Structured salary systems

Many managers and directors are wary of too much procedure and structure in their people management. They fear it will limit their flexibility and decision-making and inhibit growth and agility in a competitive marketplace – and may even inhibit creativity.

The ability to make effective management decisions without being hampered by burdensome procedure is certainly crucial to a successful organisation, particularly one where there is a creative workforce. Many would class formal salary structure systems as among those procedures that are unnecessarily inhibitive. But is that the case? Even in the smallest organisation, in a sector where flexibility and creativity are highly prized, some kind of salary structure can be useful.

Employees in organisations where there is clarity about salary decisions feel reassured that decisions around their pay are fair and consistent

Structured remuneration arrangements give a framework for fair, consistent and effective decisions around compensation and solid data to justify pay decisions. This makes defending any kind of grievance or legal claim much easier. Structure in your salary decisions helps avoid discrimination claims or equal pay claims in the first place by reducing the likelihood of inequalities and inconsistencies creeping in. This happens more often where more than one manager is making decisions about pay, and results in resentment and possibly grievances. Employees in organisations where there is clarity about salary decisions feel reassured that decisions around their pay are fair and consistent, reducing any distrust of management more generally.

Nor does a salary structure, or at least some kind of formal system for determining pay, have to be complicated and overly restrictive with spines, points, scales and complicated rules. It is possible to have a looser, more flexible framework for pay.

The options available for reward structures are numerous and can be complex. You could use job evaluation and set formal grades for each job. You could use competencies and set pay against how well each employee achieves the relevant competencies for their role. You could pay against skills rather than looking at job titles and where a role sits within the hierarchy. You could have performance-related pay whereby at least some of an employee’s compensation is directly related to their performance and/or the organisation’s performance. This could go further with bonus or commission schemes.

It is essential to make the right choices for your organisation, and to implement those choices fairly and effectively. Getting the right system in place can be enormously valuable but poor implementation, communication or poor choice of systems can inhibit growth and result in a management team bogged down in grievances, appeals and resentment. Which system works for you (or whether to have any kind of system at all) will depend on a number of factors.

If you are considering implementing some kind of framework for remuneration, you should look at a number of external factors. Consider where you usually recruit staff from – what types of organisations. Do they tend to have structures and what level are the bands or grades set at? Look at which organisations you feel similar to in terms of size and culture and find out what they do (the salary checker on this website should help). Think about where your funding comes from. If you rely heavily on government funding you could be required to implement a structure resembling or matching a public sector environment as part of the funding agreement. If your organisation is a voluntary sector one, consider what happens elsewhere in the sector, arts-related or not. Some voluntary sector organisations model themselves on the public sector, some lean more towards the private sector.

If your arts organisation is very small, all those factors need to be considered when deciding whether to implement a structure at all. But whether you do or not, identifying the right level of salary for a role can be challenging, particularly where you only have one of each type of role or it’s a brand new position. Again, look at what’s happening elsewhere. Monitor recruitment pages and sites to find out what your competitors, organisations you feel similar to, those you work closely with or those you tend to recruit from, are offering for similar roles.

If you want to look at implementing a structure around your remuneration, it is strongly recommended that you seek professional advice before doing so. An expert with experience in designing and implementing effective reward systems, ideally with specific arts sector experience, can be a valuable investment and help you achieve a system which works for your business, and which employees buy into and understand.

Eleanor Deem is Managing Director of face2faceHR.
www.face2facehr.com