Pay scales may be designed to reflect individual performance and all-round contributions to an organisation, but the findings of a recent survey show that Hong Kong employers don’t always get things right. In fact, they regularly miss opportunities to differentiate pay by means of increases in base salary or other monetary incentives and, not surprisingly, that is something employees are quick to notice.
More specifically, the “Getting Compensation Right” report by consultancy firm Willis Towers Watson reveals that just 58 per cent of Hong Kong businesses believe their base pay programme is effective in driving better individual performance.
In 2018, the average pay increase for employees who met expectations, those considered satisfactory performers, was 3.65 per cent. And for the top employees, judged to have far exceeded expectations, the average increase was 6.3 per cent - just 1.7 times higher overall. Also noteworthy was that most employees who failed to meet their company’s expectations still received an increase in base salary. There may be good reasons to explain such decisions, but the better performers are still left wondering.
In other ways too, organisations seem to have difficulties linking pay to performance as closely as they might. For instance, many Hong Kong-based employers tend to pay bonuses to top performers, who were just above target, even when the organisation as a whole has not had a great year. Furthermore, the survey found that 35 per cent of companies still pay incentives to members of staff who clearly failed to meet certain stated objectives. And, in other cases, the payouts to top performers are often reduced by a greater percentage than those for lesser performing employees if the overall bonus pot has been reduced.
Doing that overlooks the fact that people who have contributed more or performed demonstrably better than their colleagues expect to be paid decisively more than the average. That is an integral part of how they view fairness and giving “value for money”.
But, that said, money isn’t the only way for employers to recognise and reward performance. They sometimes forget that a simple pat on the back can do a lot to increase individuals’ motivation, loyalty and job satisfaction. And taking that a step further, it is encouraging to see that roughly half of Hong Kong employers are now considering changes to their pay and recognition programmes.
In particular, they are exploring new ways to differentiate incentives without increasing fixed costs and, in some cases, managing to switch the focus from purely cash-based awards.
Some such initiatives take a slightly simplistic approach, perhaps marking long service or anniversaries with the company as a way of engaging employees and strengthening corporate culture. But with others, the focus is more on creating shared values and a common purpose. And for many employees, especially the millennial generation, that kind of involvement and recognition can even outweigh short-term monetary rewards.
In general, this type of in-house programme is more effective if it follows a few broad rules. For instance, if recognising individuals, it is better to put the emphasis on behaviour rather than specific outcomes. It makes sense to be timely instead of leaving thing until, say, the end of the year or the annual dinner. And it should involve everyone, not just managers or employees above – or below - a certain grade.
Finally, if introducing such a programme, employers should also devise ways to assess and measure its impact.
