Rising Wages and 9 Other Signs It’s Time to Remove the Sludge From Your Comp Plan (If You Have One)

August 13th, 2014
Written by: Elizabeth Richards

A recent Association Now article titled, Business Economists: Wages Rising at More Firms, talks about “a new survey from the National Association for Business Economics in which more than four in 10 respondents said that wages were increasing at their companies—a big surge.”

From an employee’s perspective, the article states,“What a difference a year makes—especially if you’re looking to get a raise.”

But what about from the employer perspective?  Imagine key team members start asking for those raises.  Do you have a compensation plan that will help you make decisions about what raise—if any—is appropriate based on that team member’s experience, her peers and market comparisons?  If you’re like most organizations, Compensation Assessment and Strategy is a much discussed but often delayed initiative.  Perhaps you developed a comp plan at one time but it’s out of date and therefore useless.

Compensation plans are like the car engine that becomes sluggish and sludgy over time: First, it must be properly overhauled; then it must be maintained on a regular basis.  And like the old engine, the cost of waiting to fix it is always higher.

In addition to rising wages, here are nine some other signs that it is time to revisit your organization’s compensation plan:

1. A competitor has lured away several of your key team members, and the word is that they are offering higher salaries.
2. You have a vacancy that you can’t fill because you can’t offer enough salary and/or benefits.
3. You have not looked at your compensation plan in over 18 months—and you have the nagging feeling that it is disorganized or even “broken.”
4. In attempting to fill a role you haven’t filled in awhile, you are finding you need to pay far more than others at that level in your organization.
5. You wouldn’t be able to explain your compensation strategy to your Board if they asked.
6. A critical employee has asked for a large increase, and you don’t know how to respond or justify your response based on financial and morale implications.
7. There is significant “chatter” in your organization among people comparing salaries, and it has become a distraction.
8. Your leadership team doesn’t know how to respond when employees bring compensation concerns to their attention.
9. You don’t know if what a candidate is asking for is legitimate.

Ideally, you shouldn’t wait until these signs start appearing to assess your compensation.  But practically speaking, if you’ve seen three or more of these signs, it’s time to get your compensation assessment into full gear.