5 Signs Your Pay and Promotions Policies are Stupid
In order to get people to work for you, you have to pay them. And if you want good people to work for you, you need to pay them fairly. What does fairly mean? Well, it's more than paying them the amount that they negotiated during the hiring process. Here are five problems that I see frequently in businesses of any size.
You set a maximum raise percentage. This is super common. No one can receive a pay increase greater than, say 10 percent, in a given year. This seems to make sense--how does someone become 20 percent more valuable in a given year? Well, they take on new responsibilities, they take a new position, or they were undervalued to begin with. What's wrong with this? If someone is being paid below market rate, they will resent you and eventually leave. How much will you have to pay someone to replace this person? What you should have been paying in the first place, plus the cost of recruiting and training.
You don't make contracts. Have you ever paid to relocate someone, with all the details worked out via email? What about having a tuition reimbursement program but no retention component to it? How about sign-on bonus with no repayment clause if the employee quits within a year? All of these happen all the time. It is worth your time and money to pay an attorney to draw up a contract that specifies exactly how you are paying for relocation and what percentage the employee has to repay if she quits within X number of years (standard is two to three years). If you are offering tuition reimbursement, make sure you give the person new responsibilities that relates to his new knowledge. And, include a repayment aspect again. Sign ons? Should always come with a signed document that details when repayment is required.
Your pay and promotions are based on seniority or last name. Bob's been here the longest, so he'll be the new manager! The only idea that is worse than that is, "Bob's my son, so he'll be the new manager." Yes, the person who has been there the longest often can be the best choice, and your son may have inherited your keen sense of detail, but you need to makes sure that the person who gets the promotion is the one that can do the job. Managing is different than doing. Someone with good "doing" skills doesn't necessarily have good "managing skills." Both can be trained, but you need to provide that training. Giving someone a promotion without the support is a recipe for disaster.
You're illegally cheap. Yes, everyone must be fiscally aware. If your business isn't bringing in the money, you'll have huge problems. But, you can have even bigger problems if you take deductions from employees pay that you shouldn't, or not pay overtime that you're required to pay by law. You cannot avoid overtime payments simply by making someone exempt. They also have to meet the strict requirements of the law. Sometimes even the act of paying someone a day late can be a violation of the law.
You interview multiple candidates even when you know who you are going to hire. Many companies have policies of interviewing three or more candidates for every position. Sounds good, right? You don't want to get the wrong person in the job. But, often the hiring manager has already determined who will be in the position--especially in the case of an internal promotion. But, to stay in policy, they interview three people anyway. And what good does this do? None. A decision has already been made. But worse, you've just made external candidates take a day off their current jobs in order to come in. Would you like to waste a vacation day for a completely fruitless exercise? And internal candidates? They don't enjoy the stress and anxiety either. If you know who you are going to promote, just promote her.
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