In today’s competitive world, where every organization is talking about making the workplace inclusive and working towards building their unique EVP and Employer brand, retaining their employees is top most priority for the employers. But the question is, how far will you go as an employer to retain your top talent? Progressive HR Processes, Diversity Charters, Inclusive Workplace, Fair Rewards & Recognition program, Performance Appraisals based on merit and a Pick your Own Pay policy? Does it fit the employee expectations? Here is my article on “Pick your Own Pay Policy”, a progressive move by some organizations to retain their talent. Do read, share and pen your comments.
In a corporate world ruled by increments and promotions based on performance and resignations by dissatisfied employees, companies are looking for different ways to retain their top talent. And while there are a lot of options like ESOPs, Progressive Work Policies, Fair and Equal treatment and more, one such initiative which has taken the corporate world by storm is “Pick Your Own Pay Policy”.
Payscale Compensation best Practices Report found that 45% of employers agree or strongly agree that employees feel that they are paid fairly, while only 21% of employees agree or strongly agree that they are paid fairly, a 24% gap in perception.
A mumbai-based Software developer company, Frappe Technologies, was the first Indian company to try this policy in their annual appraisals for last year. The company asked all its 70 employees, except for the ones who were in probation period, to propose what they should get paid and after due consideration, approved for everybody. While a lot of other companies called this a bold move, this company had another view to it. When employees ask is met, we give them the wings to fly high and soar in the sky. Similarly, knowing that the company is going all out to support them, results is higher level of engagement in employees and enhanced accountability and productivity. Also, at an organization level, there is a whole new definition of transparency and trust which gets built.
Pick Your Own Pay has its own meaning for different organizations and industries. While for Frappe Technologies it was about giving its employees the freedom to choose their salary in complete, for some other larger MNCs like Coke, it meant letting the employees choose which and how much allowances they needed in their salaries every year. This lets the employees decide, depending upon their needs, life stages and wants about when they want to have a larger part of their salary as basic and take home, vis-à-vis when they want to have more allowances and flexibility in salary pay-out.
Whatever be the definition, one thing is evident. This policy focuses on driving ideal values – transparency, trust, lower pay disparity, job satisfaction, responsibility and greater accountability in employees. But whatever be the meaning and interpretation, the corporate world views this as a bold yet necessary move to give employees the flexibility to choose. Giving the power in the hands of their employees, on who should get paid what, is quite risky for any organization. So why would organizations want to risk it all and offer this to its employees. The answer is Retention. Satisfied employees stay longer in organizations and monetary aspect plays a critical role in job satisfaction.
But, is this a sustainable effort for retaining employees? Or is this giving an unnecessary leverage to the employees which leads in a certain comfort zone? Let’s deliberate.
Firstly, it is indeed a very transparent culture to build by letting employees decide what they want to be paid. While it may work well for start-ups and smaller size firms, but for larger conglomerates? For MNCs? For bigger organizational setups, it may be a short-term win but not an approach which might be sustainable in the longer term. As organizations grow, the size of workforce also grows and in such a scenario, paying everybody what they are asking for might not be a feasible solution to attrition.
Secondly, in the absence of any benchmarking data or range of salary, employees are likely to use soft benchmarks like the salaries of friends and families which can lead to greater pay disparity and discontent. Also, there will be no basis upon which these salaries will be hiked, except for creating a trust relationship with the employees.
Thirdly, while monetary benefits do play an important part in keeping employees motivated, it is not the only thing that helps in retaining the employees. We have all heard the quote – “Employees don’t leave companies. They leave Bad managers.” So along with giving them a pay / salary which they want, an organization also needs to give their employees the culture, values and environment where they can grow and thrive.
And lastly, pick you own pay policy is like a double-edged sword. While it may help in retaining employees in the short term, but it also might create unnecessary expectations in employees. These expectations, if not met in the long term, could lead to further dissatisfaction in employees and eventually, into attrition.
Drafting this policy and implementing it in an organization might be a short-term attrition reducer but in the long term, it is not a game changer for any company, big or small. We must not overlook the fact that we are all humans. And it is natural human tendency to compare. Leo Festinger’s Social Comparison Theory states that “We compare ourselves to people we see as being similar to us. Our opinion of our own abilities and worth come from comparing what we can do with what others can do.” This means that for a large number of people, the significance of achievement is driven via comparison with others. So, there will never be an absolute and a permanent solution to retaining employees.
While a Pick Your Own Pay Policy or Open Salary Policy or Pick your Allowances Policy may help in providing the financial support and satisfaction which the employees need but it is equally important to give them an enabling environment and culture. Employee retention cannot be achieved only on the basis of monetary satisfaction. Through constant evolution of the HR practice and introduction of progressive HR policies, an organization can create a growth path for self and a culture of innovation.