Intentional Pay Conversations Beyond the %

If you’re a leader today, pay conversations are no longer annual events. They show up in one-on-ones, career check-ins, hallway conversations, and sometimes without warning. With AI, employees can look up their perceived “worth” with a single keystroke, which often leads to challenging questions leaders didn’t plan for.

Questions like: “Why does the new hire make more than I do?” “What’s the salary range for the next level?” “I’m meeting my goals — why isn’t my pay increase higher?” “I saw my job posted elsewhere for more money.”

These are not trick questions. They are normal human questions — and when leaders fail to prepare for pay conversations, the impact lingers long after the meeting ends.

I’ve worked with hundreds of leaders across various industries and company sizes, and one pattern is always clear: pay conversations feel personal because they are, in fact, personal. They touch livelihood, value, identity, and future opportunity. When handled poorly, employees don’t just leave the meeting frustrated — they take that story home to the dinner table.

That’s why pay conversations deserve more than a script, a policy link, or a rushed response.

Why Pay Conversations Are More Than Just About Pay

Pay conversations aren’t really about the number. Well — they are — but leaders have far more influence than they realize in shaping the narrative. These conversations are about trust, clarity, and perceived fairness. Employees want to understand how leaders make decisions and whether their efforts matter.

According to Gallup, managers who actively engage employees significantly reduce the risk of turnover — even when budgets limit compensation outcomes. https://www.gallup.com/workplace/236441/employee-engagement-drives-growth.aspx

That means leaders who navigate pay conversations well directly influence retention, regardless of budget constraints.

Yet, organizations expect leaders to handle pay conversations with little to no preparation. They get guidelines, ranges, or a merit budget — and sometimes, if they’re lucky, a few slides on compensation bands. That approach sets everyone up to struggle.

Posting a range doesn’t explain context. Sharing a PowerPoint doesn’t replace a conversation. Leaders need confidence to explain the why, explore the employee’s perspective, and guide the discussion forward.

Leaders also need support. This isn’t about reading slides, watching an LMS video, or typing a prompt into ChatGPT. Pay is personal, so the training must be personal. Adults learn best when they hear it, say it out loud, experience it, and receive feedback. Simply sending information is not enough to prepare leaders for real conversations.

Preparing for Pay Conversations Before They Happen

Preparation is the single biggest differentiator between effective and ineffective pay conversations. Leaders who prepare don’t panic when tough questions arise. Instead, they pause, listen, and respond with intention.

Preparation starts with understanding your organization:

Your total rewards philosophy, how job frameworks and titles support pay decisions, how market benchmarking is used, and how merit and performance factors are applied

Even if you don’t share every detail with employees, you need to understand it to speak with confidence. Uncertainty often shows up quickly in pay conversations.

Equally important is preparing how you’ll engage — not just what you’ll say. Balance telling with asking. Anticipate emotional reactions. Plan questions that invite dialogue rather than defensiveness.

Quick Implementation Checklist – Prepare

Review pay guidelines and philosophy. Identify key talking points and examples. Anticipate common questions. Prepare ENGAGE™-based questions. Know when to pause and ask HR for support.

During Pay Conversations: ENGAGE™, Don’t Defend

This is where many leaders — let’s be real, humans — struggle. When emotions rise, the instinct is to explain, justify, or defend. Effective pay conversations require the opposite.

The ENGAGE™ model helps leaders slow down and create space:

Explore the employee’s perspective. Naturally honor contributions. Ground the discussion in goals and content.xt Acknowledge reactions. Guide toward next steps. Explain what comes next

Pay conversations should never feel like, “Here’s the decision — take it or leave it.” They should feel like a dialogue where leaders listen to the employee, even if the outcome doesn’t change.

For example, when an employee asks how leadership determined their pay increase, a grounded response might sound like this:

Your increase reflects several factors: your performance, your pay’s relative position in market data, and alignment with others doing similar work. We also balance decisions within the overall merit budget to ensure fairness and consistency across the organization. At this time, given your contributions, your pay is aligned accordingly.

It’s also important to be clear: merit increases are not a form of negotiation. They are recognition decisions tied to defined guidelines.

ENGAGE™ question to ask: What questions do you have about how this decision was made or how the process works?

This keeps the conversation open and surfaces what the employee is really trying to understand.

After Pay Conversations: Follow-Up Is Where Trust Is Built

Many leaders believe pay conversations end when the meeting ends. In reality, follow-up determines whether the pay conversation was impactful.

The most common comment I hear from leaders in coaching conversations is, “I wish I had been more direct and followed through more consistently throughout the year.”

Employees need clarity on:

What does growth look like in this role? When will I receive feedback on whether I am improving? What does Excellent look like? What skills or impact matter most? When will progress be revisited?

Without follow-up, pay conversations feel transactional and final. With follow-up, they become developmental and a shared moment of accountability. In many cases, the employee owns the next move.

Effective leaders document commitments, schedule check-ins, and revisit goals. This reinforces that the conversation wasn’t just a moment — it was part of an ongoing relationship.

Common Pay Conversation Questions Leaders Face

As I reflect on the numerous training sessions I’ve facilitated with leaders, one insight consistently stands out. Regardless of industry, company size, or organizational level, the pay conversation questions that leaders struggle to answer are remarkably consistent.

I’ve worked with leaders across healthcare, manufacturing, technology, nonprofit, and professional services — from front-line managers to executives. While their organizations look different, the pay conversations that challenge them most are the same.

This realization is one of the reasons CompAware exists. Leaders don’t struggle because they don’t care. They struggle because they haven’t had the opportunity to practice tough pay conversations, hear how others approach them, and receive feedback in a supportive environment.

“I achieved my goals — why isn’t my pay increase higher?”

Meeting goals reflects strong, consistent performance — and that’s what we expect. It’s important, but it’s not the same as expanding impact. Higher increases are typically tied to work that broadens scope, influence, or contribution beyond core responsibilities.

ENGAGE™ questions to ask: Where do you feel you had the greatest impact this year? Where would you like to stretch or grow next?

“Why did someone else in the same role get a higher pay increase, especially when I’ve been here longer?”

It’s understandable to compare. Merit decisions reflect individual performance, responsibilities, impact, and how pay aligns with the market and peers. Tenure is valued, but it is not the primary driver of merit increases.

It’s also important to be clear that leaders don’t compare employees to one another in these conversations — just as no one would want their pay discussed in someone else’s meeting.

ENGAGE™ question to ask: Let’s stay centered on you — your performance, your development, and what you want next. What feels most unclear or frustrating right now?

“Do pay conversations adjust for cost of living or inflation?”

Merit increases are not tied directly to inflation. Inflation reflects the cost of goods and services, while compensation is designed to attract and retain talent in the external market.

Organizations benchmark jobs and set merit budgets annually, balancing market data, internal equity, and business considerations to ensure fair compensation. Merit is never guaranteed.

ENGAGE™ question to ask: Would it be helpful to walk through how we use market data and set pay ranges?

“How can I earn a higher pay increase next year?”

This is often the most productive pay conversation leaders hear. Higher increases are typically tied to expanding impact — taking on new challenges, broadening contributions, demonstrating leadership behaviors, or increasing scope and influence.

ENGAGE™ questions to ask: What areas are you most interested in growing or expanding your impact? What kind of work would feel like a meaningful stretch for you?

Close with partnership: I’m happy to work with you to outline clear focus areas, so you know what success looks like going forward.

“I see my same job posted somewhere else — I could make $10k more down the street.”

Start with curiosity. One of my favorite questions is: What led you to look into this? You may be surprised by the answer.

Then explore what the posting actually includes — responsibilities, expectations, benefits, location, and culture. Help the employee reflect on what truly matters to them. Often, even when pay appears higher, the work, scope, or environment is not the same.

This isn’t about defending decisions. It’s about helping leaders and employees see the whole picture.

A Critical Reminder: AI Can’t Replace Leadership in Pay Conversations

AI can help draft emails or summarize policies, but AI does not know your employee. It lacks understanding of context, history, emotion, and trust.

Pay conversations are not “watch a video and repeat the script” moments. Leaders need adult learning techniques:

Reading key messages out loud, practicing scenarios, Role-playing, receiving feedback, and reflecting on real experiences

Confidence comes from practice, not automation.

Resources You Can Use

Strong pay conversations don’t happen by accident. They occur when leaders have the right tools, data, and opportunities to practice.

If you’re looking to better support leaders navigating pay conversations, these MorganHR resources may be helpful:

CompAware – A facilitated learning experience designed to help leaders practice real pay conversations, explore common scenarios, and build confidence using the ENGAGE™ model https://www.morganhr.com/compaware

SimplyMerit – A cloud-based compensation planning platform that gives leaders visibility into pay ranges, market data, and budgets so they can make informed decisions and enter pay conversations with clarity https://www.simplymerit.com

For additional guidance on preparing leaders for these discussions: https://www.morganhr.com/blog/impactful-pay-and-performance-conversations

Together, these resources support both sides of the equation — the conversation and the data behind it — helping leaders move beyond transparency and into meaningful, trust-building pay discussions.

Key Takeaways

Pay conversations are about trust, not just numbers. Preparation changes everything. ENGAGE™ creates dialogue, not defensiveness. Follow-up determines whether trust grows. Leaders don’t need to do this alone.