At a time when securing skilled people, transparency and strategic direction are central challenges for mid sized companies, pay is becoming ever more important. A fair, comprehensible and future oriented pay structure is no longer a nice to have. It is a decisive competitive factor, and one accompanied by a growing obligation to make pay transparent.
Why pay models in the mid market need modernising
Many mid sized companies face the task of modernising pay models that have grown over time. Often there are no clear criteria that make salaries comparable and comprehensible. In this area too, much in a company has simply grown historically. That can lead to dissatisfaction, a lack of transparency and ultimately to unwanted staff turnover. The aim is therefore to develop a clear and transparent pay strategy that is connected with job profiles, career levels and skills models in a grading system.
Introducing a grading system with salary bands
A central element of pay principles is the introduction of a grading system linked to salary bands. This creates comparability across departments and allows jobs, roles and responsibilities to be classified fairly. Employees can then see more clearly where their position sits in the company and what scope there is for development.
Binding principles for greater orientation
Alongside the technical structure there is also cultural clarity: binding principles that define how pay is handled in the company should be established at the outset. They include criteria such as performance, market comparison, experience and responsibility. These principles should guide managers and also give employees orientation.
Putting target and bonus models to the test
A further building block is reviewing the existing target and bonus models. The analysis asks whether they still fit the company's strategic goals and whether they have the intended effect on motivation and steering. Where necessary, adjustments are made, always with the aim of creating a fair system that supports performance.
A structured approach to delivery
To deliver these ambitious goals successfully we follow a clear, structured process:
- Analysis of the current situation
- Survey of existing pay models and practice
- Benchmarking against comparable companies and sectors
- Identification of ambiguities, imbalances and room for improvement
- Definition of guiding principles
- Development of principles for fair and transparent pay
- Definition of criteria for salary development and differentiation
- Development of the grading system
- Development or adjustment of job descriptions
- Structuring of the job descriptions into job families
- Building a grading system to evaluate the jobs in the company
- Allocation of salary bands to the grades on the basis of market and company data
- Alignment with the works council (where one exists)
- Early involvement in developing the concept
- Joint work up and negotiation of the new pay principles
- Revision of the target and bonus model
- Evaluation of the existing target systems
- Adjustment to the company's strategic goals and to new conditions
- Communication and training
- Transparent communication to all employees
- Training for managers on applying the new systems
- Implementation and evaluation
- Rollout of the new pay structure
- Regular review and further development based on feedback and key figures
A modern pay strategy is more than a salary model. It expresses the company's culture and its commitment to acting fairly, transparently and with an eye on the future. Getting there takes the courage to change. It is worth it, for the company and for everyone who works in it.
THE MAK'ED TEAM develops pay concepts for your company on the basis of existing structures and a defined target structure. Alongside this we develop job profiles, job families and the grading system and bring employees into a transparent, fair model for pay and development. You can find a project example here.
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