Talking to employees about compensation can be hard.
As a manager, you want to strike a balance between keeping your employees engaged and protecting the company’s financial interests, but that balance isn’t always easy to find.
At MorganHR, we’ve guided hundreds of managers through the tricky waters of compensation conversations—rest assured you’re not the only one looking for advice about what to say in a compensation meeting. That’s why we’ve put together the following guidelines, complete with lists of compensation talking points for managers to use.
Tips & Compensation Talking Points For Managers To Use In Common Situations
Acknowledge the person’s feelings first.
When you’re having difficult compensation conversations, the last thing you want to do is invalidate the feelings of the person sitting across the table. Instead, you’ll want to show them that their feelings truly matter to you and will be considered.
As an example, let’s say an employee walked into your office looking upset and asked why a new hire is already making more money than he is, when this person has been with the company for a few years now.
Try one of the following ways of addressing his need to talk before you begin to answer his questions in earnest:
- “I see that you’re frustrated. Let’s talk about what’s on your mind.”
- “I want to take time today to talk more with you about this. Do you have some free time after lunch?”
- “Thank you for sharing what’s on your mind. Let’s get to the bottom of this together.”
Focus only on the person sitting in front of you.
If your employee seems fixated on how much someone else at the company is making, redirect that energy back to their own individual situation.
- “I can’t speak about what other people are making. You would not be comfortable if I discussed your compensation with other people.”
- There are many factors we consider in determining pay (list those for your organization)
- “Let’s focus on you. This is your time.”
Be as transparent with your answers as possible.
Dodging uncomfortable conversations, while tempting in the moment, will backfire in the long run. MorganHR firmly believes that leader transparency is one of the most important factors in building trust and helping employees feel engaged.
You might not know exactly where the line is between too much and not enough information, and that’s okay. Whenever possible, err on the side of providing plenty of context, background information, and reasoning for your decisions. This will help your employees understand that they do indeed matter to you, and that the pay rate you’ve chosen has real logic behind it.
It’s this crucial point where you’ll need to make sure you’re clear on your company’s pay philosophy, the compensation policy that was used to determine the employee’s pay, and the criteria that would need to be met for the employee to increase their pay. Ask someone else for help if you need to; never punt or dodge these important questions.
Continuing our above example, it can help to explain in detail why a person might make more or less than someone else at the company.
- “We follow the market rate for each role. Let me show you where we got these numbers.”
- “Tenure doesn’t necessarily equal pay. We value your time and experience, but we also take into consideration other factors such as…(list from your company)”
- “Let’s discuss some specific examples of your goals and achievements. I want to hear your thoughts about why you believe the pay is unfair.”
- What are your expectations for pay in this role?”
Redirect their emotions into a more positive direction.
Help the employee focus on the future:
- “There’s an opportunity for you to grow within your current role. Let’s discuss some ideas.”
- “What are your interests? Would you like to pursue further training in your role?”
- “What does growth look like to you? And how can we get there?”
Share your company’s pay practices according to the unique situation.
Not all compensation conversations will go the same way. It’s likely you’ll face a variety of questions about pay at some point during your career.
As another example, let’s say an employee has been doing their own research into the market value for their position, and now they have questions about why they aren’t making more in their current role.
You’ll still want to address the person’s feelings, focus on their unique situation, be transparent, and ask them productive questions. But the exact form your conversation should take will vary.
These are great, probing talking points with plenty of opportunities for follow-up:
- “I’m glad you’re taking an active role in understanding your pay. Let’s talk more about that.”
- “You bring a lot of value to this company. I’d be happy to explain how we arrived at your current pay rate.”
- “Let me explain how we look at market data and then use internal data to develop our compensation packages.”
- “It’s great that you want to know more about how we pay people within the market range for your position. Let’s look at some of the sources you have found together. I would like to understand the location, industry, and what kind of ranges they are posting.”
- “Take into consideration some of the other perks you value about your position. What is important to you in terms of flexibility, benefits, and workplace culture?”
- “Here’s why we believe our company stands out in terms of the total benefits package and other rewards of working here.”
- “If you’d like to move toward the higher end of the pay range, let’s talk about how you can accomplish that. What are some ways you’d like to grow within your role?”
Remember, even positive compensation changes deserve a personal conversation.
As a manager, you might feel that good news doesn’t necessarily warrant a face-to-face meeting. After all, your employees will be happy about the increase, so there’s no need to schedule a meeting to address tricky questions. Right?
Actually, this isn’t the case. Let me share this personal anecdote illustrating exactly what not to do when giving good news:
In a previous job, I was awarded a pay increase in recognition of my achievements. I was handed a post-it note with ‘4.5%’ written on it, which was the highest increase it was possible to achieve. That was the extent of the conversation. My leader didn’t take the time to have a real discussion with me or explain what they valued about my work. It turned what should have been such a positive interaction into something so cold and distant that it left me feeling almost disappointed.
Instead of handing someone a post-it note (or simply letting the person find out when their next paycheck is higher than expected), you’ll want to be sure your employee receives the same transparency you’d take time to give if the news wasn’t so good. Be prepared to offer some heartfelt congratulations, appreciation, and a detailed explanation of the value the employee brings to the company.
Handle compensation conversations like an expert—ask us about our CompAware program.
When you prepare for these conversations ahead of time and have a thorough understanding of your company’s compensation structure, talking to employees about pay becomes much less daunting. And when you go into a discussion with a good idea of your employees’ motivations, questions, and perspectives, finding common ground becomes even easier.
Having transparent conversations is crucial to good leadership! Master this, and you’ll not only keep yourself out of uncomfortable situations, but you’ll also increase trust within your company and contribute to a workplace culture centered around healthy communication.
CompAware—MorganHR’s Manager Compensation Conversation Training Program—is MorganHR’s answer to the burning question of how managers can learn these crucial skills. We craft each session with the goal of training leaders to handle complex discussions with transparency, grace, and confidence.
Contact us here if you have any questions!
