If there’s something we can all agree on when it comes to reward it’s that fairness should be front and centre of all efforts.

Now, what ‘fair reward’ actually looks like in practice is not as clear. This ambiguity is often at the heart of dissatisfaction with reward and the negative impact on employee engagement that comes with it.

In this article we share some ideas on how to make sure fairness is a core part of your approach to managing reward and recognition.

Setting the context for fairness

‘Fairness’, be it in reward or any other domain, can mean different things to different people. Whilst a dictionary can provide a common definition, the application of this concept to a reward framework can take on different forms.

That is why it is very important for organisations to provide a clear view of what ‘fair’ means in the context of reward. Otherwise, each employee will make a judgement on the fairness of reward based on their own perception of what is – and isn’t – fair.

The first step is to agree on a clear philosophy and guiding principles to underpin reward. Organisations need to explore and decide on what it is that they wish to reward and the main criteria they will use to determine reward outcomes.

Then, organisations should consider how the different features of their reward system are going to reflect this philosophy and principles. How will you manage the annual pay review? How do you set salaries for new hires? What should the benefits package look like? What role do incentives and recognition have to play? How does this all fit in the wider Employee Value Proposition? Etc.

Finally, and often overlooked, is the communications strategy. No matter how great your reward strategy is, if employees can’t see it – nor understand it, your efforts will have a very limited impact.

Testing for fairness

In our work with clients we always seek input from management, employees and other stakeholders on what fairness means to them in the context of reward.

Whilst this question triggers many different answers, we have seen that there are common themes that can provide the basis to ensure the fairness of your approach to reward. These can be summarised in the following dimensions from QCG’s “5 Cs” reward effectiveness model.

First, there is a need for clarity. Key aspects of the principles, structures and processes used to determine reward outcomes need to be visible to employees and easy to understand.

Second, it is vital to have consistency in the application of these rules and principles across the organisation.

Third, you need to factor in competitiveness. Not in the sense of paying more when compared to similar organisations, but in a wider interpretation that considers the value your employees place in the compensation and benefits package in the context of the wider Employee Value Proposition.

Fourth, there is an element of control i.e. the degree to which employees can influence their reward outcomes through their contribution and performance.

And fifth, congruence through the alignment of reward to the organisation’s strategy and values – and the environment it operates in.

We have found that getting these factors right goes a long way towards ensuring both the perception and reality of fairness in reward– and the overall effectiveness of reward in your organisation.

The next time you’re thinking about how to ensure your approach to reward is fair, dig out this article. We’re sure it will help.

And if you need some expert advice or an extra pair of hands get in touch today.

Juan Novoa, Consulting Lead at QCG - April 2021