HR PERSPECTIVE: Getting your remuneration policy right

HR PERSPECTIVE: Getting your remuneration policy right
Is the company’s position statement outlining its remuneration

Are company’s position statement outlining their remuneration

THE purpose of a remuneration policy is to guide management and staff in the administration of remuneration. Is the company’s position statement outlining its remuneration philosophy and what it aims to achieve through it?
The policy should outline how the organisation uses total rewards to attract, retain, motivate and reward employees.
It should also outline the link between remuneration and business strategies.
Most organisations require multiple strategies to support each business strategy, which may vary by business unit, employee group and geographic location.  One should try to avoid the common belief that what works for one organisation will probably work for another. For companies that form part of a group, different remuneration policies to support each business unit may be required. Having a blanket remuneration policy may be costly, especially in cases where some business units are unable to sustain group remuneration packages.
Considering the many challenges organisations are facing, there is need to redraft some of the remuneration policies currently in existence. Collective bargaining driven remuneration policies at company level can be disastrous.
While it is mandatory to adhere to National Employment Council (NEC) driven remuneration systems for non-managerial staff, the company should be able to demand, through its own internal policies, the highest contribution from its staff members in return for rewards.
This can be done by drafting a remuneration policy that has a higher component of variable pay.
Is your remuneration strategy driving the performance of your business? If not, it might be time to look at it again and see where the loopholes are.
The current business environment demands that organisations align their remuneration to their company strategy. Too often policies that are drafted have no direct bearing on the business drivers in the organisation.
By not articulating their remuneration policies, organisations are missing an opportunity to redirect their employees to those things that are critical to the success of the company.
The organisation’s business strategy is the starting point in drafting a remuneration policy. The question that should be answered in this regard is: “Where is the organisation going and how should the remuneration packages be structured to support the strategy?”
After mapping out what your strategy requires from your staff, you should be in a position to pinpoint those behaviours that need to be rewarded. Your remuneration strategy should clearly spell out the role of the total remuneration concept. Here we are looking at the total cost of employing an individual employee. This should cover all the benefits, both cash and non-cash and basic salary.
As part of your remuneration policy, make an effort to inform employees about what it is costing the company to employ each one of them. This can be done in the form of a remuneration statement that is issued annually to each employee. The statement details all forms of remuneration in dollar terms that the employee received from the company. This can help staff understand how much the company is spending on them. This statement should also have a summary of how the company is performing in all key aspects of the business.
Your remuneration policy should clearly articulate the relationship between basic salary and benefits and the key success factors of the business. The policy should state, in no uncertain terms, that individual packages are determined by the ability of the company to pay and individual performance. However, if performance is going to be a key factor in your policy, there is need to ensure systems have been put in place to measure and manage performance objectively at all levels within the organisation.
The policy should also acknowledge the importance of adhering to regulatory requirements as outlined in NEC statutory instruments and the Labour Relations Act. It should spell out the role of job evaluation and market salary movements in determining pay.
To check whether your company’s remuneration policy and strategy are driving your business result, just check how much you are spending on staff costs to generate a dollar of revenue. How does that compare to similar organisations in your industry?
If you find out that you are spending, for example, 70 cents on staff costs to generate a dollar of revenue you might need to revisit your remuneration strategy. There are other checks you can use to see if your employees are being productive in relation to the other resources the company is deploying.
Your remuneration policy should clearly state your preferred position with regards to the balance between fixed and variable remuneration. Above all, it should clearly identify what your organisation expects to achieve with remuneration.
Your policy should also aim to democratise the pay process and demystify remuneration management by communicating the policy to staff.

Memory Nguwi is an occupational psychologist, data scientist, speaker, and managing consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm. Phone +263 4 481946-48/481950/2900276/2900966 or cell number +263 77 2356 361 or email: or visit our website at

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