How do you decide pay for new employees?

Whatever
amount you decide to pay an employee new or one who has just been promoted
bring risk to  your business. The risk is
that the individual may fail to deliver while you have tied the organisation
into a high-cost structure. The euphoria of getting a new person on board
sometimes works against good principles of salary structuring and
administration. In practice, it has not been easy for most organisations to get
rid of non – performing employees due to inability to provide credible evidence
of non-performance and due to political considerations.  Is there a best way to set salaries for new
employees?

In
order to minimise the risk of overpaying or underpaying there are a number of
checks and balances that you need to undertake. The first one is if you have a
pay structure this assignment becomes very easy. Pay structures indicate the
minimum, midpoint and maximum salary for each grade.  The minimum per grade represents the minimum
salary or risk you are prepared to carry when paying someone whom you are not
sure how they are going to perform. Organisations with credible pay structures
always start here. We know there are some new employees who will claim they
have the experience and have been performing in their previous roles so they
would want more. Don’t get tempted. If a new employee refuse to accept the
offer and demand a salary close to the midpoint of the grade here is what you
do. Let me illustrate this with an example. 
On the market Accountants can fetch a minimum of $1,606 and midpoint of
$1,832 and maximum of $1,832. When employing the Accountant who falls into this
particular grade I will offer them $1, 606 and if they refuse this offer and
demand $1 81, and I desperately need them here is what I will do; I will offer
them $1 606 as fixed basic salary and offer them an extra $226 which will fall
away if they prove that they cannot consistently meet the performance
standards. The fact that 100% of what people earn in Zimbabwe is fixed,
requires that executives exercise extreme caution when deciding what to pay
individual employees. Once you commit to a fixed salary, you cannot easily
reduce it and you have to honour your commitment.

The
second point to note is that new employees and inexperienced employees must
always start at the minimum of the grade.  This rule does not apply in all cases but has
a few exceptional circumstances where the rule can be violated. Good performers
must be paid around the midpoint and very few top-grade performers qualify to
be paid at the top of the salary range. Administering your pay in this way
ensures that you do not overpay people who do not deserve such pay or underpay
people who deserve more. In our pay structure and salary audits we normally find
a lot of financial resources are wasted in paying people who do not deserve
such earnings in relation to their contribution to the business.

One
of the biggest challenges in how remuneration is administered in Zimbabwe is
that over and above the basic salary, all the costly benefits employers give
employees have nothing to do with the company or the employee’s performance.
This is a tragedy considering the dire conditions businesses are operating
under.

Memory Nguwi is an Occupational Psychologist, Data Scientist, Speaker, & Managing Consultant- Industrial Psychology Consultants (Pvt) Ltd a management and human resources consulting firm. https://www.linkedin.com/in/memorynguwi/ Phone +263 4 481946-48/481950/2900276/2900966 or email: mnguwi@ipcconsultants.com  or visit our website at www.ipcconsultants.com