1st May 2018

4 ways to use HR software to prevent pay decisions affecting productivity

How pay decisions can affect your company’s productivity and four ways that your HR software can help you balance employee reward and motivation.

We often read today in the press that UK pay rises are now seemingly outpacing the falling levels of inflation and generally it’s reported that people are benefitting from increases in both earnings and income levels.  However, employee satisfaction surveys are indicating that despite these positive trends there is still a large number of employees who do not feel that they are rewarded enough.

So why does there seem to be this discrepancy? From research and feedback in the HR world it seems that delivering and maintaining longer-term and sustainable financial wellbeing remains a challenge for many employers, employees and their families.

Research by the Chartered Institute for Professional Development (CIPD) published in July 2015, discusses the thorny issue of reward and demonstrates that how people respond to pay matters is clearly more complex than economists would perhaps have us think.

Communication is key

It suggests that reduced productivity and performance are a result of managers not explaining pay decisions, rather than the actual amounts themselves and that there are important steps that managers need to take.

Firstly, they need to help people understand the reason behind pay decisions – often there is a direct link between pay and performance and morale. Performance related pay, it seems can do as much to demotivate as motivate.

Secondly, bosses need to think more strategically about pay – is giving someone a pay rise really going to motivate them for the long term, or is it just a quick fix until they decide to move elsewhere, maybe for promotion prospects or different job role?

Thirdly is the way that a pay related decision is communicated. Perhaps the employee may be more motivated with a lower pay rise, but with the promise of training to increase earnings potential or to be more engaged in the role and their impact on the company’s overall performance. Feeling that their role has a worth and is valued can be highly motivating for some employees, improving attitude and performance.

Of course, there is the reverse of the coin, when employees that do not get a pay rise when others do, or when theirs is less, which may result in them either looking for another job or simply not working as hard.

So what’s the answer? From discussion with our clients we have identified four ways that effective use of HR software can help you to address the issues;

1) Keep HR and pay data in one place

Information on training, overtime, holiday, absence and more enables an HR team to connect investments with employees pay to business issues and performance. For example, a team with high turnover of employees or absence may mean that they or their manager require more training, rather than simply increasing pay. Integrated HR and Payroll software enables cross function reporting to support strategic decision making of this kind.

2) Planning career development

Recording expertise, training and competence helps give an understanding of what works best for an individual employee. They have a better view in terms of their own job role and expectations and, with a clear development plan, can be encouraged and motivated to undertake training to meet their objectives. Being able to capture and record such data also highlights the importance of managers having a quality relationship to be able to discuss and plan such issues with employees.

3) Total reward

Reviewing your pay data can help you to consider the relationship between fixed and variable pay and ensure that the reward model you have in place is balanced for your organisation. While most people can tell you what their salary is, they may not be able to draw to mind the full value of their remuneration package quite so easily. A good employee self-service portal gives employees access to their remuneration and reward statement and enabling people to see their contracted package easily helps in retention.

4) Succession planning

With accurate HR systems you can review your HR focus on the business strategically and anticipate the changes in your workforce demographics, helping you plan for the growing population of older workers and the potential costs of health and we