The Globe and Mail Interview: Employers increasing salaries as talent shortage and inflation persist

Read the full interview in The Globe and Mail.

Employers across the country are increasing wages and projecting future salary bumps into their budgets amid inflationary pressure and a continuing talent shortage that shows little sign of easing in the near future.

Janet Candido, a long-time human resources professional who runs a consulting business in Toronto that advises employers on HR issues, told The Globe and Mail she is increasingly encountering employees who are demanding wage increases that match inflation. “I had to deal with an employee, who works in financial services, who wants an 8-per-cent salary increase, after getting a 5-per-cent salary increase last year. The employer told her, ‘Look, we can’t do that, but we can give you more time off.’ But I am fully expecting the employee to start looking for other jobs,” Ms. Candido said.

One way employers are navigating the demand for higher salaries is to offer better benefits and higher bonuses, Ms. Candido said. “I’m seeing HR professionals getting more creative with compensation packages. They are expanding health spending accounts, or improving mental-health benefits.”

Small Business Owners Should Spend More Time On These Five Things

If you think your business is too small to need Human Resources processes, think again. As most small business owners will tell you they wear many hats but often put more focus on customers, finances and their particular area of expertise. Good HR process is an area that can get overlooked, but the minute you have employees on the payroll, HR issues will abound.  

A small business owner should make sure they are getting these five things right, in order to attract, develop and retain good employees: 

Hiring: Don’t hire your friends, it is next to impossible to discipline or fire them. The boundaries between business and friendship are often either blurred or create resentment and tension if enforced. We think friends will be more loyal because of the personal connection, but often that is not true. Take the time to hire properly – consider your needs for the role, and the cultural fit within the organization. The more care you take in hiring, the more likely you will find a good employee. 

Onboarding: Most small businesses don’t have a formal ‘onboarding’ process, and it’s a crucial step that is often overlooked. This is an introduction to your company culture, environment, and fellow staff. Taking the time to onboard a new employee will help set them up for success. Be specific about how they fit in with the organization and any performance metrics related to their role.  As with any other important relationship, put in the effort to make them feel welcome.  Introduce them to others.  Take them out for lunch. 

Salaries: It can be challenging to get salary data to pay people properly. Often small businesses pay too much or too little, because they rely on information from their colleagues, or the employees themselves.  Look for independent, external, market data (recruiters often publish annual salary guides) and pay attention to internal equity (how employees are paid vis a vis each other. Note that when an employee believes their pay is not competitive, their loyalty and performance will suffer.  It is difficult to recover from this.

Bonuses: Small/new business owners may often give their employees generous bonuses at year end out of gratitude for a good year, believing it will engender loyalty and motivate team members. However, a ‘thank you’ type bonus that is not attached to a performance metric will not actually impact the business or the employee’s performance if they do not know how to earn that bonus next year. Also, it can give rise to a sense of entitlement.  Employees are happy as long as they get the annual bonus and as long as it is at least as much as last year, but the negative impact of a bad year is devastating to morale and performance. Bonuses are best tied to specific, measurable achievements

Compliance: Some small business owners may think they don’t need formal policies or try to develop them on their own, but not having them – or not meeting appropriate standards – could end up costing you more in the end. While some legislation is designed for larger businesses much of it is applicable to small businesses as well.  These include, for example, accessibility requirements, harassment and violence policies, health & safety training.  Don’t assume your business is too small; no matter your size, you need to meet certain standards and requirements.

Creating good HR policies and practices for your small business need not be expensive or time consuming. But you might be surprised at how much they will pay off in terms of productivity and reduced turnover.

Salary transparency is more than a number-sharing exercise

A recent Workopolis article is one of many that argues the case for full transparency in compensation. The basic rationale is that full salary transparency can increase loyalty, improve productivity, and boost bottom lines.

But two questions remain: What exactly does one mean by transparency? And how transparent should you be?

There is a common misconception in discussions around transparency that all employees should know what others earn. This is unquestionably the wrong thing to do, as a person’s salary should be kept private. However, transparency around an individual’s own compensation – including salary, bonuses and benefits – and how that might change based on specific criteria, is critical. 

Organizations should be transparent about how they make compensation decisions, including salary ranges. But a critical, yet often overlooked aspect, is transparency around their methodology and who is involved in making the decisions. This is particularly important, as it not only instils respect for the employer, it helps employees judge the fairness of their own pay.

If an employee understands how salary decisions are made, and accepts the fairness of that methodology, they are more likely to accept that their compensation is equitable, rather than thinking decisions are arbitrary and biased. It stands to reason that when employees believe they are unfairly paid, performance can suffer, and they may end up looking for alternate employment.

Bonuses are also part of the transparency equation. In cases where bonuses are based on corporate performance, the company should provide regular (i.e. quarterly) updates on how the company is doing, relative to their goals. For example, if bonuses are paid out only if the company reaches a certain revenue or profit threshold, regular updates should include a statement of where the company stands in relation to that goal. This does not mean disclosing all financial data – only enough to keep employees informed and engaged.

Conversely if bonuses are based on individual performance, employees should be updated regularly on how they are tracking against it, and more importantly, what they need to do to earn their bonus. Otherwise, achieving their results will be, at best, hit or miss, and there will be no behaviour change. 

Organizations looking to benchmark their transparency practices can start by ensuring they have a defensible compensation program.  An assessment will reveal if they have a good program with a clear methodology, or have a tendency to make arbitrary pay decisions. Once a defensible methodology is in place, the next step is educating employees about the compensation program and its processes. 

Being transparent in compensation matters is key to a productive workplace. However, simply disclosing compensation numbers without explaining to employees what it means to them will not achieve the goals employers are seeking. Transparency has to be done properly, always keeping the employees’ needs in mind.

CTV News: Janet Candido on Shaw's voluntary severance package offer

https://www.ctvnews.ca/video?clipId=1327986

Globe and Mail: How businesses can handle provincial changes to minimum wage

This article was originally published in the Globe and Mail

 Following Alberta’s lead, the Ontario government has committed to raising the minimum wage to $15 per hour within the next few years and, in addition, is upgrading the mandatory minimum vacation allowance for employees. Business owners now need to make a plan for how they will absorb these costs and determine what the impact will be on their business.

While the change to minimum wage is only targeted at those workers earning less than $15 per hour, the overall impact is scalable as the implications for compensation are far wider than simply bumping up the pay. In addition to forking over more for items calculated as a percentage of pay, such as payroll taxes, CPP, EI, benefits and company pension contributions, many business owners will also have to address pay increases for workers who are already earning more than $15 per hour to remain competitive while ensuring that pay is based on value to the organization.

A solid compensation plan ensures that employees are paid fairly, based on that role’s market value and worth to the organization. If those employees who are currently earning less than $15 per hour are bumped up, this will likely create a ripple effect on the entire pay grid necessitating salary increases for those who were already near the new minimum wage as well. 

A holistic review of the company’s compensation policy may be necessary – particularly if the bulk of your employees are paid hourly, or earning a salary of around $30K - $40K per year.

If this is your company’s situation, here are the steps you should take now to make sure you’re ready when the minimum wage policies come into effect:

Start with an audit. It may come as a surprise, but many owners may are not actually aware of the specifics of individual jobs or contract entitlements, and it’s important to make sure you have all the facts before making the necessary changes. Now is the time to review all positions and contracts to determine pay scale, current vacation allowances and job responsibilities. If you haven’t already done so, an audit will help reveal whether the pay structure is aligned with your business structure and plan or if the pay is not being distributed effectively, among other things.

Determine the scope. Depending on your business, if you only have a few employees earning less than $15 per hour, it may not be a huge burden to simply increase those salaries. But if you have many employees and your salaries are spread from minimum wage upwards, you need to consider the compression issue identified above.

Determine job worth. Consider how you evaluate the roles within your organization. How do you establish the worth of each role to the business, especially as it relates to other roles? Does it have a direct impact on sales or new business? Is it integral to customer service or satisfaction? Does it require a higher level of critical thinking?  By asking these types of questions you can determine whether your current system of evaluation is still appropriate. Review each job role to help identify whether any changes to responsibility are required.   

Create a new pay grid. Based on your findings, you’ll now need to establish a new pay grid. In addition to accommodating government regulations, you may wish to increase the salary ranges to give you greater flexibility to absorb the minimum wage increases over the next couple of years.

Communicate changes clearly. Compensation sends a value message to employees as well as external customers who deal with your business. It goes without saying that any changes to compensation can affect employee morale and need to be communicated clearly and early. Yet it’s a step that’s often overlooked – or even mishandled. While an increase in wages is usually good news, it’s an important change that always requires a communication plan. This should happen before rumours can skew expectations, and include consistent messaging, personal interaction and the opportunity for employees to ask questions.

The good news is that both the Ontario and Alberta governments have given substantial notice before the wage increases need to take effect. Use that time to review your full compensation program to make sure that any actions taken are best for your business, rather than a knee jerk reaction to government policies. By acting now, you can hopefully mitigate the impact the reforms will have to your bottom line.