Are you overpaying your employees?

Are you overpaying your employees?

April 10, 2017 Remuneration, Uncategorized

We all know how employee salaries and incentives used to work. Company X would hire John, and they would agree on an annual salary for the position. It was so simple. Each year based on performance, John would receive a pay increase of approximately the CPI increase for that year, and all was well.

Well, it was. Now John’s been working with Company X for 10 years, and his performance is average at the best of times (and quite poor at the worst) – yet he is now one of the most highly paid employees in his position, simply because over time his salary has gone up with the CPI increases.

Many businesses find themselves with employees like John, who are paid more than other (and better performing) employees, simply because of tenure. So what do you do?

The answer is simply to review the way you are incentivising your employees. The ‘good old’ days are gone, and now it’s harder than ever to terminate an employee or change their salary – so the key is to prevent it from happening in the first place.

Incentive schemes based on salary increases are troublesome in a number of ways. Firstly, when you increase an employee’s base salary, you’re also increasing the amount of Superannuation, Personal/leave and Payroll tax you pay too. It just keeps adding up.

What if, for example, instead of continually adding to your bottom line, you removed the expectation of salary increases each year and focused on Short and Long Term Incentives such as bonus payments? The lump sum payment is likely to be attractive to employees, and it allows your business to pay high performers when they perform at a high level, without continuing to accrue more expenses in the long run.

Not sure where to start? Well that’s why we’re here! TalentCode HR are the experts in Incentive and Remuneration change management, so why not call us today on 1300 559 585 to see how we can help you start to lower your employee cost, whilst maintaining high performance!

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