In this third article of our Pay Review series – we’ve covered market research and data wrangling so far – we’ll focus on reducing spend. That will involve pointing out some unexpected (often unnecessary) ways that costs rack up, and introducing our affordable pay review platform: Compensation IQ.

The 4 things that cost you during a pay review

It’s no surprise that finance teams get a little anxious when salary reviews roll back around. After all, you’re never going to reduce people’s pay – so it always means finding space in the budget. But the process itself is likely to cost you money too. And that means getting it right should be a priority for stakeholders too, from your leadership team to the HR professionals likely to be carrying out the exercise. So let’s explore what those potential costs look like:

1. The process itself: tools, data & time

The pay review process, on some level, is always going to cost you something. If you pay to access data from a salary survey, that’s a major one-off cost. Use a salary benchmarking tool like ours and that’s another cost, albeit an affordable and worthwhile one – in our opinion!

And even if you do the salary benchmarking stage manually, as we’ve discussed, you’re going to end up spending a considerable amount of time and effort. Not to mention the associated costs of making decisions based on bad data, as is much more likely when you’re relying on free sources.

Beyond the data collection and analysis stages, there’s also the actual decision making. Deciding on the right location for your next team social is hard enough – so sitting down with all the stakeholders to make major financial decisions is never a quick and easy task. Without clear guidance backed by reliable evidence, this stage can take weeks. And that delays the process, and breeds employee resentment – impacting retention.

2. Mistakes relating to the decisions made

There’s a lot of ways the actual decisions you make could cost you – if they’re not based on reliable data. And while the salary benchmarks you’re relying on could be to blame, spreadsheet mistakes, or general human error could be to blame, there’s only two real outcomes: underpaying or overpaying your employees.

For employees, being overpaid isn’t going to be a source of conflict – obviously! But we’re focused on reducing costs. Giving out unnecessarily, unjustifiably high raises might boost morale in this cycle but it’ll hurt your bottom line. And also, it could cause tension in the long run when the next review comes up and you’ve got nothing left to give.

Underpaying employees, on the other hand, will have an obvious impact on their engagement and satisfaction. If you know you could earn more elsewhere, why wouldn’t you look to move to a competing organisation? We all know the price of attrition – so this is where pay review costs can be far-reaching.

3. Employee satisfaction (and attrition)

We’ve discussed the knock-on effect of bad decision-making, when it comes to pay reviews and employee satisfaction. But it’s not just the final figure that can impact engagement. When the pay review process drags on and on – because of manual work taking time, and stakeholders disagreeing on outcomes – then employees can just get sick of waiting around.

There’s also another risk area to be aware of. If your pay practices aren’t equitable – with pay gaps relating to sex or race, for example – then that hurts your employer brand, and your people’s perception of the organisation they work for. This also applies if pay is imbalanced in other ways, like not reflecting performance fairly.

4. Strategic consequences for the company

So far, the costs have largely related to overpaying current staff or raised levels of attrition. But a poor pay review process can also lead to the inability to attract top talent, and damage to your overall brand too. And that’s where the wider strategic importance of the process comes into play.

The market is constantly shifting, unexpected global events can have a surprising impact, and industries can experience their own shifts when it comes to talent. Lengthy pay review processes make it impossible for businesses to react quickly. Before you know it, you’re struggling to hire top talent, losing the staff you have, and both your employer brand and consumer brand are on the decline.

5 ways Compensation IQ makes pay reviews cheaper

We built Compensation IQ for growing businesses – namely SMEs and mid-market organisations that need to make the right pay decisions, but can’t justify spending the big bucks on enterprise-level ‘Talent Intelligence’ solutions. It’s built with you in mind, too – with clear, confident insights and easy-to-use collaboration tools. Here’s how it helps you cut costs when it comes to pay reviews:

1. Connects and analyses all the data

Don’t spend big, one-off lump sums on salary benchmark data. Don’t spend weeks finding, collating, and analysing market pay insights. Compensation IQ has the most comprehensive database of UK pay data – with filters for industry, location, role, and more. It takes all that data and maps it automatically to the job titles in your business.

It turns weeks of work, and gives you the answers instantly. No huge price tag, no headaches. Just a clear understanding of how your current salaries compare to industry standards.

How this saves money: no need to buy one-off data sets, no time spent researching/analysing

2. Provides clear, accurate evidence

Not only is the data reliable – industry, location, company size and role-relevant, plus updated weekly – it is also presented in easy-to-understand formats, so there’s no confusion. Your pay decisions need to be backed up with facts, and Compensation IQ lays them all out.

It means no ambiguity about what the right decisions are, and no mistakes made that could affect the bottom line. It’s peace of mind, instead.

How this saves money: no overpaid employees, no raised attrition costs from underpaying

3. Makes decision-making easier

Remember all that time spent debating, deliberating and questioning proposed decisions around pay? Compensation IQ puts an end to all of that. By being able to present a clear case – based on reliable data – you can come to a joint conclusion. And collaboration tools like smart data downloads, board packs, and dashboards make that possible.

There’s much less chance of weeks of stalemate, because who can argue with the numbers? Especially when they highlight the risks of not taking your recommended actions.

How this saves money: employees don’t get disgruntled and disengaged over delays

4. Gives 24/7 access to pay insights

It’s not unusual for businesses to do annual pay reviews, as it’s such a lot of effort. But it does mean you can’t react to industry trends and wider job market trends – and risk losing out to competitors who do keep their finger on the pulse. Compensation IQ gives you instant access to pay data, so you can be proactive instead of reactive.

You’ll find it much easier to attract and retain talent, as you can adapt your compensation offerings to reflect the current state of the market.

How this saves money: don’t lose talent because you’ve missed a market shift

5. Offers all this at an affordable price

Compensation IQ is built and priced for SMEs and mid-market organisations. It works out to less than a monthly team social, meaning you’re spending a nominal amount to make sure that employees stay satisfied, retention is high, and top talent is attracted by your job advertisements. You’re spending a little to save a lot, and gain even more.

It’s affordable but powerful, and you can try it for free too…

How this saves money: no expensive salary surveys needed

Get a 7-day free trial of Compensation IQ

Want to make pay reviews easier? Give Compensation IQ a go. Just sign up for a free trial, connect your HR data, and you’ll instantly get access to relevant salary benchmark data and much, much more.

Get a free trial, and simplify your salary decisions