Salary Talk: Tips for Talking About Pay with Employees

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Salary conversations - such as negotiating an offer with a job candidate, confronting an inquiry about a pay increase from a current employee, or dealing with a complaint about pay - can be uncomfortable and difficult for employers. Pay is personal. It affects employees' ability to pay their bills, support themselves, and provide for their families. Salary matters, however, need to be discussed with objectivity and frankness by managers. HR can help facilitate these conversations in the following ways.

In the case of current employees, meet with managers to discuss employees' performance, tenure, skill set, scope of responsibility, and value to the organization. With job candidates, look at their skill set, scope of responsibility, experience and education, the job's value to the organization, and how other employees with similar skills and backgrounds are paid for the position.  Address how pay decisions will affect the team or department as a whole. Will other employees' pay increases be affected by giving an employee a higher pay increase, or will an increase exceed the range for the position? Is the employee eligible for a promotion or could they be transferred to a role with higher pay? How will the new employee's pay compare to other employees in the position? These are all important issues to consider when discussing pay with current employees or job candidates.

Next, understand the organization's needs, including how the organization is performing. If your organization has a strong track record of success and profitability, it may be in a better position to provide higher compensation or a pay raise. Success generally allows organizations to pay employees better. If performance is lagging or has been variable, it may be advisable to limit compensation costs.  Also, consider what the organization wants to reward and how it wants to pay employees relative to other companies.

Help managers talk about pay. Arm managers with the tools, information, and education to understand what is going on in the market relative to employees' compensation. This requires actually understanding the data yourself in order to communicate those trends back to them. Educate managers on the overall market trends for the positions in their department as well as how other companies of similar industry, size, and location are paying their employees. If your organization is truly paying employees fairly and based on the market, there's no reason not to be transparent with the data. Additionally, train managers on your organization's pay philosophy and compensation systems. Make sure they understand why your organization pays employees the way they do, the many issues that factor into pay decisions, the latitude they have in making decisions about pay (if any), and how to discuss employees' total compensation (i.e. benefits, rewards, etc.). Teach them how to explain to employees how they can earn a pay increase (i.e. gaining a promotion, enhancing skills, improving performance) in the future or provide alternative rewards if pay can't be adjusted. The trick to having pay discussions is to be able to justify your decisions and present options.

On a final note, recognize that compensation complaints are often the symptom of a larger problem in the employee's job or the workplace. Ask yourself if pay is really the issue because compensation is rarely a driver of engagement for happy, passionate, and motivated employees unless pay is perceived to be so unfair that it creates a major problem related to job satisfaction. Keep in mind that it will usually take much more compensation to satisfy an employee who is a poor fit for the job, has a bad manager, or is unhappy in the workplace. It may be worthwhile to explore these areas before considering changing their pay.

Additional Resources

Survey Information
Use ERC's compensation surveys to determine how other local employers are paying employees of all levels, from hourly to salaried to executive jobs. Click here to see our upcoming surveys schedule.

HR University
HR University is a comprehensive course for those who are newer to the HR profession or those who have limited experience or realize it is time for a refresher which covers topics including compensation and benefit plan design, performance management, staffing, and more. Click here for more information or to register for this series which begins April 26th.