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How to Have Difficult Conversations about Salary

How to Have Difficult Conversations about Salary

by Frank Roche on September 27, 2010

in KnowHR

The current economic situation is picking up for many companies, but maybe yours isn’t one of them yet. If so, you’re probably not looking forward to explaining to your employees that they might not be receiving salary increases commensurate with their hard work this year. Well, luckily for you, we here at IFRACTAL specialize in HR Communication. Here are a few tips on softening the blow of lukewarm pay increases.

  1. Manage your employees’ expectations. If they understand that your company’s financials don’t allow for you to offer them large increases (or any increases at all), they will be prepared when you do discuss their increases with them. Even if the news is good, surprised employees may be suspicious about the catch.

  2. Offer frequent communication about the company’s status. This will help manage employee expectations. This communication should be consistent and should correspond to what your employees are hearing from their managers.

  3. Make sure to support your managers. Give them access to compensation tools–like our Year-End Software–to make good pay decisions. And don’t forget that managers will need a refresher course every year. This course should include both information on using the compensation tools and information on how to communicate their decisions to their reports. A consistent message is key.

  4. Give all employees a Total Rewards Statement.  If you’re not doing this already, you should. It’s a great way to help them understand the breakdown of all of their benefits. Managers will need to understand what everything in the Statements mean, so they can answer employee questions accurately.

  5. Reward high performers. With the economy improving, your top employees will soon realize there are other opportunities out there.  Make sure they are rewarded above and beyond.  The Total Rewards Statement is especially key with these high performers, as they should understand the entirety of what they’d be giving up if they decide to leave.

  6. Expand your variable pay plans. Emphasizing variable pay will strengthen the link between your employees’ performance and their pay. One way to do this is to extend eligibility. As mentioned above, communicating the expected results to employees throughout the year is the best motivator.

  7. Make sure your employees they are valued. Recognition and career opportunities are huge drivers of engagement, more important than pay. Engaged employees will be productive employees.

      The most important facet of any employee communication, good or bad, is honesty. Anything you say to your employees has to be real, and can’t fudge the truth. Maybe you can’t give your employees the best merit increases this year, but you can give them honesty and recognition.

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