Mar 28, 2011

DEALING WITH ANOMALIES | Reward Management Procedures

Within any pay structure, however carefully monitored and maintained, anomalies will occur and they need to be addressed during a pay review. Correction of anomalies will require higher-level increases for those who are under-paid relative to their performance and time in the job, and lower levels of increase for those who are correspondingly over-paid. It is worth noting that over-payment anomalies cannot be easily corrected in fixed incremental structures, and this is a major disadvantage of such systems.

The cost of anomaly correction should not be huge in normal circumstances if at every review managers are encouraged to 'fine-tune' their pay recommendations to ensure that individuals are on the right track within their grade according to their level of performance, competence and time in the job. It is important, therefore, that managers should be given the scope to carry out such fine-tuning by making adjustments to the rate of progression as necessary. Of course, they may need guidance on what they can and should do, and they also need clear information on the relative positions of their staff in the pay structure in relation to policy guidelines as a basis for decision making. The conduct of pay reviews can make a major impact, not only on motivation and commitment, but also on the perceptions of employees about the fairness of the whole process of reward management. It should not, therefore, be carried out mechanistically.

In a severely anomalous situation, which may be found at the implementation stage of a new structure or at major review, a longer-term correction programme may be necessary either to mitigate the demotivating effects of reducing relative rates of pay or to spread costs over a number of years.

As well as individual anomaly correction there may be a need to correct an historical tendency to over-pay or under-pay whole departments, divisions or functions by applying higher or lower levels of increases over a period of time. This would involve adjustments to pay review budgets and guidelines and, obviously, it would have to be handled with great care.


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