To be able to set the right salary and decide about rewards in general, you need a lot of information about the employees. Often it is good to involve more and different people when providing feedback on performance.

Base salary

The foundation of all reward strategies is a fair base salary. A fair salary is a hygiene factor that needs to be there to provide a stable employee experience and a sense of fairness towards other employees. The base salary should be based on criteria that are objective and perceived as possible to evaluate in a fair manner, for example:

  • Educational level
  • Previous work experience
  • Level of reponsibility
  • Market medians in the region and for the role
  • Etc.

Variable salary / reward / feedback

If there is enough revenue, you can also work with different types of variable pay. Recent research suggests that bonuses and bonus models designed by the principle of anticipated reward for work performed, is effective for simpler types of work (chords), but not for more complex tasks (see, for example, Daniel Pink, Drive). Instead you should follow a number of principles regarding how to work with variable pay:

  • Involve many different people in the decision of reward – it is not certain that the boss always knows best how an employee has performed
  • Keep the rewards small – big rewards tend to create stress
  • Make it possible for employees to reward each other by encouraging that they give each other small gifts or ivite each other for coffee or lunch
  • Reward often – when there is a reason to celebrate, do it!
  • Reward behavior, not just results. HOW is as important as WHAT
  • Public rewards have greater effect than anonymous feedback – therefore, make good feedback and small rewards visible and public whenever possible.
  • Profit sharing models, where all employees share the company profit is often a positive and motivating way of rewarding employees
  • Work towards increased transparency regarding reward strategies – the journey to get there depends on where you are today in terms of company culture