Many managers spend a lot of time to establish the salary system, but both senior employees and new employees complain about it, and even cause serious management problems. What's the reason? According to a recent article published by Stanford University, many people fall into the trap because they don't know about salary. He further pointed out six common salary mistakes made by enterprises.
Mistake 1: labor cost accounts for a large proportion
Although it is true in some cases, the proportion of labor cost in the total cost will vary greatly because of the difference between industries and enterprises. However, many managers think that labor cost is a big expenditure. In fact, labor cost is just one of the many cost items that can be adjusted immediately.
Mistake 2: labor cost is not equal to employee's salary
Labor wage is the total labor wage divided by working hours. Labor cost should consider productivity, that is, how much output the enterprise pays its employees. If we regard labor wage and labor cost as the same thing, it will lead to many management mistakes.
Mistake 3: to reduce labor costs, we only need to reduce the hourly wages of employees
In fact, labor cost is a function of salary and productivity. If we want to reduce the cost, we should consider these two factors at the same time. However, generally lower wages will lead to higher labor costs.
Mistake 4: give appropriate rewards for individual performance
Many studies have shown that it is not an effective way to improve employee performance by giving individual rewards. Because giving appropriate rewards for individual performance will hurt team performance, encourage short-term goals, and even lead people to think that salary has nothing to do with performance, but has something to do with personal relationship and flattery.
Myth 5: the effective and lasting weapon is to reduce labor costs
In fact, reducing labor costs is an unreliable and unsustainable way of competition. In contrast, improving quality, strengthening service, improving products and processes, innovation and leading technology are more difficult for competitors to imitate and surpass.
Myth 6: who will do without salary
If there is work, there must be remuneration. Employees without salary will not do it. Of course, employees work to get paid, but in addition to benefits, they also need to get the meaning and interest of life from work. If enterprises don't understand this, paying employees' salaries is like bribing employees. Although they pay, they can't get loyalty and centripetal force.
After understanding these six misunderstandings, how to establish a good salary reward system for enterprises has an eye: first of all, we should start from the distinction between labor wages and labor costs. We should understand that it is labor costs, not labor wages, that affect the competitiveness of enterprises. Moreover, the labor cost may not be a large proportion of the total cost. In addition, enterprise managers should also understand that salary and reward are just one of many management tools. Enterprise managers can use other tools to improve centripetal force and team cooperation performance.