The statement is of course true: there are always individuals whose services can be obtained for less than the “going rate”. The reasons are almost endless, and include:

· Those who are unemployed and urgently seeking employment;

· Those who are unaware of their true market worth;

· Those who are attracted by the reputation/image of the company or its proximity to their home;

· Those who are relatively independent financially and do not need a high package from their employer; etc.

However the purpose of market benchmarking is to establish the middle of the market (and the spread on either side of this midpoint) to obtain the most balanced view of an individual’s package relative to market.

In effect organisations need to pay their employees the packages for which those employees are prepared to work; this is a separate issue from market benchmarking. And often this “deal” (the accord struck between employer and employee regarding the package for which the employee is prepared to offer their services) works, sometimes for a long time. Just remember that eventually people do come to understand their true market worth and can end up leaving for greener pastures.

In essence it’s a risk management issue: the more you pay someone below their market worth, the more you are exposing yourself to the risk of the employee leaving for package reasons. Assessment of the degree of risk of losing specific individuals is key to this whole risk management process: some people create a bigger void on leaving the company than others.

Incentives are meant to be….incentivising (duh!) - but you’ll be surprised at how many incentive plans aren’t! So, before you consider putting one in place, work out how much of the pie you are prepared to share.

Now for a few other things:
1. When does the incentive come into effect?
2. What is it based on? Turnover, profit, something else?
3. Define this carefully - are the figures affected by VAT, discounts, credits etc…
4. Is there a minimum target that must be reached before the incentive kicks in? If yes, what criteria have you based the minimum on?
5. ….and once the minimum target is reached, does the incentive pay out from R1 or only from the the minimum target onwards?
6. When does it pay out?
7. Is it based on money in the bank, monies invoiced, or some other criteria? (Remember to mention that all incentives are subject to tax).
8. Are there any penalties? You may have some model to control over-performance in one month and under-performance in the next
9. Always give an example of how the incentive works, showing under-performance, on-target performance and excellent performance
10. If the incentive is experimental, you may want to have a clause that says so…e.g. “This incentive has been put in place to motivate you to sell. It is however, experimental, and may be changed or removed at any time”.

Give the incentive document to a trusted colleague who is not connected to your business. Let them explain your incentive back to you - if they have understood it from the document, good job!

• Have you formally identified who are the critical, key employees in your company?
• Have you determined what your remuneration strategy is for each individual?
• What have you done in terms of training and development to show your investment in them?
• Do they form part of your succession plans for the company, and have you told them?
• How regularly do you meet with them to discuss frankly how they are performing, and where they can add value, and gain value?
• Have you told them, in ways other than money, how you appreciate their contribution to the company?
• Have you gone any extra mile to show your interest in them?
• It’s one thing to have an open door policy, but how much time have you actually invested in each of them…today…this week…the last month

In our experience people begin to look around when they don’t feel valued, and that’s not always just about money. Said differently, where employees feel their contribution is really appreciated and is making a difference, they will think twice before selling themselves to the highest bidder.

Everyone is generally aware of this, management and staff included. All the more reason to look at ways to recognise and acknowledge staff in non-monetary ways.

We regularly hear comments from staff wishing their managers would simply greet them, thank them for a job well done, one person even said “a bowl of flowers isn’t necessary, just an occasional pat on the back to show that they are aware of what I’m doing, would be nice.”

A memory that will always be stored in my mind was an “employee day” I witnessed. Staff arrived one morning to a work entrance with a long red carpet edged in bright balloons (picture Hollywood Oscar night!). A banner above the entrance simply read “Employee Day”.

When they reached their desk, there was a personalised note from the MD with a small gift (Ferro Rocher chocolates in this instance).

This had all been arranged at night with only a select few people involved in arranging this (and NOT the same folk that always do it).

Budget - nominal, effect - a real buzz for most of the day, more smiles than most days and a warmth that was infectious.

Is there an ad-hoc, but meaningful way in which you could thank your staff? In tough times, these acknowledgments go a long way.

Ratcheting refers to the fact that guaranteed pay either stays the same or increases over time, since it is so difficult to decrease.

Coasting happens when an employee who has performed at a high level over several years (and received commensurately high increases), decides to perform at a less impressive level. This may happen because they have burned themselves out somewhat performing at the high level; or decide that there is more to life than just work, priorities may change because they marry or develop a health problem, etc.

Variable pay/incentive bonus schemes have received a fair amount of bad press over the past few years, for a number of reasons, but there is no doubt that properly designed, properly implemented variable pay schemes improve overall employee performance to the financial benefit of both employees and the company.

Such schemes are worth the time and effort needed to design and implement them properly, but be warned: take short cuts at your own risk - if you are planning to implement incentive pay, do it properly!

A good mindset to develop when it comes to package review time, for example, is to ensure you have paid your top performers well and then ask "how much do I have left to pay the other people?"

It may be that 3 top performers receive 15% increases and 12 other people receive 6% increases.

If this is what it takes to ensure your top performers are properly looked after, you have allocated scarce resources (cash available for package increases) in the most effective way.

I had an incident where an employee gloatingly came to tell me she had resigned and was off to greener pastures. After asking a few questions it became very clear that she was joining the new company on worse terms. She thought it was better as she only understood what cash she’d get out each month, and didn’t consider the whole package.

An employment contract with supporting policies and brochures usually sets out the main agreement, whilst the payslip reflects that agreement (usually on a monthly basis).

Have you, as an employee, read your contract carefully? Do you understand your payslip?

• Do you know what benefits the Company offers?
• Do you know what you/the company contribute to Medical Aid or a retirement fund?
• Do you understand how you are taxed?
• Do you know how your company car or travel allowance works?
• Do you understand how your commission or incentives work?
• Is your year end bonus guaranteed or not?

Many companies negotiate pay on a "Cost to Company" (CTC) basis - in other words - what they believe it costs to employ you. This however is determined differently by different companies, so it is important to appreciate how your company defines this, and when applying for work elsewhere, to have a clear understanding of what that company believes is the "bundle of goodies" in the basket they call CTC.

Companies spend a lot more on employing staff than employees appreciate, so it makes sense for management to use every opportunity to communicate the costs well.

If you don’t grasp this info the first time, keep working on it until you do.