How to communicate pay to employees
Many managers dread communicating pay review outcomes to their employees. It can be a difficult conversation, fraught with tension and secrecy. However, it is a critical opportunity to demonstrate how you value your employees.
In this blog post, we will discuss pay reviews and how to communicate them to your employees. We will also provide tips for making the process easier for everyone involved!
What is a pay review, and why is it important?
A pay review is a process where employees are given a new remuneration package. This package is based on various factors, such as their terms of employment, job performance, market data, pay review budgets and the company's overall compensation strategy. A pay review generally happens annually but can also occur in stages throughout the year.
One of the most important reasons for this process is to ensure that your employees are fairly compensated for their work and aligned with the company’s pay structure. If something like this becomes an issue, people may feel less valued and lose motivation to work hard to meet expectations. Not to mention that having competitive pay in the marketplace helps attract and retain top talent.
Why talking about pay is taboo
Let’s face it, talking about pay still feels taboo and makes many people uncomfortable. This is because it’s a personal topic, often leading to uncomfortable conversations. It affects a person's entire life to the extent that it may make or break their financial plans for stages of their life. People can also feel insecure if they find out their peers are making more than them or frustrated if they see their managers earning significantly more than them.
"People feel sensitive about how much money they are making, they feel they're going to be judged by it.”
Dr. Ryan T. Howell, an Associate Professor of Psychology at San Francisco State University
Talking about salaries at work is often frowned upon by the higher-ups too, and some companies actually try to impose pay secrecy policies that prohibit employees from discussing their salaries with coworkers. However, this is not legally enforceable in the UK, and the Equality Act of 2010 allows everyone to talk about their salary freely.
How to communicate pay increases to employees
When communicating pay increases to employees, it’s important to remember that it’s a two-way communication process. Not only do you need to be clear about what you are communicating, but employees need to be willing to listen. Making sure that this communication channel is open is vital because if it breaks down, it can lead to negative feelings building up in employees.
Image source: https://officevibe.com/blog/secret-to-discussing-pay-with-employees
Salary negotiations are also often based on both local market conditions and an individual's qualifications, so there can be some awkwardness in explaining why one person has made more than another over the last year.
Here are a few tips on how to communicate pay increases effectively:
Make sure that you are clear about the pay structure and how the increase fits into the broader compensation strategy. Employees will be more understanding if you can provide them with a breakdown of how their salary review fits into the larger context of the organisation. This includes knowing how pay is benchmarked, whether their performance was a factor, and how much budgets affected their pay review.
Be honest with employees about why they are receiving an increase (or not). This could be because of their performance or because the company is doing well financially.
Explain how the increase was calculated. Larger companies especially can have relatively complex calculations to determine a pay review. If you can help employees understand this process, it can help them accept it.
Employees may have more individual queries, such as how to achieve better pay or compare to their co-workers. Be prepared to answer these more sensitive questions meaningfully.
Tips for making the pay review process easier for everyone involved
One way to make things easier is to keep a constant stream of communication flowing to employees. It can be tempting to hunker down and avoid any tough conversations until the unavoidable annual meeting. However, talking openly and often throughout the year means that people will come into the pay review conversation with more knowledge and realistic expectations. You can do this by telling people at the start of the year the kind of pay raises and bonuses to expect if they achieve their goals and by regularly assessing their progress.
32% of employees have to wait more than 3 months to get feedback from their manager.
OfficeVibe Survey
You can also try to avoid making the pay review conversation one-on-one. If you can involve other decision-makers in the meeting, it puts employees’ minds at ease. It’s easier to see that there were checks and multiple levels of approval involved in the decision. V. G. Narayanan from the Harvard Business School says that having a team-based meeting lets "employees know there are checks and balances, and that the process is fair and consistent.”
Finally, make sure you actually have a plan. Of course, conversations should be free-flowing and not stuck to a script, but having a good idea of what you want to communicate and how will deeply benefit the pay review discussion. If you try to wing it, you risk being caught off guard, which can result in your employees losing trust in the management team.
Speak Easy
In this article, we’ve explored what you can do to make communicating pay reviews easier. We know it can be taboo for many employees and managers alike, but communicating about pay is vital if you want your company culture to thrive.
By following these tips, you can make communicating pay increases easier for everyone involved. With a little bit of planning and thoughtfulness, you can ensure that your employees feel valued and appreciated - which is essential for a thriving company culture.
Our pay review software can also help you breakdown and understand pay structures, meaning you can better communicate it to employees. Book a demo now to see how you could improve the pay conversation at your company.