The second someone hears about “compensation updates,” they think one of two things: (1) “I’m going to lose my job” or (2) “I’m finally going to get that massive raise I deserve!”
If you work in compensation, you know that neither of these situations is likely to be true. But without communicating about compensation with your people, inaccurate expectations can lead to increased stress, reduced productivity, and undesired turnover.
I understand why many employers shy away from communicating about compensation. It can be a touchy subject. And that’s because pay is personal. But avoiding the conversation does little to help your organization and has the potential to cause harm.
If you’re just warming up to the idea of talking about pay, we recommend four critical times that you should communicate about compensation—when:
This is your best opportunity to promote everything that’s offered to your people—pay included. During new employee orientation, it’s critical to outline the compensation and total rewards philosophy and strategies your organization is using to support its employee value proposition. Provide information to people managers and individual contributors, and differentiate the messaging accordingly. Managers often receive questions about compensation, so it’s critical that they understand your organzation’s pay structure and philosophy for their own pay and also for the people they manage.
While organizations approach annual pay increases differently—some offer merit increases and others follow a step or cost-of-living approach—it’s valuable to remind employees about how pay increases work at the organization, regardless of the approach you take. With higher inflation in recent years, employees are exposed to even more information (and misinformation) in the news and press about how pay increases work, so it’s important to clearly communicate your organization’s philosophy and approach.
Transparency is key to establishing and maintaining trust.
If you’re conducting a compensation study with the outcome of updating job descriptions and compensation levels, it’s important to communicate early (at the beginning of the project) and often (while the project is underway). Inform your people about the study and its intended outcomes. Lead with the most important news that addresses anticipated questions and concerns about how people will be affected.
Many organizations provide bonuses or incentive compensation to employees. This aspect of compensation is often referred to as variable compensation because the payout is “variable” based on the level of performance achieved. Bonus plans and incentive compensation help drive an organization’s financial success when effectively implemented and managed. If employees don’t understand how it works, however, you may want to revisit how it’s designed and/or explained, to ensure that it’s helping you achieve the financial results you’re seeking and helping you obtain the greatest return on your investment.
Compensation conversations can seem like a taboo topic, but it’s best to communicate proactively. Help your people understand your pay philosophy, and be sure to reach out to them early and often during periods of change so your compensation and total rewards strategy is understood and accepted.
We’re proud to work with organizations that value their people. If you want to learn more, we’d love to talk.