Passion, purpose and meaningful work are all key ingredients to a fulfilling career. But without the right pay, the equation doesn’t quite add up. Money isn’t just important; it’s the fuel that keeps us all running.
This month, we talked with HR professional, Carlin McRae, to learn more about how performance reviews influence salary adjustments, and how companies determine raises and track industry salary trends. She talks with us about why cost-of-living increases aren’t always as straightforward as they may seem, and how HR helps companies stay competitive in building compensation and benefits strategies that are mindful of employees’ needs.
Q. In your experience, are performance evaluations effective? How can HR managers ensure that performance reviews are successful and where might they fall short?
A. Performance reviews are most effective when they are part of a larger performance review cycle and managers and employees have clear understanding of the performance metrics.
HR teams can help train managers and employees on performance review best practices to ensure positive outcomes. For example, if managers are only providing one performance review to their direct reports once per year, that does not provide adequate opportunity for their reports to make timely change or improvements. It’s critical for managers to develop their communication skills, provide ongoing feedback, and foster rapport with their employees.
Q. How frequently are performance evaluations conducted, and how do they typically influence bonuses and salary adjustments?
A. This depends on the organization, the systems in place, and the allocated budgets. Some organizations opt to separate annual or quarterly bonuses from annual salary increases as a way of delineating organizational and individual performance metrics.
Performance reviews that are based on a rating scale impact the available amount for an individual’s annual salary increase or bonus. For example, if an employee is rated as “meets expectations,” they might expect a 2-5% increase to their annual salary (again, depending on the organization and their systems).
Q. How are salary structures determined within the company?
A. It depends on the organization – some use systems like Payfactors to review and calculate salaries based on domestic and/or global markets. Smaller organizations may use simpler tools like Excel spreadsheets and online research to review employee pay and develop pay bands for positions.
Q. Are you seeing trends in companies adjusting pay scales to keep up with the rising cost of living?
A. I do see this as a growing trend but it’s a tricky thing to adjust pay based on rising cost of living. Stable organizations that have more available discretionary funds may be able to react faster to rising costs of living while others may not be able to make swift changes. This can depend on many factors including quarterly budgets, whether they rely on donation or grant funding, industry stability and customer demand, and employee turnover.
Organizations tend to be judicious about making cost-of-living adjustments because making multiple adjustments in short order can quickly deplete budgets and may lead to layoffs down the road.
Q. How can companies make sure their pay and benefits are competitive in comparison to what other companies in the industry are offering?
A. Research and networking are key. It’s important for benefits administrators and HR teams to consistently review and make suggestions for benefits to be added to plans or for items to be removed that don’t serve their employee base.
Further, it’s important for HR teams to tune into the needs of their employees. For example, the manufacturing industry has the highest levels of suicide and self-harm. How can HR and benefits teams in the manufacturing industry ensure that there are proper channels for employees to easily access mental health support? Or for industries that are trying to increase the diversity in their workforce, what benefits may they consider adding to entice those audiences? Organizations that are looking to recruit more college graduates may consider adding student loan payoff assistance.
There are many other ways to enhance the benefits and perks of working in your organization, including:
* Expanding or changing your bereavement policy
* Adding paid parental leave
* Gym memberships and other health and wellness perks
* Transportation assistance
* Opportunities to work from home or hybrid work
Carlin McRae is a Chattanooga-based professional with a combined 15 years of human resources and operations experience. She has worked in a variety of roles in both the tourism and manufacturing industries. She also serves on the board of directors for the Women’s Fund of Greater Chattanooga, the diversity committee for Southeast TN SHRM, and is the chair of the Leadership Chattanooga Curriculum Committee.