As a PayScaler and a people manager, one of my all-time favorite features of our PayScale Insight product is the (newly updated!) Employee Compensation Report, which enables managers to communicate with employees about their total compensation reports. This report — and other forms of total compensation statements — is a crucial tool for employee compensation communication and pay transparency.
However, a report alone does not ensure communication perfection, so I’m here to share some dos and don’ts for effective utilization of an employee total comp report.
DO: Share total compensation reports with your employees.
DON’T: Wait for the increase cycle to do so.
It’s very common for organizations to share total compensation reports in alignment with the annual pay review and increase cycle. This works well for lots of orgs — it’s a nice book-end to that process and signals a “final delivery” of pay decision information. But, if you’ve never delivered pay information in this format and feel your employees chomping at the bit for some transparency and communication around comp, don’t delay!
The simple act of laying out total compensation details — even if it has little to do with a promotion or pay increase — is extremely beneficial to employees. In fact, communicating compensation can mitigate the effects of low pay. PayScale’s data show that when an employer pays under market rate, but clearly communicates the reasons behind that lower compensation, 82 percent of employees report job satisfaction. As an added benefit, this makes additional “out-of-cycle” comp conversations less of an event and can get your company started down the path of regular communication about comp outside of the increase cycle.
DO: Make time to put together a comprehensive employee total compensation report.
DON’T: Overshare details your employees don’t care about.
The total compensation report is an extremely worthy tool for guiding conversations around pay and painting a full picture of an employee’s total comp, including base pay, variable pay and benefits. This report should prompt conversation about pay, and ideally conversations about performance and development. What this report shouldn’t do is bore the heck out of your employees while you drone on about the details of insurance contributions.
Take a quick pulse of your workforce and do a gut check on what types of details your employees would benefit from. Maybe you have a workforce that really DOES want a breakdown on the company contribution to healthcare benefits, or maybe your employees are more interested in taking lots of time to talk about their incentive payout. Not sure which route to go? Ask employees beforehand or enable managers to prompt those questions during employee compensation conversations.
DO: Train your managers on the ins and outs of the compensation conversation.
DON’T: Assume managers are ready to talk pay without some help.
Managers are managers for a reason — they should be expected to talk to their employees about a lot of things, including performance and compensation. However, that doesn’t mean they won’t need help. In fact, less than one in five organizations are very confident in their managers’ abilities to have tough conversations about compensation with employees (19 percent). That’s got to change! In the same way that HR leaders might coach or prepare a people manager to deal with an employee performance conversation, they should also be enabling managers to discuss pay with their employees.
An easy way to get started with manager training is to hold a couple of sessions walking through the details of the comp report — and then maybe partnering or shadowing those conversations with managers the first time around. Want to go the extra mile? Role-play these conversations with managers and equip them with details about the company’s pay philosophy and comp strategy.
Need help training managers? Check out PayScale Professional Services.
DO: Consider sending employees their compensation BEFORE the conversation.
DON’T: Send an employee their total compensation report without having a conversation.
If a compensation conversation is happening with an individual who typically needs time to process before discussing new information, consider sending the employee compensation report ahead of a scheduled conversation.
This is especially fruitful if these reports are being shared outside of the increase cycle — if there is no “reveal” to that compensation report, you may enable your employees to ask more robust questions by sending the report ahead of time.
With that said, email should never be the ONLY communication about a total compensation report. Don’t assume employees have no questions, even if this is something you do regularly. Even tenured employees deserve an opportunity to talk face-to-face about their total compensation — you never know what new questions might come up.
DO: Understand that’s someone’s personal circumstances have a big impact on their perception of comp.
DON’T: Refer to personal factors when discussing someone’s compensation.
It’s no secret that big life events, job changes or career opportunities get people thinking about money.
Most life events — happy, sad or somewhere in between — have costs associated with them and often inspire people to think about how much money they’re making, how they can make more and what they should be doing with that money. This means you can expect employees to point to their personal life when discussing pay.
This should be expected, understood and empathized with — but be careful of conversation that leads an employee to believe decisions about their pay were made because of their personal circumstances.
Phrases to avoid:
“I know you are getting married this year, so I am excited that we’re able to offer you a significant pay increase.”
“I’m sorry we don’t have a budget for pay increases this year; I know you just bought a new house.”
“With a baby on the way, I bet this additional money is going to be really helpful”
While it’s true that compensation is the thing that pays bills, buys houses and sends kids to college, those things aren’t (and shouldn’t be!) deciding factors of someone’s pay. This doesn’t mean you can’t be happy for your employee when they exclaim, “I’m so excited about this bonus; it’s going to pay for my honeymoon!” or empathize with their disappointment if they didn’t receive a raise. Just ensure that you’re communicating the business and performance components of that decision.
DO: Give ample time to discuss WHY someone is getting a pay increase (or not).
DON’T: Bury the lede. Get to the interesting part first.
Many total compensation reports are delivered in partnership with annual increases. If someone is getting a pay increase, start with that information! Then dig in to why that increase occurred, how the decision was made, how it impacts their total compensation and any other relevant details laid out on the employee compensation report about total compensation, performance, etc.
Giving increases without explaining the “why” can lead to confusion, missed opportunities for continued development and entitlement. If your company is going from a tenure-based or COLA-based increase strategy to a merit-based or pay-for-performance strategy, it’s even more important to talk about it. Even if your employees weren’t fully aware of why they were getting increases in the past, they’ve likely come to expect one. The total compensation report conversation is the perfect time to talk about the shift.
If you have reason to believe an employee is expecting an increase and their performance or contribution has not warranted it, start the conversation with that fact. It’s highly probable that conversation won’t feel great on either side — and I’m not here to pretend it will be easy — but it’s going to be worse if you spend 15 or 30 minutes talking through their compensation break down only to end with an awkward and mumbled, “So I guess this means I’m not getting an increase?”
Honor the contribution that person has made by being honest with them.
“Your performance is steady and you continue to be a solid performer in your role. Your current pay and position in range are aligned with that current performance. I know that you are eager for a pay increase and I’d like to talk through the additional productivity I’d like to see from you to warrant an increase in your range.”
DO: Talk about compensation in relation to performance and career development.
DON’T: Talk about all of this in the same conversation.
A conversation about compensation without discussion of performance and development is a huge miss. However, it’s going to be hard to have a deep and impactful conversation about career opportunities and professional development amidst a breakdown of compensation details all in one sitting.
Consider breaking the compensation conversation and the performance and/or development conversation in to two or three sessions.
If this is your first time creating a more formal space for these convos, consider breaking them out across a quarter (one each month), or having each piece take place every three to six months — especially if you don’t do traditional long-form performance reviews. There’s a lot of opportunity to make performance and development discussions relevant to, but not part of, the total compensation report conversation.
If your organization has a more traditional existing annual process, ensure that you are communicating that order of events to your employees. This simple heads up will go a long way:
“This year, annual performance evaluations will be taking place in October and annual salary reviews will occur in November. Total compensation reports will be delivered to all employees through a conversation with their manager by December 15. Any pay changes, increases or promotions taking place as a result of performance and salary reviews will be effective January 1 of next year.”
Either way, these conversations should involve my favorite communication strategy: “Tell them what you are going to tell them, tell them, then tell them what you told them.”
Are you ready to start sharing a total compensation report with your employees? Learn how PayScale can help!
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