Memory Nguwi
Sometimes both big and small organisations struggle when deciding what salary and benefits to pay an employee.
There are various factors that you need to consider when deciding on what to pay your employees. The primary factors overriding all of them is affordability and sustainability. There is no point in paying employees a salary you can not afford or sustain into the future. Even with such an overarching factor, you need to factor in legal requirements related to minimum wages. Once these big three factors have been taken care of, you need to look at other factors.
As already highlighted above, before you decide to pay an employee or employees, you must decide whether the amounts targeted would be affordable and sustainable going into the future. Several factors need to be considered here. These include company performance, especially profitability and cash flow projections. It is not advisable to pay your staff salaries you can not afford. If you can not afford it, you may need to reduce the number you employ to remain with a sustainable headcount.
Whether you decide to pay a new employee or adjust salaries for your current employees, always check whether you can afford and sustain the salaries into the future.
Like many other countries, lower level staff are covered under collective bargaining agreements for the sector in Zimbabwe. You must check what the minimum wages are before you finalise what you want to pay your staff. Please note that this does not cover managerial employees. Collective bargaining agreements do not cover salaries for managerial employees; their salaries are subject to negotiations. When looking at salaries for NEC employees, strive by all means to ensure that you pay at least above the minimums prescribed by the NEC.
If you can’t afford to pay the minimum wages prescribed, engage your NEC through the DA and seek an exemption. However, please note that such exemptions are not easy to get, and if you get them, they have stringent conditions that are time-bound.
Another factor to consider as you decide to pay an employee is the demand and supply for skills. Employees who possess demand skills, e.g. specialist IT skills, artisans, and many others, may command a premium salary by market standards. Such individuals have bargaining power when they join. Even in such a case, try to negotiate for a lower salary that can be adjusted as the employee adds more value to the organisation. The danger with pegging salaries for new employees too high is that it may turn out that the employee fails to perform when you have already tied yourself into a high salary.
Remember, salaries are easy to give but hard to take away due to contractual issues.
The headache on what to pay an employee is settled if your company has a pay structure. A pay structure shows the minimum, midpoint and maximum salary for each grade. Such a structure has standard principles that must be adhered to, and you can easily follow these. I will illustrate below how to use a pay structure to decide what to pay your employees.
A typical pay structure will be something like what you see below:
When deciding what to pay an employee using a pay structure, the rule is always to pay new employees at the minimum of a grade. However, this rule does not apply if you are about to employ a highly skilled employee with skills in demand on the market. In such a case, you pay the employee close to the midpoint. In this case, you pay close USD387.
The other basic rules in using the pay structure to decide what to pay employees are that; all new employees and inexperienced employees must be paid as close to the minimum as possible. Your good performers must be paid between the minimum and the maximum.
Only top performers with rare skills should be paid close to the maximum.
While the above factors are vital in deciding what to pay employees, many other factors that have nothing to do with job performance are factored in against advice.
Such factors include personal factors such as nepotism, the use of sexual favours to gain better pay and general abuse of pay setting to settle personal scores. Our research shows that such practices are common in small businesses and any other organisation that does not have proper policies guiding pay decisions.
My advice to organisations, regardless of your size, is that you must have a job evaluation system that is used to place jobs into a relative ranking that leads to the development of a pay structure. Get the job evaluation and the pay structure designed professionally.
The job evaluation system and the pay structure systems must all be supported by a sound remuneration policy.
Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm
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