Article by Arthur Venter, Audit Supervisor, at BDO Pretoria
One of the key determinants of a company’s success is its ability to attract talent, and remuneration is a fundamental factor in that. However, this goes beyond simply what salary is offered.
Of course, money is the foundation of a remuneration package, and a useful point of reference for companies and potential employees.
In advertising a post, or when interviewing a potential new hire, a company should be aware of the labour law and regulation, as well as the salary range for the role. This allows the company to budget effectively, and ensures that no one is wasting each other’s time.
Determining what this range is, will take some research. Factors affecting salary range are industry trends, the city where the company is located, what a particular person earns at the current employer, and the unique skill set that the person brings to the table. It is crucial at this stage to also set out the correct job specifications, as this will help in determining the range of salary.
A company should be prepared to pay an amount at the top end of this range. It wants to attract the very best talent it can afford, people who will enhance the effectiveness of the organisation and who can be trusted with the operational aspects of the job.
The remuneration package is about far more than money, though. It must be seen holistically within the context of the employee’s quality of life. While salary may initially attract a person to a firm, the length of time that they stay at that company will depend on how happy and fulfilled they are in their job.
Job priorities will vary according to life stage. A 25-year-old might be motivated by rands and cents, whereas a 40-year-old with a family would look for medical aid, retirement benefits, perhaps the opportunity to work flexi-time, as well as a competitive salary.
The interview process can thus become a negotiation around working conditions as much as salary. Workers can also be incentivised through profit-shares or equity in the company. The leave offering is another important motivator.
It’s also largely about culture fit. A CV will already have been submitted, so the candidate’s qualifications should not be at issue. Once it is clear that the person is a culture fit, sometimes the remuneration is a formality.
Salary should also be based on the person’s worth to the company. This can be through an estimate of their value, or through a direct mechanism such as a commission for sales staff, or other incentives. Why are incentives necessary? Sales staff bring in revenue for the business and thus compensating them for the amount of revenue brought in to the business will not only make them feel valued but will also make them hungry for more, which in return will benefit all employees in the business. When it comes to administrative staff members, determining their salary will be based on how much time they would save you (the owner) in doing the work yourself and what other values they bring to the table. At the end of the day the owners want to focus on running the business and making deals.
Specific KPIs (key performance indicators) are vital, and go hand in hand with accurate job specifications. This ensures that the firm finds the correct person for the job, it creates clarity on what is required during the employment period, and it can also be used to evaluate performance.
The real clincher is more sophisticated than simple money. It comprises the full remuneration package – medical aid, pension, leave, paternity and maternity benefits – but also the level of fulfilment the person will gain from joining the company.
Career path and personal growth are fundamental to this. People are ambitious, and will look to join firms where they see the opportunity to grow their skills and rise to more senior positions.
A company should also look to employ people who are looking to grow, and who can contribute more to the company as time goes by.
A staff member who is looking to grow will also be more likely to stay on and build a career, as opposed to a job hopper, who can be lured by a higher salary, but can just as easily be lost to another company offering a pay increment.
A fun, rewarding work environment is also a good selling point. Your staff spend a large portion of their life at work, and no one wants to work in a negative environment. A company’s reputation can have a material effect on its ability to attract the best talent.
There are other creative ways of linking performance to remuneration in the KPIs for other roles. This is an underutilised form of remuneration. If a staff member sees an opportunity to earn a significant dividend like a 13th cheque for excelling, this can really inspire high-level performance.
When it comes to remuneration, salary cannot be seen in isolation. Besides money to take care of our physical needs, we look for quality of life, and personal fulfilment. Companies that cater to all these needs will be able to attract the best people and build long, mutually beneficial relationships.