There’s only one thing worse than not getting a merit-based pay rise: watching your boss get one. As you work harder than ever, for no extra pay, your manager snares a juicy merit-based pay rise, bonus or promotion.
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Naturally, you ask: “why am I slaving away to help my manager secure his or her next big pay rise and promotion, while I go without?” And you question why the pay-rise pool is almost always dominated by executives, managers and their favourite staff.
With wage growth in Australia at a 17-year low – and likely to remain subdued for some time – companies will have to work harder than ever to contain staff resentment towards colleagues who receive big pay rises. And show an unusual – and perhaps unnatural – degree of sensitivity on this issue.
I once worked for a US strategy consulting firm that had a strict rule on pay discussions. It was almost a sackable offence to disclose your salary to a colleague. Pay rises were shrouded in secrecy, bonuses were a mystery, and nobody “celebrated” pay gains in front of colleagues. The firm’s old-school approach worked because high-performing staff knew they would be rewarded.
What’s your view?
- Is it time for more companies to bring back “gag” orders on salary and pay-rise discussions?
- Do you disclose your salary and annual pay, or lack thereof, to colleagues?
- Does your boss or manager show restraint with their pay rises when times are tough?
- Would more discretion around pay-rise time limit the fallout from staff who miss out?
I’m in two minds about gagging staff on salary and pay-rise discussions. It rarely works in the long run. Staff who miss out on pay rises eventually talk. Or they speculate about their colleagues’ salary and pay rise, fuel vicious office politics, and implode professionally. Younger staff, in particular, may feel more compelled to discuss their income with their peers.
Banning salary discussions can also be demotivating. I recall a US investment bank that had a highly transparent salary and bonus system. Dividing the bonus pool was almost an end-of-year blood sport. It was brutally effective: you had to compete vigorously to get your share, but there were few secrets or surprises.
Moreover, implementing a policy to not talk about pay rises, or glossing over unfair wage inequality, is a dumb approach. Better to have an open, honest conversation about why wages have been frozen and merit-based pay rises are scarce. And to still put your case forward for a pay rise if you deserve one.
That said, companies can take some simple steps to reduce the fallout from a shrinking bonus pool and fewer merit-based pay rises.
The most obvious is managing staff expectations. I’ve seen too many managers over the years tease employees with the prospect of a pay rise to get them to take on more work and responsibility. Good managers have a knack of motivating staff without having to always offer more money, and they never promise something they cannot deliver.
Providing more information on company and industry trends also helps manage expectations. Some staff anchor pay expectations to the past; they wonder why the person who previously had their job was paid $30,000 more. Or they are unaware of current market rates for their position. Or they base pay-rise expectations on longevity; they haven’t had a rise for three years and believe they are due for one, even though they are paid market rates.
The performance-review and pay-rise process is equally critical. Managers are usually eager to explain to staff why they received a big rise, and praise and motivate them. They often say nothing to staff who miss out, leaving them to stew on the poor communication. Having these difficult conservations can make a world of difference to staff who feel unloved and unrewarded around pay-rise time.
Companies should also ask staff to show greater discretion with bonuses and merit-based pay rises in this work climate. Gloating about a pay rise or bonus is a terrible look at the best of times, let alone when real wages are going backwards for many people, after inflation.
Flaunting a big promotion or other career success is equally galling when many colleagues are worried about job security and how they would cope with a forced redundancy. Companies need to ensure their managers lead from the front, if not with pay restraint, then in the message they send to staff through their words and body language around pay rises.
Most of all, managers need to recognise is some staff are near breaking point, as their hours and responsibilities rise, while their pay flat-lines. Persistent poor communication of the policies and processes behind merit-based increases could snap the back of even the most motivated employee if wages growth is anaemic for the next few years, or slows even further.
