The Sweet Science Of Pay Communication

11 actionable strategies to boost pay transparency and empower managers to lead confident compensation conversations

When it comes to an organization’s compensation philosophy, employees deserve and expect confidence in compensation. Businesses need to create an environment where employees feel included and valued for their work. In doing so, organizations need to renew their focus by infusing transparency and confidence in pay practices, aligning pay to performance, and communicating compensation to all employees. 

Research from World at Work shows that only 28% of organizations note that a majority of employees understand their organization’s compensation philosophy. 37% of organizations either do not have a compensation philosophy or it is unwritten.

Confidence in pay matters. It creates a transparent foundation for productive conversations between managers and employees and demonstrates a commitment to equal pay for equal work. 

Inspiring Confidence in Pay 

The increase of pay transparency legislation has boosted the visibility of salary ranges. This transparency encourages employees to ask questions about their pay and provides data to interpret their compensation packages. Employees seek to understand more than the hiring ranges on job postings. They want to know the “why” behind their pay: how it was calculated, how it is influenced by their experience and geography, and how it connects to their individual performance. 

Total rewards leaders use a compensation philosophy to create compensation programs aligned with the organizational goals and use relevant data to develop salary ranges and structures. However, Payscale research shows that only 59% of organizations say they train managers on pay communication. When employees and managers have clear conversations about pay and understand the why behind compensation decisions, it builds trust and confidence and positively affects organizational culture.  

Actionable Pay and Communications Strategies and Why They Work 

Transparent pay and communications strategies are essential to instilling confidence in managers and employees. Here are 11 steps HR leaders and communications practitioners can take to help effectively structure pay communications. 
 

1. Benchmark positions against the market. Use this information to build pay structures and adjust salaries that are outside of range. Develop incentive plans based on eligibility data from benchmarking efforts. 
2. Perform a pay equity analysis. Partner with legal counsel and conduct a pay equity analysis. Adjust individual pay if needed. 
3. Create branded compensation communications. Ensure consistency in messaging so employees quickly can identify compensation-related messages. 
4. Communicate and publish the organization’s commitment to pay equity. Discuss it broadly will all employees and post internally so current and new employees can view the organization’s commitment.  
5. Document pay practices in a handbook for people leaders. Outline compensation procedures and guide managers to additional resources. Avoid jargon when possible and include a glossary of compensation terms to ensure understanding.  
6. Discuss merit budgets annually. Remind employees how budgets are determined and of the merit process. When will employees see their merit increase? How will they learn the amount? Communicate this information to all employees and publish an FAQ for employees to refer to throughout the year. Be sure to explain how merit increases tie to individual performance if that is your organization’s philosophy. 
7. Provide updates to incentive plan performance for plan participants. Have executive leaders like the CEO and CFO lead the conversation. Provide updates on organizational performance and projections on plan funding, and discuss the items plan participants can focus on to achieve greater bonuses. Communicate to eligible employees on a dedicated call, in person, or in writing at a minimum of three times annually (beginning, middle and end).  
8. Publish individual merit and bonus statements. Provide managers with compensation statements to deliver to their direct reports each merit cycle, summarizing the individual’s percentage increase and new pay rate. The individual bonus statement shows how an employee’s bonus is calculated to further foster transparency and trust. 
9. Train managers to have confident pay conversations face-to-face. Do not assume tenured managers are comfortable with compensation discussions. Train leaders on the organization’s philosophy, pay practices and strategy to provide a solid understanding. Conduct practice sessions and use recordings to train newly hired and promoted managers. Supplement with annual training. 
10. Empower managers with toolkits and resources to talk about pay. Include talking points about how to have compensation discussions and how the organization uses salary survey data.  
11. Explore a variety of communication channels. Record videos to gain excitement and emphasize key messages. Design infographics to enhance understanding of complex topics such as complex long-term incentive plans.

How Compensation Communications Enable Confident Conversations

Organizations can apply these 11 steps to support managers to be more confident in their pay conversations with employees. This process helps employees see merit budget information in advance of the annual merit cycle. 

The recipe for successful pay communications is transparency and confidence. With both ingredients, employees trust the process and understand how their individual performance affects their pay, thus driving the business’s objectives. Building trust and confidence in pay practices positively affects the culture of the company, leading to sweet rewards for everyone involved.  

Danielle DuBois (PHR, CCP, GRP) serves as Director of Global Rewards, HR Technology, HR Operations, and Talent Acquisition at American Dairy Queen Corporation. With over 25 years of experience, she brings deep expertise in Total Rewards and HR technology strategy.