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Follow these seven steps to successfully increase your staff salaries

by , 13 January 2014
One of the best things you can do for your company is to ensure you're paying competitive salaries and wages during these times of dire skills shortages. Follow these seven steps to successfully increase staff salaries and retain valuable employees in the process.

The approach to salary and wage increases differs across companies. But you must consider the same factors before deciding on an appropriate increase or payment level.

Here are seven steps that'll help you increase staff salaries successfully

Step #1: Decide on a review period

Newly established companies usually increase staff salaries on the anniversary date of an employee joining the company.

But, if, for example, it becomes difficult to remember the increase dates after the tenth employee joins the company, implement an annual review date.

Annual reviews must take place after your company's year end, and when you've finalised the budget for the New Year.

You must ensure that all your employees are subject to the same fair increase process.

Step #2: Analyse what increases your company can afford

Consider the following when deciding on increases:

  • Cost of living
  • General expectation of an increase
  • Expense budget
  • Budget for salary increases
  • Market view of salary increases

The Consumer Price Index excluding interest rates on mortgage bonds (CPIX) figures provides the base most companies use to decide on their product increases and expense budgets, says the Practical Guide to Human Resources Management.

If you know your market will only bear a 10% price increase on the products you sell, you can't increase your salary bill by more than 10%.

Step #3: Know the market-related salaries for your staff

Compare and benchmark your salaries using the comprehensive salary surveys available in South Africa.

Step #4: Establish what the average increase is going to be

Find this information in the various salary surveys, newspapers and financial magazines. This will give you a feel for what salaries are being negotiated.

Most industries that negotiate salaries have the details of their negotiations reported in the press. Normally by March of each year, you'll have an idea of where salaries will settle.

Step #5: Decide if individual performance will affect salary increases

You can link salary increases to the achievement of key performance indicators or other measures of performance.

If your company doesn't link salary increases to performance, take individual performances into account. You might give a good performer a high increase and the poor performer none at all.

Step #6: Communicate the salary review process to your employees

The Practical Guide to Human Resources Management recommends you make your employees aware of the process you intend to follow in determining increases and the inflation and budget links you'll use.

This will help you avoid disappointment and possible grievances later.

Step #7: Notify all employees individually of their increases

Compile a letter stating how you arrived to the increases.

Make sure you send this letter well before you pay out salaries. If, for example, increases will be effective on the 1st of March, you must send the letter to staff before the beginning of the month.

Well there you have it. If you want to increase staff salaries successfully, be sure to follow these steps.

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