In a context of labour shortages, what are the best practices for HR professionals to set wage increases that will not jeopardize the company while not scaring away the best talents?
In theory, one might be tempted to link performance directly with salary increases, in order to reward the best employees and thus ensure that they stay in the company. Geneviève Cloutier, CHRP and partner at Normandin Beaudry, recalls the other criteria to be considered to set the amount of a salary increase:
“You have to take into account the cost of living, internal equity and then the company’s ability to pay. Is it restructuring or growing? It’s very different… the context will have a direct impact on the budget allocated to salary increases.”
Before being too generous, the long-term effects of a salary increase on the employee’s overall remuneration must also be calculated: “If you raise the base salary and you have a bonus that is expressed as a percentage of the base salary, there are two expense accounts that increase at the same time,” explains Geneviève Cloutier. “Added to this is an increase in the costs of disability insurance and life insurance.”
Salary increase: Not the lever generally believed
In addition, it should be known that salary increases are not the only tool available to managers to retain their best people in their company.
“Since the time when salaries became competitive, there are other levers that are much more powerful on employee loyalty,” says Geneviève Cloutier. “Employers can stimulate their employees by improving the company’s business plan, investing in professional development and adopting work-family balance measures.”
What is a competitive salary? “It doesn’t necessarily mean being the highest payer in the industry,” Geneviève Cloutier points out. “You can consult data available for each job title, and you can also rely on what is observed internally. Managers have first-hand information. They know what the workers want.”
Degrees of transparency
What about transparency in all this? Should salaries and salary increases for everyone be disclosed?
“There are several degrees of transparency,” Geneviève Cloutier responds. “Yes, the company’s salary scales can be posted. On the other hand, we rather suggest our clients explain the process followed to determine a salary increase. What criteria have been used, what persons were involved in the process and what are the factors that make a difference? If the employee can have this information, it will already be a lot!”