Hack:
Employee Remuneration , Let me tell you what I am worth..

From academic literature it seems that effective remuneration setting and attempts to motivate employees with monetary incentives, is in practice difficult to get right, and there seems to be divided opinion if it is at all possible.

It can be concluded  that monetary rewards are more a hygiene factor for employees, and if employees perceive their wages or salary level to be fair for the work they do, relative to what others do, they are satisfied, but not necessarily motivated by their remuneration package.

 It is probably very easy to de motivate staff with by a remuneration package they perceive to be unfair, as people have self serving bias perception and often credit good outcomes to their own efforts, and others peoples's good performances due to favourable externalities. The converse of course also exists.

A person’s sense of equity is often self centered and most people cannot in my opinion, correctly judge the value and worth of others relatively to themselves.

Incentive pay appears to work in some instances particularly for employees who are motivated by money , however if the target or measurements are inaccurate, inappropriate or perceived to be inaccurate or biased,  then incentive pay can easily de motivate employees, or lead to dysfunctional behaviours, like prioritising own goals ahead of team goals, or just giving up or not trying  hard.

 It seems the chances of getting remuneration wrong is much greater than getting it right. While over paying staff might improve the chances of not de motivating staff, this may still not work as the comparison group for equity judgments about what is fair pay, may still be fellow employees.

Additionally, organisations have a conflicting goal of trying to minimise costs to maximize returns, and it is difficult to justify paying staff well above market rates to stakeholders and other employees. Market labour and salary rates are also often perceived to be unfair and unreflective of skills and abilities, but for a business and in particular a business where salaries and wages are a high portion of costs, there seems no advantage or incentive to pay well above market rates, unless special circumstances dictate this.    

 With this in mind knowing that employee satisfaction with remuneration is an important factor in their motivation to perform their job, to and above expectations, my recommendation is to improve employee knowledge and trust in the remuneration practices employed in an organisation. This trust coming from active and open annual participation in the remuneration setting process and full disclose of relevant information,

 This information could include an organisations’ financial performance, general salary/wage market levels for similar positions in other similar organisations, and salary and wage range levels for employees within the same organisation.

 Accordingly taking the above views into account, below is a recommended process that may improve remuneration setting for employees, which may improve a feeling of equity and fairness in the process and outcomes and accordingly reduce possible de motivational aspects to remuneration setting, and at best improve motivation for work performance through monetary or non-monetary rewards.

 1)      Organisation to subscribe, participate and widely circulate Market surveys for specific occupational positions to
          establish salary or wage ranges, the ranges incorporating variables such as organisation size, location, and
          years of  experience.

 2)      Regular self assessment by employees on where they should sit in the market range for their positions, including
          self assessment on how they work with others in the organisation, what is their future
          potential to their organisation, and what skills and experiences they have acquired since the last review.
          The self assessment is to also recommend a new salary for the next review period and after discussion with the
          employee’s direct supervisor or manager, a recommendation and justification is to be passed up the hierarchy
         one or two levels for approval and moderation.

     3)  Written recommendations prepared by an employee for an one off bonus reward for individual work   achieved over
          last review period this is for achievements above and beyond  normal tasks undertaken.  Bonus reward to be
          agreed and moderated by at least  two higher levels of management. The bonus could be based on agreed target
          or objectives prior to a review period ,or if that is too complicated and subjective, after the review period, based on
         an employees written and justified request for additional reward above and beyond their normal salary.
         This type of bonus may work best for employees whose individual performance contributes directly to reliably
         measured desired organisational outcomes.
         Employees could have their bonus target rewarded at three levels (threshold,target and stretch targets) 
         as all or nothing targets can be de motivating.

   4)  Work group bonus and/or organisation wide bonus schemes which could be based  on  agreed achievement of set 
       group /and organisational targets (threshold ,target snd stretch) and possibly be conditional on achievement of some
       overall financial thresholds, in case the organisation falls behind budgeted financial performance.

   5)  Full and open disclosure to all staff of salary ranges, bonus payments, and organisation and work group
       performances rewards.

 For this reward system to be successful a lot of time, effort and communication is needed to establish employee trust. Management must demonstrate openness and integrity and support employees in their self assessments of competency   and performance.

 Such a reward system will also take some time and resources to introduce and implement. Staff will need to given support to develop communication skills to justify the self assessed positions they take in relation to salaries and bonus payments. Supervisors will need to develop communication and negotiation skills to help employees accept compromises and understanding, if there expectations cannot be met.

 Above all, staff will need to accept that market rates for occupational groups including the survey data available to them, is the reality for the positions they hold.

Salary bands or ranges for all organisational positions will need full disclosure and explanation. Privacy concerns could be alleviated by not disclosing individual salary levels, but only ranges applicable to each position.

 A genuine "good faith" dispute process must exist and full explanations need to be provided to employees on request.

While this approach to establishing remuneration seems bureaucratic and requiring heavy management support and approvals, organisations need to be aware that remuneration expectations of employees is correlation to individual job performance, and remumeration need to be clearly understood and accepted by employees, to work without a feeling of injustice.

 As not all staff are motivated by monetary benefits, perhaps organisations could offer individuals a combination of monetary and non monetary benefits like more annual leave, reduced or flexible hours, training opportunities, travel opportunities combining business travel with holidays and so forth.

 Again, this would require agreement for each individual by management and be seen to be an equitable trade off by other employees in the organisation. Nevertheless, giving  employees the opportunity to negotiate his remuneration and how it is paid, would appear to be empowering and hopefully motivating.