Earnings vs Worth

[cguy]

Hi All

I am in the lucky/unlucky position to be the one to review all my staff's salaries annually. This would include increases, bonuses and promotions. I have also seen alot of payrolls in my life so I have a fair idea of what the average man/woman has been earning for ages.

What I find so impossible is that more and more nobody is ever satisfied no matter what they get, if you raise a staff members salary by a significant amount over 2 years it becomes an expectation or if you hire someone who is overpaid but is needed and you give them modest increases they are also not happy.

There are generally two reasons for increases like that: 1) The employee is doing an awesome job, or 2) The employee is in "catch-up" mode due to their previous employer paying peanuts, or a significant promotion.

In the first case, I try to manage expectations by making sure that the trajectory I've put them on is targeting something in the order of 4 to 5 years out - this way, if there is a bit of a slow down in their performance, I don't have to put on the brakes entirely, and it's not like I just pushed their income through the ceiling instantaneously, and now I feel that they're suddenly overpaid. There is a place for instantaneous compensation increases, but this takes the form of bonuses, not salary increases. People are generally far less concerned about a decrease in their bonuses, than their salaries being static or decreasing (assuming that their bonus isn't a huge chunk of their total comp of course).

In the second case, I also manage expectations by explaining that they're in a catch-up phase, and that their income can't increase at that rate for very long, and will level off. It's important to repeat this both often and firmly.

Is this a 3rd world issue when CPI is not really 6% and everything is going up ? As you speak to people in UK , USA and often increases are few and far between yet they are just happy to have a job. Have we become a society which is never happy or is this a myth?

I think the real reason here is that nobody in SA trusts that the CPI is accurate, because it's not (or at least it's not targeted at your average white collar worker). In the US and UK, the CPI is more accurate, and is also generally pretty close to 0 (well, 2%-ish), and this is visible in day to day life, where it is apparent that prices just aren't changing very much at all, which removes any fear or urgency to "catch up or get poorer".

The other item which has been discussed on many occasions is that you should be paid based on the work you do, so if you are asked to do an extra task then you should be compensated for this? My view is that we all should be looking for more opportunity as this might turn into long term wealth/success. But imagine if that was true everytime you take a task away do you then reduce a persons salary?

I believe that this does make sense - people should be compensated for the work they do, however, the actual salary should only change once a year to reflect the mean work done over the year.

What is seems is that people at different levels of organisations have a different view on the above, while lower level staff see it as more money for more work those of a senior nature see it as part of the job description. Do you think this is a education issue or just a seniority issue?

This is just a value judgement. Both should work on the basis of more money for more work, but the price per unit of work should be higher for the more senior staff, assuming that each unit of the senior staff member's work actually provides more value. "Value" here should also account for the cost of the staff member leaving, the impact on the firm without them, and the replacement cost of the employee (i.e., so defining value as benefit-over-cost, don't think of just the salary as the cost).