It’s the time of year when most organizations are gearing up to communicate pay decisions as part of the annual salary review process. Months of work have gone into analyzing the benchmark salary survey data and the salary increase survey results to come up with the competitive budget and individual pay decisions. Too often though, organizations gloss over the planning for the final step – communicating pay decisions with each individual employee.
The majority of effort goes into making sure the information is ‘right’. Ensuring the information is ‘understood’ is where there is potential to drive greater returns on the investment in human capital. To help you strike a better balance and get the most out of your compensation spend, we’ve put together these 5 tips to communicating salary review decisions.
- The big picture: enhance employee understanding of the compensation decisions by laying a good foundation. It helps to provide some context and the guiding principles that frame up the pay decisions. Every organization has its own culture that will determine the level of transparency that is appropriate when talking about pay, but you should give thoughts to how best to address,
- Reward philosophy – the organization’s pay philosophy should express the beliefs about what is most valued and what gets rewarded. Are you truly a pay-for-performance organization? Do you value external pay competitiveness? Internal equity? Both? Again, the purpose here is just to set context so be brief.
- Individual performance – a full performance review is worthy of its own conversation and its best to hold that separately and well in advance of a discussion about pay. In this session about pay though, a quick recap of where that prior discussion landed helps set the context for the rest of the pay discussion.
- It takes a village: There are many roles to be played in carrying out a successful communications plan and it’s important to get buy-in early from the different ‘actors’ as to what role each member plays,
- Senior leaders –reinforcing the key message points as part of their communications with their management team or in larger employee sessions helps. When employees see consistency in the messaging from the leadership up and down the organization, the understanding goes up.
- HR generalists – facilitating the timely execution of the communication plan is key. HR business partners have great leverage in making sure the messages are being delivered.
- Compensation – developing the communication materials and managing the overall timeline are a central part of the compensation team members.
- Front-Line managers – engaging with the employees on their teams is where it all comes together.
- Arm the messenger: front-line managers are arguably in the best position to deliver the compensation messages. However, in many cases, that same person is also the least equipped to talk with their employees about pay. Most front-line managers got into their role by being functional experts in their field so it’s only fair to assume they may feel some anxiety about engaging in discussions about pay decisions. Here are some things you can do to help,
- Preparation – be clear about the logistics of what each line-manager needs to complete and by when.
- Provide the talking points and FAQ’s – managers can be most effective when they carry out the conversation in their own words. It’s just more natural and comfortable for anyone. However, you should provide a detailed conversation outline to ensure all the key message points are covered.
- Practice – role-play and allow managers to ‘try on’ different ways to deliver and respond around their key talking points. By practicing, managers can sharpen their deliver and be more clear by the time they talk to their first team member
- The details of the message: the level of depth a front-line manager would get into is largely dependent on the culture of the organization and the extent to which there is pay transparency. In this era where employees have access to data like never before, organizations are increasingly evolving towards more transparency. However, the culture needs to support more disclosure and dialogue.
- Little to no pay transparency – the extent of the communication is limited to things like the amount of award size and when it will be effective. There tends not to be too much discussion.
- Moderate / evolving pay transparency –managers are able to share a bit more about the specific pay action, but also go much deeper with information about the structure and the mechanics for making pay decisions.
- Full pay transparency –a discussion about compensation in highly transparent organizations could include details such as how the market data was analyzed, what survey sources and data elements were used, etc. The primary goal of the highly transparent organization is enhance worker engagement by increasing the level of trust in the system.
- Where do we go from here: the objective of the salary planning discussion is to communicate to the employee the specifics about pay actions they’ll be receiving either to their base pay or to an incentive award. But it doesn’t have to end there. This can also be a time to discuss longer term aspirations. Learn what sort of financial goals the employee has so that you can collaborate and help navigate to the desired next level.
- Performance improvement tips – reflect back to the performance assessment. Are there specific things the employee is going to need to address in order to earn higher increases and payout awards?
- Expanded role opportunities – would their financial aspiration be more feasible if the employee expanded their role or moved into different areas? What behaviors or exposures does the employee need to pick up to move into a different / higher level?
These communications tips should help spark some ideas for you for how you can improve the employee understanding of their compensation. Looking for additional resources? Our compensation experts can provide you with market data you need and help you make the data actionable for your business. Contact us to schedule a brief call to assess your needs.