Apr 6, 2011


Control over the implementation of pay policies generally and payroll costs in particular will be easier if it is based on:

  • a clearly defined and understood pay structure;
  • clearly defined pay review guidelines and budgets;
  • well-defined procedures for grading jobs and fixing rates of pay;
  • clear statements of the degree of authority managers have at each level to decide on rates of pay and increases;
  • a personnel (HR) function which is capable of monitoring the implementation of pay policies and providing the information and guidance managers require and has the authority and resources (including computer software) to do so;
  • a systematic process for monitoring the implementation of pay policies and costs against budgets.
These aspects of control have been covered elsewhere in this book, but there are three further features of a control system which need to be considered; namely, the control of grade drift, the problem of devolving authority to managers to develop 'ownership' of the reward management processes in their departments while still retaining control, and the provision of control information.

Control of Grade Drift

Grade drift - the tendency for people to be upgraded without a justifiable increase in their job size - can be controlled by the following methods:
  • using a strong evaluation panel trained in the job measurement methodology on a formal basis and advised as necessary by an independent expert;
  • insisting on rigorous comparisons with well-established benchmark jobs - the re-evaluation of such jobs should be a major exercise;
  • ensuring that panels ask pertinent questions on any claims that an increase in responsibility justifies regrading - among these questions it is useful to ask, not only what the increased responsibilities are, but also how they have arisen and what effect this will have on another job if it has lost those responsibilities;
  • requiring a sponsoring manager to provide supporting justification;
  • resisting demands from managers for jobs to be regraded simply because of market rate pressures, difficulties in recruitment or threats to leave to get more money. If these concerns are genuine there are better ways of dealing with them than upgrading by, for example, reconsidering market stance policies, market rate premiums or creating special market groups. What must not be allowed to happen is upgrading someone simply in response to threats.

Developing Ownership Without Losing Control

We have frequently referred to the concept that line managers should take ownership of reward practice. This is an aspect of empowerment - devolving down the line the responsibility for making decisions on key management issues - and pay is definitely one of these issues.

Devolution does not mean abdication, and the following steps are required to ensure that freedom is exercised within the framework of generally understood guidelines on corporate pay policies and how they should be implemented:
  • Discuss and agree with managers, team leaders and staff the key reward processes which will maintain standards throughout the organization - these will include processes for job evaluation, tracking market rates, performance management, performance rating and paying for performance, skill or competence.
  • Ensure that all concerned thoroughly understand and appreciate the new freedoms and their associated responsibilities.
  • Train managers and team leaders so that they have the level of knowledge required to make informed, business-led decisions about reward - the aim is to ensure that they are 'pay literate'.
  • Develop computerized personnel information systems that reduce all the bureaucratic reporting which has been necessary in the past. As Clive Wright, then Manager, Corporate Remuneration, ICL, said at the Compensation Forum in January 1993:
    Recording and reviewing the key business numbers at the centre, without involvement of the line operations, is essential, if you want to convince people that empowerment and reduced bureaucracy is actually happening. As long as we keep asking people to send in reports, fill out forms, and sign off changes at detailed levels, no one will believe anything has really changed.
  • Ensure that the central remuneration specialists change from a controlling to a guidance and support role.
  • Spell out to all concerned that in providing this guidance and support the HR function has a duty to audit reward management processes departmentally to ensure that they are being used in the most effective way. It must be emphasized that the organization has every right to see that proper procedures are being followed and that, where appropriate, consistent policies are being applied.
  • Ensure that managers understand and accept the principle that while they may have a fair degree of independence they are still interdependent with other operating units. They must therefore consider the implications of what they are doing on other parts of the business.
  • Achieve, as far as possible, a reasonable balance between empowerment and control. The aim must be to give managers the maximum space and freedom to act. But it is still necessary to ensure that their actions do not contravene fundamental reward management policies and guidelines, or prejudice the overall impact of reward processes as a means of helping the organization as a whole to move forward in accordance with its strategic plans.

Pay Review Documentation

The pay review documentation for line managers is best dealt with by a spreadsheet. The information should consist of:
  • name, job title and present salary of job holder;
  • details of last pay increase - amount, date and reason;
  • performance rating;
  • proposed increase - amount and percentage.
The individual details on this spreadsheet should be totalled so that the percentage increase to payroll overall can be calculated and compared with the budgeted figure.


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