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Illogical salaries

14 September 2016


“Here is the truth about your salary: When it comes to pay, most companies are making things up as they go.”

So says an article in the Wall Street Journal (3rd August 2016). Reporting on a study by PayScale Inc of data of 7,600 companies in the US, Canada and the United Kingdom, the WSJ says that only 38% of employers have a formal compensation structure or philosophy guiding their pay decisions.

A third of companies with no formal strategy in place are developing one, according to PayScale.

None of this comes to any surprise to the HR Consulting team at Spinnaker Global. Spinnaker set up the Maritime HR Association in 2005 to address the increasing demand for reliable and trustworthy salary data in the shipping industry. As the WSJ article says, when pay decisions rely on imperfect data and gut instincts, gender bias and other ills creep into compensation decisions. “Prior to the formation of the Maritime HR Association, no-one in shipping was prepared to share data,” according to Karen Waltham, MD of HR Consulting at Spinnaker and formerly a senior HR professional at tanker owner AET. “HR in the industry has come on a long way since then and, using Spinnaker as the trusted third party, shipping employers are now able to demonstrate to their staff and shareholders that they adopt a professional approach to what is one of the biggest costs in their business.”

Employees simply want to know that their employers are doing their homework to ensure that they are paid fairly. Our experience at Spinnaker is that employers who do benchmark their compensation levels and are transparent with their staff about what they do, reap rewards in terms of staff satisfaction and improved retention.

Karen Waltham says, “The WSJ article is correct when it says that most companies make it up as they go. Without proper benchmarking and a structured pay philosophy, all sorts of problems creep in.”

Often it is a case of paying what the last person was paid, or paying the next person slightly more than they were paid in their previous organisation. In a hot job market or one where particular skills are in short supply, new employees can often be hired at levels above experienced incumbents with the frequent outcome being that existing staff salaries lag behind and people start to leave when they find out. This was particularly prevalent in the case of superintendents during the shipping boom, leaving many companies with pay disparities to sort out.

The Maritime HR Association has close to 100 members globally including many of the biggest names in shipping, who use the data produced by the association to compare their pay with the market and set and adjust their pay policies. Companies will typically aim to pay at a particular market level such as the median or upper quartile with a percentage spread either side based upon how closely a person’s experience and skills (and performance) matches their profile.

The Maritime HR Association benchmarks 125 shore-based jobs in all of the main shipping hubs around the world. “I am biased of course, but I find it incredible that, with this information available, there are still some companies who do not participate,” says Karen Waltham. “The bond of trust between employer and employee, concerns about gender pay gaps, transparency, staying competitive, fairness…. and of course cost control, all make compensation benchmarking a no-brainer.

Spinnaker Global’s HR Consulting division helps clients to establish compensation philosophies and policies that help them keep their salaries fair and competitive and help their employees understand what the company’s intention and mind-set is.

To find out more contact: Helen McCaughran at HMcCaughran@spinnaker-global.com / +44 (0)1702 480142

For UK companies with more than 250 employees facing the new gender pay gap regulations in October, please ask about our range of new products.