How can you avoid the wage spiral?

Statistics show that as many as 700,000 people changed jobs in 2022, and many are in processes where they become aware of the pay being offered elsewhere. If we as employers do not have a conscious approach to how we deal with this, we easily fall prey to negotiations about higher pay and other benefits.

Many hand in their resignation without giving their current employer any opportunity to influence the decision. Others try to use the situation to get better terms in return for staying, and there is nothing wrong with that. The responsibility for handling the situation well lies with management, and it can be tempting to give in to the demands to get out of the situation.

• Read: How to create meaning at work?

A "ratcheting culture"

Giving in to demands for pay or other benefits to make someone stay can easily become a disservice with unfortunate consequences. Respect for management declines, and more people will begin to understand their value and see opportunities to push boundaries. A “ratcheting culture” can quite simply develop.

One example is the manager who told me he had found no other solution than to meet an employee's demand for a 6-hour working day on the same pay, for fear of losing him in the middle of an important project. The manager said this was not the first time he had had to meet the demands of an employee who stormed into his office. I asked whether these extra rewards led to people staying in the organisation over time, but he had to admit that they did not. He was also aware that it was no secret what certain people had managed to obtain by making demands.

Read: Pay. An easy way out?

Unequal pay can lead to perceived unfairness

We can take it for granted that employees talk about the pay and benefits they receive. In a “ratcheting culture”, dissatisfaction and a sense of being treated unfairly can spread quickly. You risk losing loyal, good employees who don't like to promote their own cause. You are unlikely to get any opportunity to “negotiate” them back if they receive a new offer, because by then their loyalty has already moved to the new employer.

Read: We all want good performance

When you are in the middle of situations like this, it can be difficult to set boundaries. Sometimes we need help finding good anchors for turning things around. There can be a lot of discomfort to overcome, and it is best met with some ground rules.

Here are some tips:

• Decide whether it is the team effort or the individuals that create the most value.
• Create principles for setting pay that are followed – this creates respect and integrity. For example, that you will not use pay as a means of retaining employees. Make sure the principles are known in the organisation, and “keep them warm”.
• Be prepared to explain why any deviations from the standard are made
• Make an overview of all the benefits you offer in addition to pay, and make it well known in the organisation. Feel free to try to estimate a value in kroner, so that you become aware of how much is spent on employees beyond pay. It is often the pay that carries the most weight when changing jobs. That is why it is smart to be careful when assessing how the budget available in pay negotiations should be divided between pay and other benefits.
• Look for alternative solutions that the employee experiences as a reward, but that are not perceived as unfair by the other employees.
• Try to avoid making decisions on the spot, but listen carefully to the arguments. There may be a need for adjustments to the system that are best seen from the perspective of those receiving the benefits.
• Last but not least! Prevent unwanted departures with good individual follow-up and opportunities for development. A demotivated employee is more easily tempted than one who is happy and proud of their workplace.

At Motivati, we care about how valuable dialogue is when it starts from the employees' perception of their work situation. If you have insight into and understanding of where your employees stand, it is easier to create a good and productive working environment. That is why we have developed Motivati and the Motivation Analysis™ , which make this task easier.

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