Case study – Give an out-of-cycle increase to my employee now!

Give an out-of-cycle increase to my employee now

Imagine the scene – you won’t have much problem doing so as I’m sure you have faced a similar situation in the past 🙂 :

It’s August. The Head of Accounting calls you and theatrically announces : “There is something wrong in what you decided to pay my employee Hassan ! He is underpaid and complaining that his basic pay is the lowest and you need to do something about it – right now !

Oh yes. This is another request for an out-of-cycle, “special case” salary review.

And of course, as the manager is quick to point, it is your fault if there is a “situation” in the first place. No acknowledging that salary decisions are owned by management and processed by HR…

So you get to it and start collecting information. Hassan’s basic pay is at the minimum of his salary range, and he is paid 8 to 9% less than the average of his colleagues on the same grade.

So – the manager is right, right ?

You see the numbers and there is a difference between Hassan and his peers so you have to make an exception and grant him some form of increase in order to kill the inequity, right ?

Well, if you are a good Compensation pro, you will use your CSI skills (yes, after the famous TV show) and investigate further before you formulate any recommendation.

As I’ve written before, an internal equity analysis, especially based on an individual case, will look into more data points :

  • Total gross salary : Hassan happens to be a UAE National and his colleagues are mostly expats. Hassan’s allowances are therefore higher than those of his colleagues, and as a result, his fixed pay is the second highest in the Department for this grade.
  • Comparison across similar roles : You expand the comparison to other employees in the same grade in the Finance Division and find out that Hassan’s fixed monthly pay is slightly above average in the Division. Treasury employees tend to be the higher paid and Business Finance employees tend to be paid just 2 or 3% more than accountants.
  • Salary history : Hassan was promoted 8 months ago. He actually received an extra increase at the time to bring him to the minimum of his new salary range, as per your internal promotion rules. So at the time his compensation was substantially increased, by over 20% on basic and 25% on monthly fixed pay.
  • Personal profile : You check tenure in grade, age and professional qualification if relevant. These elements give you more background into ensuring if you are comparing apples to apples or not. For example in general, you will find that the longer the average tenure, the higher the basic pay in the team – simply as a result of past salary increases received by the team members. Similarly, a group of “older” employees will usually be paid more than a recent graduate in the same job, because they have a history of past salary increases. In our specific case, Hassan has less than a year tenure in grade while his colleagues have been on this grade for over 2.5 years on average.

You now have a more complete picture to present to the Head of Accounting.

Hassan may have the lowest basic pay in his team, but overall his situation is not at all bad, considering he receives the second-highest monthly pay in his team, above average pay in the whole of Finance despite being one of the less tenured employees in his grade, and he recently got a 25% increase.

OK – so clearly this is not a case for an out-of-cycle salary increase.

However, simply giving that answer to the manager is not going to be helpful. Yes, the manager needs the facts.

But he also needs guidance as to what to say to the employee.

Otherwise he may just come back to Hassan and say: “I wanted to give you an increase but HR prevented me from doing it”….which unfortunately is not an unlikely scenario…

So – beyond your irrefutable analysis, you will give the manager some advice such as :

  1. Acknowledge that you heard the employee’s concern and you had the situation investigated.
  2. Give the results of the comparison analysis to the employee.
  3. Explain what the resulting, logical decision is : no out-of-cycle increase.
  4. Go on to emphasize positive messaging to the employee. Remind Hassan that he was very recently promoted and that the company has hopes in his success and his development. Promotions are given based on past achievement but also on perceived potential to take on additional responsibilities. His hard work (process) and actual delivery (output) will be taken into account at year-end, after one year on the job, for performance evaluation.
  5. Reinforce the pay-for-performance message of the organisation : how the merit matrix is built on 2 factors : relative basic pay in the salary range as well as individual performance – so with the same rating, an employee with a lower basic pay will receive a bigger salary increase. How the bonus payout also links into individual as well as collective performance.
  6. Finally as the manager, offer support and guidance in the form of resources, training, coaching etc to ensure that Hassan continues to deliver and is motivated to grow so that he gets the increase he deserves at the end of the year during the regular cycle of salary increases.

Performing an internal equity analysis (and please note that I deliberately stayed out of market or job analysis in this case study) is not just about deciding if we should give a “special increase” to an employee or not. It is also about us as Compensation and HR professionals offering guidance to the supervisor to help him manage expectations and communicate the right message to his employee.

Would you add any additional advice to the manager ? If so, please leave it in the comments !

 

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Comments

  1. Hi Sandrine,

    Thanks for sharing the case study. I think all the points you highlighted should be considered to deliver the message to the employee. Some employees or even managers are stubborn, inspite of sharing with them all the details they still argue that this is not the right approach to solve the case without increment.

    Thanks
    Moiz

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