Find out how you can use this somewhat delicate area to retain your staff and make them feel valued
Does your statement of particulars (employee contract) mention pay reviews? If so, do you have a process or just hope no one mentions it and it goes away every year? As we move into 2017 let’s explore the various elements of pay reviews and how you can use this somewhat delicate area to retain your staff and make them feel valued.
The simplest form of a pay rise comes in the form of the government-imposed National Minimum Wage or National Living Wage. (Nb from 1 April 2017, the National Living Wage is increasing from £7.20 per hour to £7.50 per hour for adult workers aged 25 plus.) Of course, you may have staff on more than the National Minimum Wage, and they may have the clause in their contracts that says they will have an annual pay review. If it does state this, it’s recommended it also says that a review doesn’t guarantee a pay rise and there is no contractual right to an annual pay increase.
How do you handle a request for an increase in pay? Well firstly, asking for a pay rise doesn’t come in a standard format.
Employees can ask for one in person, in writing, or through a chat with colleagues, hoping word passes to the boss. They might drop hints to test the water, threaten to resign if they don’t get one, secure another job or just leave. So how you respond is of the utmost importance, especially if there are key members of staff you need to retain.
It’s a good idea to keep your eye on the market rate for the roles you employ. This of course doesn’t mean the rate you have to pay, but remember the law of supply and demand: if the skills are in short supply, then the skill holder can technically demand a higher rate of pay.
It’s also important to recognise, and encourage your staff to recognise, the difference between the value of the role they perform and the value of them as an individual. The two aren’t the same. There will be a natural limit to the value you can place on a role. This will also be dictated by the staffing budget you have in the business to pay staff.
The key to successful pay negotiations is to have a calm and professional discussion. You may wish to share the market rates; you may wish to discuss the limits of the budget. It may be that the business cannot award a pay increase now but may be able to do so in the future months. Helping the employee to understand the bigger picture is often a valuable exercise.
There are other ways that pay increases can be awarded. You may have performance-related pay. Of course, any increase here is dependent on targets being achieved and there is likely to be an amount of money set aside per employee for the time they meet the requirements.
The overriding consideration to give to any request or eligibility for a pay rise is acting in a fair and impartial manner. If the outcome is likely to be not to the employee’s liking, giving them the opportunity to discuss their request and their reasons is important. You may be able to re-evaluate their role or contribution in the future, which is often an approach that employees respond better to than just being told they’re not entitled to a pay rise now or in the future!
The two key factors in any pay considerations are you must pay the legal minimum rate for any employee or you face a hefty penalty, and you can only pay what you can afford above this. If you’re not in a position to offer your employees a pay increase, be open and honest with them, and you’ll find that those staff who matter are much more likely to stay.
Vicky Stanton is director of HR 4 Your Nursery. She has also set up HR Hub – a one-stop shop for all your people resources (including contracts, letters, policies) online. To be kept up to date, visit vickystanton.sendmedetails.com/teach-early-years.