Organisations unwilling to attract talent with higher pay

Most organisations are finding candidates scarce, but the majority will not increase their pay levels to attract them, according to Korn Ferry Hay Group research.

For some in-demand roles in Australia employers are willing to pay a salary premium – these include IT, engineering (all types), health/safety/environment, and energy trading, pay specialist Susan Gilbert-Daviestold the Korn Ferry Hay Group 2016 Pay Forum this week.

On the other hand are roles that have "a lot of noise" – meaning they are in demand but don't attract a premium – these include marketing (digital and e-commerce), sales, finance and accounting, and risk management.

The research shows salaries are forecast to increase in Australia this year by only 2.5 per cent nominally and 0.4 per cent in real terms, Gilbert-Davies says.

She says organisations trying to address the candidate scarcity issue by offering more pay can opt for short-term incentives (STIs), higher fixed pay, sign-on bonuses, or additional benefits.

"Some of these items are things that are easy to claw back and some of these items if you put them in place, you will have difficulty removing them as time goes on," she warns, noting STIs and sign-on bonuses are "easier to control".

"We would definitely caution you to think before you do any increases to higher fixed pay as a result of candidate scarcity, and be careful with doing any additional benefits that are difficult to claw back," she says.

Linking performance and pay

Just under 40 per cent of organisations are reviewing their links between pay and performance, the research shows, with the performance management process and the reward-performance philosophy the main items under consideration.

"The reality is that people have been blaming ratings or talking about ratings being an issue, but the issue has been about performance management. Organisations haven't made managers capable, they haven't put in process that have allowed for continuous process management – they've been focusing on the year-end ratings," Korn Ferry Hay Group rewards and benefits senior principal Trevor Warden told the briefing.

GE for instance has three different performance ratings methods: one-third of employees have no performance ratings, another third have the comprehensive system, while the remainder have a hybrid, he says.

The 'no ratings' system is working well because employees and managers "are focusing on performance management", having regular discussions, and they know whether they are above or below target without compromising the link with pay or bonus.

Performance management can be done "on the back of an envelope", as long as managers and employees are talking regularly, Warden says.

Mind the gender pay gap

Much is said about the size of the gender pay gap, but when it is measured across "like-for-like roles" at the same level with the same job size, the actual pay difference for fixed annual rewards (base salary and super) is 5% between women and men – men are 2% above average and women 3% below, Gilbert-Davies notes.

It's important for organisations to consider how and when to address their gender pay gap differences, she says.

"Are people actually reviewing gender equity at times of promotion? At salary review [or] as part of a bigger project to try and address any core issues that exist in your organisation?"

According to the recent Fixing the gender pay divide report, Gilbert-Davies says several impediments widen the gap, such as the lack of available career development and promotion for women who work part-time or flexibly, poorly integrating those returning to work from parental leave, and not having enough "champions" to foster female talent.

A lot of it also depends on organisational culture, whereby some organisations encourage assertiveness – "if you don't ask you don't get".

"It's concerning the fact that when people are pushing for pay rises and promotions, some women don't necessarily feel comfortable being assertive at that point in time.

"It's a matter of identifying that in organisations and seeing what measures can be taken to correct that," she says.