Do you remember that line from Jerry McGuire? Cuba Gooding’s character was motivating Tom Cruise to get him more money for playing football with his current team. Cuba had Tom Cruise screaming into the phone “SHOW ME THE MONEY” among other things.
Have you heard this from your employees? Well, maybe not yet but more than likely they are whispering “show me the money” when you aren’t looking. Many businesses have had wage freezes for the last two years, however during this time living expenses have increased – in essence – your employees are earning less since their paycheck doesn’t buy as much as it used to.
It’s not your fault – the economy is down and possibly your business is as well. However, when business turns around and you have returned to previous sales level (or even better – surpasses them) – your employees won’t be whispering any more. In fact they will start screaming “SHOW ME THE MONEY”.
Don’t be caught off guard, prepare yourself now and put a plan in place. Here are a few steps to keep you on the right track:
- Determine your pay strategy (should line up with your market strategy) – do you want to be below market, at market or above market levels
- Decide if you want to compensate for the wage freezes or not
- Decide when you will implement
- Can you also reinstate some benefits?
Determine your pay strategy: This is also a good opportunity to determine your overall compensation strategy if you have not done so in the past. As mentioned before your pay strategy needs to match your market strategy. If your marketing strategy is to be the high-end provider of a product or service – your compensation plan should also be above market. If you are the low-cost alternative – your compensation plan will also be cost effective. There will be a disconnect with your employees if you offer a premier product/service but pay your employees below market average.
To Compensate or Not for the wage freeze: This is a tough question only you can answer. You will need to take into consideration how many years of wage freeze there is to compensate for, what was the cost of living increase for those years, and can you afford it. To tell the truth most companies do not make up for it and start giving increases again based when they are able to.
Decide when you will implement: If you are planning your increase ahead of time before you are actually able to give the increase – you need to determine your triggering events. In other words what needs to happen in the business in order for you to be able to give increases. The events can range from a 10% increase in sales, a 5% increase in EBITDA or a decrease of 10% in expenses. These events will be specific to your business and once you have determined what they are – share with your employees. They will be more than happy to help you reach the goal in order to get an increase!
Reinstate benefits: In some companies, benefits were also a casualty of these economic times. Are there any benefits you can either reinstate totally or at least partially? Maybe you can provide an extra day off with pay as a “Thank You” for sticking with us this year.
Want further assistance in determining a compensation plan? Contact us at [email protected]