How to communicate better about pay – part 2
Pay conversations are a vital driving force in creating fair pay for everyone. As we near end-of-year performance and compensation reviews. Following on from part 1 of this article, here are some more tips to help you formulate an effective pay communication strategy.
4. Emphasise total compensation and total rewards
Compensation isn’t all in the base pay. Make sure you discuss bonuses and incentive pay with employees and make sure they understand what they can control and what they can’t to earn these rewards. This is particularly important for incentive compensation that may be harder to earn or dependent on business results. Employees need to know what compensation they can count on versus what they have to stretch to earn.
Compensation also isn’t all cash, which is why you should also look at a total rewards statement that breaks down the entire compensation package. A lot of employees aren’t actually informed of the value that their employers are providing them through benefits, career development opportunities, education, recognition programmes and other rewards.
Employees typically respond favourably to communications about total rewards, especially when they are able to see the cash equivalent that employers contribute on healthcare benefits, retirement programmes, and so on. It can be more than they thought and make them think twice about leaving for another opportunity.
You should also decide when to communicate about total rewards and how often. For example, it makes sense to do this during the recruitment process when the employee is making their decision about whether to come work for you, but it might need to be re-emphasised during compensation reviews, or when changes to benefits and rewards are made.
5. Don’t wait for annual pay rise time
It’s common for organisations to wait to talk about pay until there is an annual compensation review, which might be on an employee’s work anniversary or for everyone around the same time each year. However, waiting for the annual compensation review cycle may be too long of a wait to retain top talent, especially if your organisation is new to compensation planning, you are experiencing high turnover, or you have known flight risks.
Annual base pay adjustments might also be insufficient for employees whose job descriptions have changed materially since the previous year or who have developed new skills. If you offer everyone the same increase when everyone has not performed equally, you can lose people who feel that their value has not been properly calculated. Whatever you decide to do, listen to employees and explain your rationale.
In these scenarios, it makes sense to have pay communications more often. This is especially effective if you can get to the employee before they have to ask about a rise — and before they start job hunting.
If you know which employees are underpaid, talk to them about their recent glowing performance, lay out their total rewards package and discuss how and when compensation adjustments can be made.
Even if you can’t offer a merit-based rise or a promotion outside the annual cycle, most people still feel better when pay has been communicated and they know what to expect when the time comes.
In conclusion
When your employees don’t understand compensation practices within your organisation and believe they are underpaid, they are less engaged with their work. When employees feel valued and aren’t spending time worrying about whether they might be underpaid, they’re more likely to be more fully engaged in their work. A more engaged workforce leads to better business outcomes.
At Payscale, we aim to spark a conversation around pay and provide employers and employees with the tools and best practices to understand how to have an informed conversation together around pay.
For more tips see our latest ebook Comp Quick Guide: Communicating with Employees about Compensation.
To read the first part of this article, How to communicate better about pay – part 1, click here.
In partnership with Payscale
At Payscale we provide technology solutions and services for companies to manage their compensation data/survey participation, job/grade pricing, compensation reviews and pay equity analysis.
