The design of reward strategies that reinforce business priorities is of paramount importance for all employers. It is critical for smaller, start-up operations where money is often a scarce resource and needs to be used to maximum effect.
Experience has shown that the way employees are treated is usually of more importance than absolute levels of pay. Nevertheless, internal equity is seen as a measure of management’s commitment to staff. When recruiting, external market pressure can force salaries to higher levels in order to attract high caliber candidates.
These factors mean that a thorough understanding of the relevant employment markets is essential when determining levels of remuneration. Consistent internal mechanisms are also required to maintain a sense of fairness and prevent unnecessary expenditure.