Compensation Conversations – How to make them better for your managers and employees

Employees and potential candidates are more knowledgeable about salary data than ever before, either through the internet or colleagues, so ensure your organization is confident with its base pay compensation plan and understands how it compares in the marketplace. Having the ability to share with employees the process by which your organization makes pay decisions increases employee engagement and satisfaction as they feel like they are thoughtfully considered and valued.

Why is compensation communication important?
This is the time of year when you have either already administered salary increases or are getting ready to do so. And inevitably, this process brings up questions regarding pay that managers may not be properly equipped to answer. If your employees feel that your pay decisions are arbitrary or do not understand how your compensation strategy tracks back to the organization’s overall business goals, it leads to confusion and a sense of powerlessness. Disengagement naturally follows, possibly leading your employees to look for other opportunities, taking with them their skill set and institutional knowledge. Giving your managers the tools to explain base pay setting, raise increases (or no increase), reasons for differences in starting pay and wage differentials, makes conversations more productive and clear while also making the employee feel like you are being thoughtful and straightforward with your approach.

According to a study done by Mercer in 2002, when employees are well informed and communicated with clearly about the pay-setting process in their organization, they walk away feeling much more satisfied even if they don’t agree with the actual number. The bottom-line is that employees who understand the process in which pay is determined have greater engagement and satisfaction. Not to mention your managers will also feel empowered and supported during the salary review process.

Top three compensation communication tips:

  1. Communicate throughout the year – Instead of having a conversation about pay practices once a year, keep employees informed throughout the year specifically when it comes to how performance tracks to your compensation plan. Ongoing communication makes employees feel informed and empowered, and helps them understand how their actions and contributions can help improve the bottom-line – both their own and the company’s.
  2. Train your management team – Ensuring your managers have the tools they need to help roll out a compensation plan or answer questions about the plan will help to increase employee buy-in.
  3. Educate employees on their total compensation package including benefits, rewards and other items unique to your culture (such as education and development opportunities as well as work life balance programs) they receive throughout the year.

In the coming weeks and months we will be sharing tips and information for creating an effective compensation strategy, communicating compensation details with employees and developing a benchmarking process. Let us know if you have a specific question or an aspect of compensation you would like us to explore in more detail.

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