With COVID-19 still weighing heavily on social and business life around the world, it is important not to neglect pay management when thinking of how to survive – and move forward. One scenario we have been hearing reward and HR professionals anticipate concerns the tightening of pay budgets due to the virus outbreak. In particular, the assumption that if budgets are stripped down to the bare bones, any decision around pay is relatively meaningless given the small amounts involved. However, this is not the case. In fact, it is more important than ever to allocate your limited reward budget as effectively as possible – both in terms of where you prioritise pay increases, and the accompanying messages. CONTACT US NOW IF YOU WANT TO DISCUSS HOW TO MAKE THE BIGGEST IMPACT WITH YOUR REWARD BUDGET In these times of crisis, your employees are likely to understand why pay budgets are so small, and give you the benefit of the doubt. However, this benefit will be quickly and significantly reduced if you fall into the trap of assuming it’s not worth thinking of how best to allocate your spend on pay increases. Here are three mistakes organisations could easily make if they do not think carefully about the knock-on effects of giving everyone the same increase:

1. Assuming that differentiating pay is pointless

“If pay pots are so small, why bother to differentiate pay?” The fact that pots are small is even more of a reason to think about which groups of employees you need to prioritise for pay increases, and the messaging behind them. The messages that are sent alongside prioritising pay and any changes to reward structures have a powerful and long lasting effect on employee perceptions of reward. Think about your employees most vulnerable to the current situation. Are your more junior grades, or those positioned at the bottom of your pay scales, protected against a potentially bleak economic picture? Even a modest higher pay increase percentage sends the message that your organisation cares about these employees and is trying to help.

2. Providing little or no transparency of pay.

If employees view pay as opaque or in a ‘black box’, this will add to the sense of frustration around the situation. In the worst case scenario, it may even lead to a perception that the organisation is keeping money aside for other purposes – resulting in a breaking down of trust. Taking the time to ensure your reward structure is easy enough to understand and communicate will make sure your employees feel you are doing the right thing by them – and are not hiding any contingency pots of money to spend elsewhere.

3. Making inconsistent decisions.

In these times, this could be THE most aggravating factor leading to the disengagement of your employees. All judgement calls relating to pay will be under even more scrutiny than normal when budgets are limited. It is therefore important to agree and communicate a clear set of guiding principles to inform decisions, guide exceptions and ultimately increase the consistency of pay allocation. Even in tough times, by having and communicating reward principles, organisations can increase the level of transparency, trust and engagement in reward. Managing reward is, and will be, as tough as it’s ever been in the coming months. However, assuming you cannot make an impact – or do much harm – with a small reward budget is a mistake. It is crucial to get the clarity, consistency and messaging behind pay management right to keep employees engaged with the organisation and allow them to trust in reward. In turn, employees are more likely to continue giving you the benefit of the doubt and believe you are trying to do the right thing. This means your employees are more likely to stay at the organisation and be engaged – which could make all the difference in these unique times. GET IN TOUCH TO DISCUSS THE RISKS AND OPPORTUNITIES AT PLAY Peter Fairchild, Senior Consultant at QCG – March 2021