According to a recent
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This transparency movement has inspired employees to ask questions about overall pay strategy and compensation; they want to know how their performance translates to pay and have confidence in how their pay is calculated.
During this drastic shift in information sharing, employers have the opportunity to build the best compensation strategy — but without robust pay communications, those strategies can fall short and draw negative employee perceptions. Pay communications is all about connecting a worker's performance and compensable skills with their paychecks.
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From compensation philosophy to employee communication
Compensation is one of the largest ways for employers to build and maintain trust with their workforce, which is why they need to improve compensation education and actively communicate about pay. When organizations are proactive in communicating business realities, employees have more trust in the process, and it reduces the shock factor. Employees should understand compensation decisions, not be surprised by them.
To ensure a thorough understanding, HR and leadership need to bring employees along the compensation journey. This means advocating for them every step of the way. In addition to aligning compensation spending with the business' financial performance, HR also needs to invest the time, effort and resources to train not only managers but employees on how the organization is making pay decisions.
Investment in pay education cannot be put aside as employees need to understand the "why" behind their pay as they are a core audience for pay communications. That means understanding the details that help determine their salary like job responsibilities, market rates for the industry and location, experience in the role, the organization's compensation philosophy, and how their individual performance impacts pay. This of course doesn't mean that every detail of compensation is public knowledge, but it does mean that organizations need to make sure employees are informed and understand the why behind their compensation, even when the news isn't exactly what they want to hear.
Again, HR and compensation teams can have the most beautifully thought-out strategy and approach, but it will fall flat if managers aren't able to communicate it. This requires managers to have confidence in discussing pay with employees, which starts with HR and total rewards teams including training in their annual planning process. Taking the time to train allows leaders to deeply understand the organization's compensation strategy on an individual level, and even more importantly, how to communicate it.
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Training people managers to have productive pay conversations
Discussing pay used to be taboo. But pay legislation and increases in pay transparency have primed employees to enter these conversations well-informed. While managers are at the front lines of pay conversations, those managers lacking confidence only decrease the overall trust between employees and leaders. To switch this mentality, training managers to have transparent conversations about pay is critical.
When managers are trained to talk about the organization's compensation strategy, it helps them understand how it ties into company goals. They're able to incentivize their teams and tie pay and performance together, becoming better leaders along the way.
Strengthen the connection between pay and performance during performance reviews
An especially critical time for managers to be equipped for compensation conversations is during performance reviews and merit increase cycles. Performance reviews and compensation are connected, even if they don't always feel that way.
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There are five things you should do to enable managers to talk about pay:
- Create talking points around your organization's compensation philosophy. Share information about your compensation plan, such as pay grades and job level, to facilitate a shared understanding around each employee's compensation package and offer tips for managers to respond to different scenarios.
- Own the story behind compensation changes. Be transparent about what's going on in the business and how that connects to pay.
- Resolve misaligned pay perceptions with data. When managers use data to communicate pay to employees, the conversation feels fair and less subjective.
- Evolve from backward-analyzing performance reviews to a forward-looking approach. Managers set employees up for the future by providing clarity around performance expectations, connecting them to growth opportunities, and incentivizing them to chase big goals.
- Help employees understand the why behind their paycheck. Managers instill trust in the numbers and reinforce the organization's communication around its pay practices.
Pay transparency is a forcing function for talking about compensation. By educating managers, you're enabling them to have better, more meaningful conversations with their teams about pay and allowing them to reinforce existing trust.
Training managers and infusing trust in your pay processes won't happen overnight. It's a long-term organizational commitment to make everyone confident in compensation decisions. But by making this commitment, you're getting ahead of questions from your employee base and helping them feel like a part of the journey you're on, ultimately helping them feel more trusting and engaged in their workplace.
Pay transparency and transparent communication is a journey, not a destination, and even small steps can have a meaningful impact. By investing in the long-term commitment, you'll be able to more effectively reinforce both the what and why behind your pay.
