It’s not just about the level of pay but largely also on the drivers for salary setting. And on the ethics. Recently the European Government felt the need to intervene on bonuses in the banking sector. Because of public pressure, it is seen as unfair that those who so called created the economic downturn, would get high bonus pay-outs. Great victory for the Indignados. Desperate decision for the democratic free trade. I can agree with politicians intervening on pay structures by setting minimum levels. A good example is the current public debate on pay and working conditions for the Bangladeshi workers that fulfil one of our most basic needs: clothing. It now looks that greedy consumers in developed countries –read “us” who always like to buy cheap- are giving our greedy lifestyle a slightly more ‘social twist’.
We can only applaud that move; but we should not accept governments to intervene on maximum pay and on total reward levels; that should be the sole responsibility of those who create employment. Cost and profit management is the return an employer should be entitled to for investing his own monies at high risk.
And all the rest in between minimum and maximum pay should also be the employer’s discretion. Let HR gurus, professors, politicians, trade unions, consultants, etc. all have the debate; I don’t care. It keeps them busy. Whether salary progression should be based on length of service, on competencies, on multiskilling capabilities, on performance appraisal criteria, etc. Whether it should be impacted by cost of living or by the negotiation skills of trade union leaders. These are all endless debates and create studies that will never overrule the basic economic principle. Because the fundamental basics are clear; for an employer there are only two questions to be answered. “Can I afford it” and if so “Is it needed to motivate and retain my staff”. That’s it. Nothing more. And that is no different and not less ethical than the two questions we’ll be asking ourselves when buying Bangladeshi clothes. “Can I afford a slightly higher price” and “am I happy to pay a bit more so to give them better living conditions so that they’ll keep producing my clothes”.
Then still the question remains on how and based upon what criteria salaries should move. Now, isn’t it the company’s owner who should be able to set and apply the criteria? It’s his monies that he’ll be putting at risk (same for public listed companies). Not different to when you select a plumber for the shower in your bathroom or when you buy a cheap holiday package; then it is your money you put at risk. Do you first consult politicians? Trade unions? For all of this, there is nothing wrong with ‘fit for purpose’, or ‘felt fair’, or ‘case by case’.
And that approach is still the most basic and most democratic. The ‘buyer’ decides. Also on reward; on the level and the criteria. And the buyers’ payment level will be based on one criterion: what do I get in return. From the plumber; from the holiday tour operator. From the employee.