Getting pay right is an important part of managing people but, like issues such as safety and a pleasant work environment, it normally only gets attention when its not working. If these factors are taken care of people can then concentrate on the real job.

While we would all like more pay, most people are satisfied if they think their pay is fair. There are a number of aspects to this and they all need to be addressed.

Internal Relativities

Pay needs to be perceived as fair relative to others in the organization. They understand that different jobs get paid at different levels but they want to see some equity when it comes to rewarding jobs of similar worth to the business.

While some businesses and industries pay more than others, and people generally accept this, they want some sort of consistency within their own organization.

External Relativities

This is where people look outside the business and compare jobs. Again, they recognise that there are differences but they will look at what they may be able to earn in another organization.

So while an accountant in a not for profit organization may realise that the oil industry is going to pay more, she may weigh up the demands of each job and decide the differential is too much. Having a good knowledge of the market is necessary to establish the right level for each type of job.

Performance Based

People like to be rewarded for their efforts, so giving the same pay increase for everyone can be very demotivating.

The concept of providing an automatic increase every year based on the cost of living may be done with good intentions but if nothing else is done about performance issues, good and bad, it will quickly lead to a culture of mediocrity.

Your performance management system needs to be carefully linked to your pay system.

Fair and Equitable

The whole process needs to be transparent so people realise it is based on objective decisions. This way, although they may want more money they at least accept that there is a process and it is not based on favouritism or unreasonable prejudices.

Communications to all staff on a regular basis is the key to this - especially when there are salary increases provided. They should know on what basis their salary has been increased, or not, as the case may be.

Consistent Administration

To achieve all the above you will need a system that can be consistently applied. While salary administration is not an exact science, the system should be objective and any deviation from it should be only for well considered reasons.

Any recommendations for salary changes should be based on a reasoned decision taking into account all the elements discussed above.

Once you have all of this in place, you can move on to doing what your business does best rather than getting into arguments about pay.