In the last few months I have worked with over a dozen companies rolling out their annual increase cycle in PayScale Team. When it’s time for their managers to communicate pay changes with employees, I am always faced with questions around how should we communicate this change in an employee’s total compensation statement. What should companies share with employees and how?
PayScale’s 2018 Compensation Best Practices Report (CBPR), shows that 36 percent of all organizations provide total compensation statements. The research also uncovered that top-performing companies are more likely to share total comp statements (40 percent), as are enterprise organizations (42 percent).
What Is a Total Compensation Statement?
The total comp statement (also known as total reward or employee comp report), is a valuable tool companies can use to foster transparency, communication and better the employee’s understanding of their compensation. Most comp statements will at minimum provide information on the employee’s cash compensation and a monetary value for non-cash benefits. The higher your organization is on The Pay Transparency Spectrum, the more you may want to include on the statement.
(Learn more about The Pay Transparency Spectrum.)
When HR teams ask me what they should share, I recommend sharing what is of most value to your employees. Think about your culture and what your organization invests in employees. Would employees or candidates benefit from knowing what you know about all the non-cash benefits offered by your company?
Timing is also very important when it comes to sharing total comp statements with employees. Ideally, share compensation reports when it is relevant to the employee: Upon hire, after an increase in pay, or after a promotion. But beware, total comp statements are typically not well-received when they come with bad news or even mixed signals. I have also never heard positive feedback when non-cash benefits have been given as a justification for not receiving a cash increase.
The Wrong Way to Communicate Compensation
I am reminded of my first total comp statement that was shared with me, and how my manager at the time was noticeably nervous and uncomfortable with me through the entire meeting. At the time, the company I worked with was becoming more transparent about pay. Also, they had recently laid off hundreds of employees, which was weighing heavily on everyone’s minds.
Our increase was expected to be the magic 2 to 3 percent percent that year. I didn’t know before our conversation, but I was already above the 90th market percentile for my role and my manager was tasked to share the new cap with me and the reason I would not be eligible for the increase. After the delivery of the bad news, he said, “But hey, check out all of these benefits we pay on your behalf! When you look at the big picture you are really making out like a bandit.”
Ouch! That memory leaves a bad taste in my mouth to this day. It is a cautionary tale to help avoid those traps. It also brings me to the point, involve your managers but make sure they are trained and confident in having these conversations before sending them to the battle field.
Train Managers to Talk About Comp
Imagine how that conversation may have been delivered and received if my manager had been more involved in his employees’ pay decisions. How would it have gone if he had more training? Sure, I wasn’t going to receive an increase, but if my manager had been more confident he could have taken an approach to educate me and talk about what would get me to that next level.
The PayScale’s 2018 CBPR shares that less than one-third of companies offer managers training to have tough pay conversations and the fact is, employees are going to talk with their managers about pay. A total comp report can be a great asset for managers to have better conversations if they themselves are confident and knowledgeable about the content. If your organization wants to increase transparency and foster a culture of feedback and communication, the first step is to prepare your managers to be the first line of defense and HR’s partner throughout your entire comp calendar.
If you are still wondering you would like to communicate with your employees, I’ll task you to remember a time when you didn’t have all the answers about your compensation. Back to that first conversation about your total rewards:
- What did that look like and what was missing from that conversation that would have made you feel your worth to that organization?
- What would you have wanted someone to share or educate you about in that first conversation?
- What knowledge about your company’s investment in you makes you feel better about being there?
That is where you should start building your total compensation statement and training for managers.
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