Pay can often be an uncomfortable talking point for employers and employees. How should you respond when an employee asks for a pay rise? Should you include salary in your recruitment advertisements? How do you calculate holiday pay for casual workers? We run through the most frequently asked pay-related questions and how you should address them:
- What to do when your employee asks for a pay rise
Obviously, this will be dependent on your company situation at the time, whether or not you are in a position to consider pay rises and whether the employee’s performance justifies a raise.
In order to assess, it can be a good idea to:
- Make sure pay is fair and equal to the rest of the team.
- Create a culture of asking, and consider scheduled rises.
- Benchmark their salary against industry averages – using job boards is a cost-effective way to research similar roles and pay structure. You can also look at competitors to get an idea of what they offer in comparison. Read our guide to establishing the right salary for benchmarking ideas.
- Consider benefits – are they receiving employee benefits in addition to their salary which needs to be offset against additional costs of salary increases and the impact on the bottom line?
- Look at performance – review their work and whether they really should be in a different pay grade.
- Most importantly, listen to them. Ask them to explain why they feel they should receive a pay rise and keep the discussion open.
If you are financially unable to offer a rise, then many business owners can worry about the impact of this decision on morale and whether the employee will ultimately look for another job. What can you do to combat this?
- Be honest about the financial situation and why it’s not possible.
- Come up with other incentives, such as staff benefits in the interim.
- Set a date in six months’ time to review the situation so that channels of communication are kept open.
- What to do when an employee queries a colleague’s pay
The Equality Act 2010 expects businesses to have a transparent and fair pay system that complies with the principle of equal pay for equal work and which applies not only to salary but to all contractual terms and conditions of employment, such as holiday entitlement, pay and reward schemes, pension payments and other benefits. In a lot of businesses however this is not the case, and for whatever reason, there is an unbalanced pay structure, leaving them vulnerable and open to accusations of discrimination.
One of the first things we do as HR consultants going into a new client’s business is a pay audit to understand the pay structure and identify any areas which could cause problems down the line.
- Conduct an audit to understand who is being paid what (including benefits) and why they may differ.
- Put in place a performance review system to monitor staff performance and base pay increases on this.
- Be honest and open about your pay structure and why one employee may be being paid more than another if asked, but back this up with evidence that you are reviewing the overall structure and linking it to performance.
- Should you include salary in your recruitment adverts?
We would always advise clients to include the salary in a recruitment advert. It saves time and resources in the long run by attracting people of the right level. If you omit the salary you are likely to receive a wide range of over-qualified and under-qualified candidates which can take considerable time to sift through.
- How to explain pay deductions from pay slips
Deductions from an employee’s payslip can be confusing even with deductions of tax and national insurance. Auto-enrolment also adds another added element where pension contributions are taken.
Firstly, it’s important to note that you are not legally allowed to make a wage deduction unless it is stated in the employment contract and you have written consent from the employee. If your staff are struggling to understand deductions or you’re being frequently asked questions around payslips, you could refer them to this useful guide from the Money Advice Service.
Company benefits such as company cars, accommodation and loans are taxable and this will be reflected on staff pay slips. Other benefits, such as childcare, are tax-free. See the Gov advice page for more information on taxable benefits.
- How to calculate holiday pay for casual staff
Working out holiday pay for full-time employees is straightforward, but many of our clients run into problems when dealing with holiday pay queries for casual staff. Employees on casual contracts or on zero-hours contracts are entitled to statutory holiday entitlement.
The easiest way to calculate holiday entitlement is to calculate hours worked and what is accrued. Holiday entitlement of 5.6 weeks is equivalent to 12.07% of hours worked over a year. So, if someone works 10 hours, they are entitled to 72.6 minutes of holiday pay. ACAS has some useful guidance on calculating holiday pay. We’ve also developed a staff holiday calculator.
- How to calculate sick pay for staff
Your employees may be eligible for Statutory Sick Pay (SSP).
You can offer more if you have a company sick pay scheme (you cannot offer less). Company schemes are also called ‘contractual’ or ‘occupational’ sick pay and must be included in an employment contract. Statutory annual leave is accrued while the employee is off work sick (no matter how long they’re off) and it is possible for an employee to opt to take annual leave during periods when they are not well enough to work, but they can’t be on sick leave and annual leave at the same time.
Download our Salary-checklist.pdf (518 downloads) .