How to Communicate Compensation & Manage Employee Expectations Around Pay

As the saying goes – communication is key. This applies to the workforce, too. When it comes to compensation, communication is vital in ensuring that your employees know why they’re paid the way they are. This helps to keep everyone on the same page. It also reduces the risk of turnover due to awarded compensation falling short of employee expectations.

So how do you establish clear and honest communication with your employees? Let’s dig deeper into how to go about compensation communication and employee expectations in your organization. When achieved, you’ll boost morale, engagement, and satisfaction among your team.

Know Your Employees’ Expectations

Start by familiarizing yourself with your employees’ expectations around pay. This includes total salary, benefits, incentives, and bonuses. Most expectations should be established in the interview process. Other concerns may arise as employees develop their careers on the job.

Hiring is a lengthy process. Candidates are expected to fill in forms, complete tasks, and sit interviews while hiring managers need to juggle applicants, paperwork, and feedback. There’s no point in going through this whole process only to make an offer well below the candidate’s expectations. Ask the questions early on and avoid wasting each other’s time.

As your employees develop new skills and take on new responsibilities in their roles, their expectations may shift. For these conversations, it’s important to conduct regular performance reviews. When you see standout work from a team member, discuss what they’re aiming to achieve and how they believe their work should be rewarded.

Establishing Effective Compensation Communication

While strategizing and developing the best compensation plan may take up a lot of your time and efforts, your employees rarely see this process. By the time they’re involved, it’s presented as a number, and all your efforts to meet budgets, be competitive in the market, and do good for your employees go unnoticed. This is why it’s important to communicate compensation choices with your team.

Often a company’s compensation philosophy and the additional benefits or incentives that come with a compensation package aren’t made clear to employees. Additionally, despite more awareness and regulations, inequitable pay practices continue to this day. Employees know this and without communication, may feel uncertain or unhappy with their compensation.

Be thoughtful and transparent. If you’re making changes or facing difficulties, conduct meetings to explain the situation. Be honest when financial hardships mean you can’t deliver on bonuses. Involving your team in conversations about compensation as you make changes will make them feel heard and appreciated. There’s also less of a chance of blindsiding anyone and upsetting them.

Compensation Communication Goes Beyond Salaries

There’s more to compensation than a salary. There are benefits and bonuses to consider. Choices should be guided by researched market data. To lead the conversations, your organization needs to establish a philosophy.

Compensation Philosophy

A compensation philosophy should explain your approach and position on compensation. It’s useful when explaining your decisions to employees as it demonstrates a fair and structured process. The criteria for deciding compensation should include an employee’s role, the industry, qualifications and experience, title responsibilities, location, and performance. Being transparent about these criteria shows fairness to the process.

Market Data

Employees will also react to compensation decisions better when they’re presented with market data. Using a compensation benchmarking tool allows you to make competitive choices that align with industry trends. You can benchmark any role depending on your set criteria. Showing your employees that you pay at or above market value will make it more likely that you’re meeting their expectations.

Benefits & Bonuses

There’s more to compensation than salary. Many employers are choosing a total rewards approach where they offer compensation beyond a salary. If you can tailor your benefits and bonuses to individuals, your team members will feel personally appreciated and considered. Each employee will have a base salary and then additional benefits including:

• Health insurance
• Childcare and education aid
• Company shares
• Paid leave
• Mental and physical sick leave
• Fitness memberships
• Transport reimbursement
• Vouchers
• Skill-building programs
• Retirement plans

Your employees will have ideas on what benefits they would find most useful. Meeting these expectations can often be easier than base salary ones. Use your existing team to form ideas and ask candidates what they want in interviews. A compensation statement can then be an effective, concise way to summarize these benefits and their financial value.

The Importance of Feedback

Another important aspect of compensation communication is receiving feedback. Ask employees how they’d resolve issues to give them a voice. Again, they’ll feel heard and respected. It’s vital to train your managers to have these conversations as they’re usually the first person an employee will go to with any issues.

Conduct regular feedback surveys and satisfaction reports. Staying on top of this will help you address issues before they lead to turnovers. Making these anonymous can yield more honest feedback. Offer a comfortable space where employees can address compensation and offer ideas on how to improve it.

Asking for and accepting feedback will create a company culture that’s comfortable with change. There’s nothing worse than putting in the hard yards in your role only to get blindsided by your employer. A transparent environment with open communication will encourage a more engaged team. You’re more likely to meet their expectations this way.

Final Thoughts on Compensation Communication

Compensation is a key aspect of any job. As an employer, you want to ensure you’re making smart financial choices but also meeting employee expectations. Compensation communication therefore should be regular and transparent with your team. Listen to what your workers want. Be honest about what you can and can’t offer and don’t blindside them with undiscussed changes. Your employees will appreciate an honest compensation philosophy paired with data-driven decision making.