Shawnee Love   •  
March 16, 2010

As of July 1, 2010, employees in BC and Ontario will be taking a pay cut. How much of a pay cut seems like the million dollar question and an extensive search on the web showed no clear answers.

What is clear is that the HST will shift costs from businesses to consumers, because businesses can claim back any HST paid. Government communications focus on the benefits to businesses of a streamlined tax and ease of compliance, and suggest that through these cost savings, businesses will have more money to create more jobs. I hope that job creation does occur, but since the reason for being for many businesses is to make money, I am not holding my breath about more jobs being created from the cost savings of the HST.

The statistics disagree, but one thing is for sure, it will cost more for most consumers to get by after the HST arrives. And as always, when the cost of living goes up, employees look to employers for more money and in this case, since so much press has gone into how businesses will benefit from the HST, employees will be expecting a little relief from the only place they are likely to get any empathy, their employer.

So how are you as an employer going to handle raises this year in light of all this? There is no easy solution, but there is a silver lining. The advent of the HST is a great time to review and revise your compensation strategy because it is a major change to the business environment and employees will understand the need to incorporate the affects of the HST into your plan.

Here are a few things you can do to ensure your compensation strategy will work for you:

1. Review your business goals and your plan for achieving those goals.
2. Consider your current compensation philosophy and whether it is enabling your business to achieve its goals and will continue to do so post-HST.
3. If there is a gap, figure out whether the problem is in execution of the compensation plan or because the compensation plan itself is flawed. You can discover the answer to this question by:
   • Evaluating how you are paying your employees in relation to your philosophy. Although there are plenty of excellent compensation surveys out there, a few websites also provide free compensation information, which is extremely cost effective and usually pretty current. Some of my favourite places to check salary ranges include professional associations and www.monster.ca which can be time consuming to do every job but good for spot checks and quick calibrations.
   • Reviewing each employee’s salary with an eye to your compensation plan and whether or not the employee is in alignment or not.
4. If the compensation plan isn’t helping you meet your goals, now is your chance to change it. Aspects to consider include:
   • How you want to pay in comparison to companies competing for your employees,
   • Whether you want compensation tied to performance and if so, what and how much is tied to performance, and
   • What is included in your total rewards package (i.e., benefits and perks?).
5. If the plan is correct but you have erred along the way, then to fix it you will need to:
   1. Evaluate where you are now in relation to your philosophy.
   2. Analyze what you have to do in order to get where you want to be.
   3. Involve stakeholders in developing the plan to get back on track.
   4. Execute successfully.

Prepare your strategy now and be ready for when your employees point out the increase in cost of living and ask about raises.