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Why It Is Important To Have A Job Classification and Salary System – Controlling Your Labor Cost

Written by advance on . Posted in Business Practices, Employment, Human Resources, Management, Strategy

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Both employer and employee want fairness in pay, but more often than not salaries are based on the individuals performing the job than on the true value that the job represents to the organization. Over time many organizations start to feel the lack of a consistent pay structure, facing substantial salary discrepancies within the same type of jobs. Together with your Management Team we will help you build a practical system that allows you to have a better grip on your labor cost. This is accomplished by evaluating the true value of the jobs in your organization, establishing job classifications and linking these to market conform salary brackets.

These are some examples of feedback that we have received from clients about the Aruban market when it comes to the height of our salaries and total labor cost. 

Based on our experiences with local companies we have observed the following challenges:

  • Companies not having caps on their salaries;
  • Companies have no clear criteria for (not) raising salaries;
  • Companies have dysfunctional evaluation systems or none at all;
  • Task and responsibilities are not clearly defined and consequently determining fair pay is hard and often arbitrary;
  • Companies have insufficient grip on their salary system and salary costs grow ‘uncontrollably’.

How to regain control?

Taking the following steps will help you regain control over your salary costs and at the same time steer your employees’ performance into the right direction:

  1. Ensure that you have clear and up to date job descriptions that describe what you employees should do (not necessarily what they are doing);
  2. Evaluate / Weigh the job descriptions so you have a clear and defendable overview of the relative weight of each job;
  3. Based on the job evaluation, classify your jobs into job classes (scales).
  4. Built a salary system that ties in with your job classification and consists of salary scales with minimum and maximum amounts;
  5. Decide on the number of steps (‘periodieken’) within each salary scale that give the possibility to decide on the height of the salary for a specific co-worker within the scale of his or her job based on performance;
  6. Have a performance evaluation system in place that, as objectively as possible, enables the evaluation of the performance of employees and provide a solid and defendable base for decision-making whether to raise a salary (or not);
  7. Communicate with your employees what is expected from them to deserve a raise in salary.

If you recognize some of these challenges and wish to regain or improve your control over salary cost versus job value and/or employee performance, we will be happy to discuss the best approach for your organization.

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