How to Talk to Leaders and Employees About Compensation

How to Talk to Leaders and Employees About Compensation Here on Compensation Today, I often encourage HR pros and business leaders to take more time with their compensation planning. And, with our PayScale clients, we carefully break down the process and go over every detail. But, then what? It’s then time to carefully communicate the results with the rest of the company. And, that process is often done too quickly. I believe that if we don’t spend as much time and energy communicating about our compensation system as we do with design and implementation, then it will almost certainly fail.

August 1, 2011

How to Talk to Leaders and Employees About Compensation

Here on Compensation Today, I often encourage HR pros and business leaders to take more time with their compensation planning. And, with our PayScale clients, we carefully break down the process and go over every detail. But, then what? It’s then time to carefully communicate the results with the rest of the company. And, that process is often done too quickly. I believe that if we don’t spend as much time and energy communicating about our compensation system as we do with design and implementation, then it will almost certainly fail.

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In my recent presentation at the SHRM national conference, titled “Communicating About Compensation with Leaders & Employees,” I shared my belief that companies that communicate effectively about pay perform better. I gave some advice on how to be one of those companies.

Common Pay Communication Challenges

For starters, there are some common situations where HR leaders must try harder to communicate their compensation strategy to their employees. I mention these in the hope that you’ll recognize them and think, “Oh, yes, this is important.”

1. Tenured employees who don’t understand why they can’t be paid over their position’s pay range maximum.

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2. Current employees who wonder why new employees might be brought in at a higher rate.

3. New employees who wonder why their pay doesn’t match the “average salary” for the position that they downloaded off the Internet.

3. Managers who want to override pay structures to compensate a “unique” new hire better.

How to Approach Communication

A well-defined compensation strategy can help you approach these difficult conversations with more confidence. You should be able to speak about the following.

1. What you reward. Along with senior management, you should develop an answer to the question, “What do we want to reward?” It could be performance, longevity, skill sets or something else.

2. Defined salary ranges. Managers should understand the ranges for all jobs and how their people fit into those ranges. Employees should understand what their pay range is and, in most cases, the ranges for positions that they hope to have one day.

3. Confidence in your numbers. If you feel unsure about your salary ranges, that uncertainty is a sign that something is wrong. You need to re-evaluate your system, make corrections, eliminate weak spots and get to a place of confidence about what you’re offering your employees in your market.

4. Explain why. There are reasons why you chose the positions and pay that you did. These reasons come from the company’s strategy, your market and your current, available budget. As much as you can, reveal this information to your employees and get them on board with your choices.

Get Executive Leaders to Take Charge

HR may be in charge of executing the compensation strategy, but I think it’s best if senior managers deliver the information about it to employees. You can not make this process a true success without their support so get them involved, visibly. The executive team should be a part of the development of the compensation philosophy and should be able to talk about it with confidence.

For example, “We are giving no more than three percent raises this year, and these are the three reasons why.”

Prepare Your Managers

After the executive team speaks, your managers will need to field questions from their team. They should be able to explain how the budget was set, the range for each employee’s position and how each raise was determined. I recommend doing some role-playing with these managers so that you’re sure that they will have productive conversations that keep close to the company’s compensation philosophy.

Do It Right

Pay is an emotional issue for employees. It’s about their and their family’s survival. Everyone in a leadership position at your company needs to understand that. Take the time to prepare them all to communicate about pay and you’ll have a much more engaged and happy workforce.

Regards,

Stacey Carroll, CCP, SPHR
PayScale, Inc.

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