Many small businesses unfortunately spend a lot of time and effort designing a pay system and then leave it to the paycheck alone to communicate their pay philosophy and administration. Silence is not necessarily golden in promoting compensation policies. You need to thoroughly brief managers and supervisors in particular on your company's pay system so that they can effectively explain, administer and support your policies.

Managers and supervisors need to possess the following information:

• Your company's pay philosophy
• How to conduct a performance appraisal, if your company has such a system
• How to handle and refer employee pay complaints
• Legal implications of all compensation policies

You need to advise employees of the company's pay policies and how these policies affect them individually. You also need to communicate and fully explain any changes in these policies promptly.

Employees need to possess the following information:

• The job's rating system, how it works and how it affects them
• How the performance-appraisal and incentive systems work
• How they can raise their own income through performance and promotion
• How to voice complaints or concerns

You must keep your compensation system competitive and up-to-date. The key steps in doing so are as follows:

• Obtain and review competitive salary data at regular intervals. (Refer to Compensation and Benefits: Nothing is Simple for more information.)
• Review – and adjust if necessary – salary ranges at least annually.
• Review job descriptions regularly and make adjustments based on disparities between actual work performance and the formal description.
• Evaluate the performance-appraisal system. One common problem is that too many employees get superior ratings.
• Review salary systems in terms of your small business's financial condition to determine whether the system is in line with the company's financial health and is tax-effective and efficient.
• Periodically measure and rate productivity and determine whether any links exist between productivity increases (or declines) and pay policies.