Treating people justly plays an important role in developing an engaged workforce. One of the key components of a positive workplace culture is trust. Leaders are in a privileged position to ensure their employees are being fairly remunerated for their skills, experience and contribution to the business. According to Hertzberg’s two factor theory of motivation, salary is a hygiene factor, meaning, if you are not being paid a competitive salary it causes dissatisfaction, additionally recognition and status are motivation factors i.e. getting pay rise to recognise the improvement you have made through the year will increase your motivation.
In effect, if an organisation pays fairly and recognises the contribution of everyone, it will have employees that are motivated by the two factors. Conversely, if an employee knows (or strongly suspects) that they are not receiving a fair salary in comparison to their counterparts it will affect their feeling of being valued (status), reduce motivation and cause friction in the team, resulting in devastating consequences for employee engagement if not addressed.
These are three actions that should be avoided to have a team of fairly remunerated, engaged and productive employees:
1. Rewarding the squeaky wheel
The saying the squeaky wheel gets the oil is all too often the case when it comes to salary negotiation, the employees who complain and threaten to resign are those who are rewarded with a salary increase to retain them. This is sending the wrong message to the team, if you contribute in a negative way to team cohesion by complaining and being disengaged you will get a pay rise. The employees who get on with the work help each other and do not complain are being disadvantaged.
2. Rely on a contract clause to enforce employee behaviour
But my team are not allowed to discuss their salary….seriously…. if you believe that, you are probably looking out the window at a flock of flying swine. Relying on a clause in a contract to mitigate an issue created by unfair management is insanity. A far better approach is to have a team who are remunerated in parity with their peers, recognising different levels of contribution. A fair evaluation and recognising effort and improvement goes a long way to developing an engaged team.
3. Dangling the golden carrot
When recruiting, establish early in the attraction process what maximum salary you can offer someone, considering the market and parity in the organisation. If a candidate is not willing to consider the salary determined, do not take them through to interview, it will only end in disappointment for everyone. If it becomes clear during the process that salary will not attract a suitable candidate and it needs to be increased, ensure this is flagged to be addressed at the next available opportunity to ensure parity. The recruitment process revealed the current employees are worth more in the market and this needs to be recognised for retention.
According to Salary.com’s 2021 Pay Practices and Compensation Strategy survey, 69% of organizations do not believe their employees were paid fairly. Having held roles across a variety of industries and been privy to salaries of staff from entry level to CEO I can assure you that salary disparity amongst colleagues is a real problem in our workplaces and does, without doubt, contribute to disconnection in teams. Coaching on how to remedy the situation has at times been challenging but it is our role as leaders and Human Resources professionals to take responsibility. Do not just look at the numbers, look at the story behind the individuals and critically, without bias evaluate fairness in salary. Not only will it improve trust in the leadership and display that the organisation is serious about living their values, it is ultimately, the right thing to do.