In the past, open discussions about pay grades and benefits were considered a taboo subject. This is no longer the case. In fact, 60% of workers say they would switch companies to an employer that promotes compensation structure transparency in its culture.
Part of this shift is generational. 89% of Gen Z employees discuss their pay structures openly while only 53% of Baby Boomers are willing to do the same. All of this data is to say that employers and HR professionals have an increasing obligation to be abundantly transparent about compensation structures.
| “Compensation transparency is vital for employee engagement. However, HR leaders and managers still have a responsibility to approach such topics with delicacy in order to avoid unneeded workplace conflicts.” – Larry Beers, Director of Consulting, JER HR Group |
Even though our culture is shifting to one where salary talk is no longer taboo, it can still be a touchy subject. As such, it’s important to know the right way to communicate your compensation plans to your employees, especially if there is a change.
What Is a Compensation System?
A compensation system is a structured approach used by companies to pay and reward their employees. This system encompasses not only salaries but also bonuses, benefits, and other forms of compensation.
This system differs from an individual’s pay structure, which primarily focuses on the direct salary or wages an employee receives.
While pay structure is a crucial part of the compensation system, it does not cover the entire scope. The compensation system includes additional elements like health benefits, retirement plans, performance bonuses, and other non-monetary rewards.
When Is The Right Time to Adjust a Pay Structure?
The right time to adjust a pay structure is often determined by several key factors, including changes in the market, company growth, and employee performance. Recognizing and acting upon these triggers ensures that a company remains competitive and fair in its compensation program.
One appropriate circumstance for adjusting a pay structure is in response to market changes. This could be due to shifts in the industry’s standard pay rates or cost of living adjustments. Regular market data analysis helps companies stay competitive with their pay structures, attracting and retaining talent effectively.
Another circumstance is company growth or restructuring. As a business expands or changes direction, its pay structure may need to evolve to reflect new roles, responsibilities, or organizational hierarchies.
In any case, it’s vital to communicate changes clearly and transparently with employees. This is to ensure they understand the reasons behind adjustments to the pay structure.
Learn More About Maintaining Equitable Compensation at Your Organization |
How to Talk to Your Team About a New Compensation Strategy
Early Involvement
Involve your team early in the compensation change process. This prevents them from feeling blindsided and helps them feel included and heard. Early communication about potential changes also allows employees to prepare and adjust accordingly.
Collect Feedback
Encourage a two-way conversation by seeking team feedback on proposed compensation changes. This involvement can lead to innovative solutions and fosters a sense of ownership among employees, even if not all suggestions are implemented.
Be Direct
While it’s tempting to use jargon to “soften” announcements, most employees prefer leaders to be direct about compensation changes. Explain the reasons behind the changes and their impact on employees in plain language. Continuously communicate after the announcement to address any concerns or questions.
Consistent Follow-Up
Establish a culture of consistent follow-up post-implementation of compensation changes. This can include creating anonymous channels for feedback. Regular check-ins help identify issues and maintain a positive work environment.
Use a Variety of Communication Channels
Use both face-to-face conversations and documented resources like compensation statements to communicate changes. This ensures clarity and builds a sense of transparency and trust. It also makes your communication more accessible to more employees.
Manage Expectations
Provide context for compensation decisions and manage expectations through regular communication before and after changes are implemented. Focus on providing clear, factual updates about factors affecting compensation. This straightforward approach helps align expectations with the company’s current situation.
Support Supervisors
Despite the normalization of pay talk, many managers still find it uncomfortable or awkward to announce compensation package changes to their supervisees. Human resources can help supervisors ease this discomfort by providing training sessions, coaching, and example scripts and scenarios for practice.
Approach Difficult Situations With Empathy
Compensation changes aren’t always positive. Under some circumstances, compensation may have to be lessened or promised pay increases may have to be delayed. In such cases, honesty and empathy are vital. Clearly explain the reasons for these changes and discuss ways to minimize their impact on employees.
Talk to Expert Compensation Consultants About Your Communication Strategies
Changing your compensation strategy while balancing it with your compensation philosophy is already a challenging situation. Even though the incoming generation of workers is more willing to have open discussions about pay, discussing impactful changes can still be uncomfortable. Dealing with both challenges simultaneously can be a difficult situation.
JER HR Group’s compensation consulting team can help you with both challenges. We have over 30 years of experience working with all types of compensation and salary structures. Our experience in both for-profit and nonprofit organizations also gives us a unique perspective on a wide range of potential challenges.
Reach out to us today to get your 3-minute risk assessment.
