This has become quite a topic especially within companies who have historically had total remuneration that was skewed in the benefits portion relative to salary. Salaries typically tracked below the 50th percentile of the market but benefits were generous. As these companies are trying to boost performance, one of the solutions is to bring in “high flyer’s” from outside but the salaries of these high flyer’s often are significantly more than the current internal salaries.
People internally start to resent the outside hires because there is no noticeable difference in performance but certainly very noticeable differences in salary. How do we address this inequity?
1. Companies should move to open recruitment where all jobs that are vacant are open to internal candidates and external candidates. Everyone goes through the same interview / assessment process.
2. The successful candidate who take on the job gets paid the rate for the job – whatever that rate it is. So it doesn’t matter if the external or internal candidate gets the job, the pay is exactly the same. After all if one is prepared to pay and external hire Rm14,000 per month, one must also be prepared to pay the internal person, if he is successful, the same RM14,000 even though his current pay may only be RM8,000 per month.
3. The quid-pro-quo for this is that the successful candidate must be prepared to sign the a new set terms and conditions of service irrespective of the existing terms and condition.
In doing so, the message becomes clear:
we do not discriminate
for the internal staff – of you are a high performer who can compete with external high performers, you have a chance to get market competitive salaries.
all the ill feelings towards the new hires are removed
the company gets to unwind itself out of a heavy-benefits skewed remuneration to a much more cash driven package.
A note on hiring outsiders, I was once counseled by YM Raja Aman, Former CEO of Affin Bank, who said “if you are going to bring in an outside hire, make sure the persons is head and shoulders above the rest in terms of performance. If not, it is not worth it.” Wise words from a very wise man.