-communicate than risk leaving things unsaid for the sake of company transparency.
Create salary review roadmaps
Employees should be able to understand from day one how an employer links performance to salary review. Again, nothing should be left to the imagination.
HR departments should work to create roadmaps, documentation, and even scorecards that demonstrate how performance and pay are linked in the organization. These systems and calculation methods should also be shared with an employee during their onboarding process so they have that education and clarity from day one at the company.
Get on the same page with goals
Employee goals can often be very different from managerial goals, which is why it’s all the more important to have these discussions.
What occurs more often than not is that employees haven’t discussed their goals in length with their managers not are they clear on how performance is measured (think metrics).
Furthermore, goals throughout the year are subject to change. Goals change more often than they stay the same. It’s important to have goals at the forefront of discussions and revise goals together as the year goes on.
Establishing a formal process around goal-setting or just prioritizing goals as one of the main talking points during check-in meetings will make a huge difference in transparency.
It’s one thing to have discussions, and it’s another to document important things that were said or milestones that were reached. Proper documentation will also help the staff at an organization more easily recall important information that factors into the performance and salary review process.
The Heartpace tool can help managers and employees record notes and store important information surrounding performance throughout the year. This not only makes the performance more transparent, but it improves alignment and makes overall company processes much more transparent when data is all stored in one place.
Things to consider when optimizing salary reviews
Something many people get wrong is that performance evaluation does not always result in an immediate salary increase. There are many factors to consider in salary review, such as:
- Position responsibilities
- Job title
- Overall company profitability and performance
- Out-of-cycle salary increases
- The market comparison ie is salary perhaps already in line with market
In addition to regular 1 to 1 talks, quarterly review sessions can be beneficial in getting an overview of progress and how to solve any issues experienced.
There are a lot of hidden costs associated with compensation such as retirement contributions, health insurance, and other employee benefits. Smart budgeting allows companies to implement better budget control and identify important markets like gross pay versus net pay. Having smart budgeting as part of salary review helps companies consider non-obvious costs and budget an appropriate amount for salaries.
Smart calculations help in rewarding the right people for their top performance. Having the right tool to connect performance management with salary review helps make calculations easier and will factor in items for consideration.
Things to consider with Heartpace
Heartpace can improve and streamline the connection between salary review and performance review. New Salary Review Module can help your organization to:
- Bring a variety of approaches to different business cases
- Stay flexible and transparent
- Manage salary budget distribution
- Get better clarity around unobvious costs
- Make salary talk more effective with an analysis-based approach
- Combine Performance data with Salary Data for a more accurate salary distribution
Our new module also supports SMART calculations whereby you can use Performance KPIs and use them in formulas to help managers with suggested salary increase distribution. That is a smart solution ;)