High performance does not equal high pay? New survey findings show that Hong Kong employers miss opportunities to differentiate pay to reflect individual performance using base pay increases and incentives. Does this sound surprising to you, as an employee and/or an employer?
Willis Towers Watson’s Getting Compensation Right Survey shows that only slightly more than half of Hong Kong businesses report that their base pay programme is effective at driving higher individual performance (58%) and differentiating individual performance (56%). However, in 2018 the average pay increase for employees who met expectations (average performers) is 3.65%, while the average increase for employees who far exceeded expectations (top performers) is 6.3% - just 1.7 times higher than average performers. More worryingly, most employees who failed to meet expectations still received a base salary increase.
There are other ways that organisations do not sufficiently link pay to performance. For instance, Hong Kong organisations tend to pay bonuses to top performers that are just 23% above target when organisational funding levels are at target. And 35% of companies pay incentives to employees who fail to meet performance expectations. The findings also reveal that actual payouts to top performers are often reduced by a greater percentage than lower performing employees if overall plan funding is below the target funding levels.
Top performers need to believe that they are paid decisively more than average employees, since it is part of how they experience value and fairness in pay. However, money is not the only way that organisations can reward and recognise performance.
Everyone likes a nice pat on the back
Employee recognition can lead to increased feelings of satisfaction and loyalty at work. But while employers know it can inspire teams, some management teams bypass them in favour of focusing on the day-to-day operations or making cash-based retention awards when required to address specific threats of departure.
The good news is that organisations are eyeing changes. Recognition programmes should gain some traction as half of Hong Kong businesses say they are currently planning for or considering new types of recognition programmes. It shows that they are keen to explore new ways to differentiate incentives without increasing fixed costs.
The most common type of recognition programme is one based on recognising work anniversaries. But this is a simplistic approach and does not encourage employees to exhibit the values and behaviours that can drive business success or create the corporate culture and environment that engages employees.
And many HR professionals regard employee turnover and engagement as leading HR issues. On the other side, employees, especially millennials, cite a need to feel that they are contributing to something bigger than themselves – for the organisations that they work for to have a higher purpose. Companies are finding that recognition awards which go beyond work anniversaries are a great, relatively low cost way to engage with employees and communicate the organisation’s values, culture and purpose.
Companies are increasingly being creative in how they design and use their recognition programmes. For instance, each quarter the online retailer Zappos gives each of its employees US$50 to use to reward and recognise co-workers. To ensure these awards are truly peer-to-peer, these recognition awards cannot go to managers or supervisors.
To improve the effectiveness of recognition programmes, there are some general rules to follow:
Finally, companies should be using technology to assist in the administering of recognition programmes and measuring the impact of the programmes.