Pay Structures

Playing games with people's salaries usually backfires. So if you pay someone significantly more or less than their peers, it will come out sooner or later. Someone has a bit too much to drink, they apply for a job at another firm and the person who catches sight of their job application tells a friend, or one of your maintenance staff is called in to mend some machines in Human Resources or accounts and gets sight of the payroll. There are so many ways private salaries can become public that it is best to structure them and behave as if they are already.

Inserting new clauses in employment contracts isn't workable either. In listed firms, the salaries and bonuses of board members are made public in the annual reports as a matter of law. These must be even-handed and transparent. Everyone will interpret sensible, self-evident salary structures as fair. This doesn't stop you from offering productivity-related bonuses for sales, programmers, and managers; it quantifies rewards with achievements. The golden rule is: Be consistent.

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