Setting Remuneration

A business needs to determine a pay scale that suits their organisation and their goals.  Businesses can take three approaches; 
  • they can lead the market, paying more than average for that industry or role
  • they can pay the market average
  • or they can lag behind and pay less than the market average.  
 
Setting Remuneration – Do you rely on gut feeling?

Payroll can be the single largest overhead for many businesses in the wine industry. Using gut feeling or “the grapevine” to determine remuneration levels is one thing, but reputable market data ensures employers make an informed decision about what they should pay their staff.

When hiring a new employee or embarking on annual pay reviews, how do you know the right wage rate?  Businesses use market research for product development, market/consumer trends and purchasing decisions, but don’t always access data required to make informed remuneration decisions.

Remuneration has to meet many criteria. The pay has to be right to entice a potential candidate to accept a new job offer, and for existing employees the annual review should take into consideration six key criteria:
1. Performance in the job (meeting their objectives)
2. Employee retention
3. Market rates
4. Rewarding longevity
5. Internal equity
6. The cost to the business

It should be noted that any pay review does not have to result in an increase, and that any increase should be linked to performance – of both the employee and the business.

There may be times when most of the workforce will be paid within the band for the role; however there may be certain times when a specialist role in a skill shortage area will be paid well above the market to attract and retain an individual.

Why is it important to develop pay bands?  

Banding enables a business to increase remuneration without overcompensating beyond the acceptable top end for a particular role - eg an employee with some years in a role has received an annual increase year on year.  The employee knows the role backwards and is in fact bored – it’s time for a change. However the pay exceeds the market rate for a similar role and they would have to take a pay decrease to move to a new job.  So the status quo remains.  It’s a ‘no win’ for both employer and employee.  There are other ways that this employee could have been rewarded than by simply ratcheting the pay level up year on year.

Market data ensures businesses are able to manage both internal and external equity.  An employee is more likely to know the wage/salary of a colleague than that of someone in another company.  Employees also perceive to know the basis for remuneration comparisons because they have a better idea of what other employee jobs are and job performance.  This creates a high potential for “I deserve a pay increase”.  Internal equity is managed by paying within the pay band and by rewarding in other ways for performance.

Businesses that have introduced a pay band system are better armed when faced with an employee who feels they are underpaid by not having to rely on gut feeling, and can deal with remuneration questions with knowledge backed up by market data.  

The wine industry has its own specialist benchmark Remuneration Survey conducted annually by Strategic Pay on behalf of New Zealand Winegrowers. Offering detailed remuneration and benefits information for over 30 specialist roles (including wine, viticulture, sales, admin etc.) it is open to all organisations operating in the wine industry. For further information contact Natasha Stone, surveys@strategicpay.co.nz. Telephone 09 303 4045.

We encourage all wine industry employers to participate so that quality data is collected and available.
  

Paddy Battersby; Battersby HR Consulting; paddy@battersbyhr.com ; 09 838 6338

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