Webinar - How to Communicate Compensation to Employees
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A study conducted by PayScale revealed that employees’ perceptions of how they are paid are a better predictor of their intent to stay than their actual fair pay to the market. These implications create a huge opportunity for employers to get it right when it comes to communicating pay effectively. Conversations about pay are often perceived as scary, demoralizing, or just boring. However, done right, pay talk can be quite motivating. View this webinar and learn: -Why talking about pay with employees is so important -How you can train your managers to have useful compensation conversations -What typical situations you may encounter when it’s time to talk pay In partnership with BambooHR
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Webinar - How to Communicate Compensation to Employees
- 1. Communicating Pay to Employees Mykkah Herner, MA, CCP Modern Compensation Evangelist Paige Hanley, CCP Sr. Compensation Professional Communicating Pay to Employees
- 2. Rusty Lindquist V P S T R A T E G I C H R I N S I G H T S B A M B O O H R @ r u s t y l i n d q u i s t r u s t y @ b a m b o o h r . c o m w w w . l i n k e d i n . c o m / i n / r u s t y l i n d q u i s t Mykkah Herner M O D E R N C O M P E V A N G E L I S T P A Y S C A L E @ m y k k a h _ h e r n e r M y k k a h H @ p a y s c a l e . c o m w w w . l i n k e d i n . c o m / i n / m y k k a h h e r n e r
- 3. Understanding How Pay is Perceived
- 5. Feeling appreciated, valued, and adequate rewarded for your effort. Value Total rewards Va Value Rewards Recognition Pay What you get from work
- 6. Comp is about an Exchange of Value Not just Money Experience in industry Experience in market vertical Experience in adjacent markets Experience in field of discipline Experience in adjacent disciplines Experience with competitors Product knowledge Competitor knowledge Time and experience in company Education Discipline training and certification Supply and demand Employer Value DriversEmployee Value Drivers Base pay Performance Pay Paid time off Benefits Travel Culture and environment Work flexibility Work/Life balance Meaningful work Who you work with Challenging work Opportunity to impact Job security Shared purpose / mission Career advancement opportunities Autonomy Senior leadership
- 8. Perception of pay matters
- 10. Five Generations of 2020 Gen Z Millenials Gen X Baby Boomers Traditionalists Bureau of Labor Statistics Employment Projections
- 11. Lead The Conversation 80% of employees will compare pay Source: Card, D., et al., (2011); “Inequality at Work: The Effect of Peer Salaries on Job Satisfaction.”
- 12. Train Managers To Talk About Comp
- 13. of organizations feel very confident in their managers’ ability to have tough conversations about pay 19%
- 14. Comp is about an Exchange of Value Not just Money Experience in industry Experience in market vertical Experience in adjacent markets Experience in field of discipline Experience in adjacent disciplines Experience with competitors Product knowledge Competitor knowledge Time and experience in company Education Discipline training and certification Supply and demand Employer Value DriversEmployee Value Drivers Base pay Performance Pay Paid time off Benefits Travel Culture and environment Work flexibility Work/Life balance Meaningful work Who you work with Challenging work Opportunity to impact Job security Shared purpose / mission Career advancement opportunities Autonomy Senior leadership
- 16. Communication Roles (and Times) Executives: Communicate program to organization at a high level Managers: Communicate compensation details to employees Employees: Bring questions to manager or HR HR: Prepare communication, consult and inform Executives, train Managers
- 17. Tips for Effective Employee Communication • Know your audience! • Tell a holistic story • Make the path forward clear • Prepare, Prepare, Prepare • Be direct and also empathetic • Communicate early and often
- 20. Employee Pay is Low Consider • Should the employee pay be low? • Is budget available? Talking Points • Start with appreciation • Mention market movement • Explain position in range • Provide context • Share this year’s increase amount • Open the door
- 21. Consider • Is this really another job? • Does the organization need it? • Is the employee qualified? Talking Points • Start with appreciation • Mention market movement • Explain position in range • Provide context • Share this year’s situation • Open the door Employee Pay is High
- 22. Performance doesn’t warrant increase Talking Points • Start with appreciation • Mention market movement • Explain position in range • Provide context • Share this year’s situation • Open the door Consider • How can they get up to par? • What future potential is there?
- 23. Perception of Increase is Unfavorable Consider • Will they perceive their adjustment is fair? • How connected are they with others? Talking Points • Reiterate accomplishments • Re-focus on individual objectives • Remind of market value • Discuss why their pay is fair • Open the door
- 24. “I found a salary report online”
- 26. Employee Report
- 29. Consider the Employee Perspective The employee is often going to want: • More money • Promotion • To be paid like their peers • To understand why others are paid more than they are
- 30. Identify Creative Solutions Consider Workplace “Currency” • Paid paid vacation • Additional/Alternative Perks • FTE preference • Staggered increase or offer • PTO • Work assignments • Development opportunities
- 31. Rental Coordinator General Manager, Rental Rental Coordinator Supervisor Rental Manager Grade 3 Grade 5 Grade 7 Grade 12 Identify Development Opportunities
- 32. Immediate Actions • Connect with your employees about what motivates them • Identify conversations about compensation you need to have with your employees • Develop clear career paths • Prepare any high level messages about comp • Prep toolkits for your managers to use when communicating with employees
- 33. bamboohr.com 1-866-387-9595 Follow BambooHR and PayScale on social media: bamboohr.com/blog payscale.com/compensation-today Thank you!
- 34. bamboohr.com 1-866-387-9595 Receive a free job posting on BambooHR’s ATS and full HRIS for one week. We will contact everyone within a few days to set this up. Questions? Receive the related eBook from PayScale Communicating Compensation We will contact everyone within a few days to share the eBook.
- 35. bamboohr.com 1-866-387-9595 Questions? Rusty Lindquist V P S T R A T E G I C H R I N S I G H T S B A M B O O H R @ r u s t y l i n d q u i s t r u s t y @ b a m b o o h r . c o m w w w . l i n k e d i n . c o m / i n / r u s t y l i n d q u i s t Mykkah Herner M O D E R N C O M P E V A N G E L I S T P A Y S C A L E @ m y k k a h _ h e r n e r M y k k a h H @ p a y s c a l e . c o m w w w . l i n k e d i n . c o m / i n / m y k k a h h e r n e r
Notes de l'éditeur
- Rusty
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- Mykkah From Dave’s HBR Article: “This may sound obvious, but our survey showed that “intent to leave” decreased in relation to how favorable an employee felt about their pay. For example, 60% of employees who perceived they were underpaid said they intended to leave, compared to only 39% of those who perceived they were overpaid. The bottom line is this: if you don’t communicate to your employees that they are being paid fairly compared to their talent market, they may leave.” https://hbr.org/2015/10/most-people-have-no-idea-whether-theyre-paid-fairly
- Mykkah Workforce Demographics are changing Preferred communication style is one of the more substantive differentiators b/n the generations. Consider workforce make-up including: Generation Life stage etc
- Mykkah Millennials prefer transparency of pay practice – which sort of forces that orgs get their houses in order – which is ultimately a good thing for everyone. So while it may be frustrating for non-millennials to support greater transparency, it is creating the opportunity for more effective and productive organizations. A nod to Gen Z – we already know they like more privacy (Move from things like facebook to things like snapchat or Instagram) than millennials – it’s the pendulum swinging back towards the center. But – your WF is likely NOT mainly Gen Z, and won’t be for many years.
- Mykkah Finding out where you stack up vs. peers can dramatically change: Desire to stay/leave Overall job satisfaction Exert more/less effort I was approached by an employee who was very upset that her base pay was being frozen. After going through our philosophy, the employees pay compared to the grade and range she was in the employee left the meeting with a smile on her face, feeling positive about the conversation. - company with 300 EEs (Monarch Landing – internal only)
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- Rusty So why is it important to train your managers to talk about comp….read stat Real concern that managers don’t know how to manage. Manager have a lot going along and talking about comp isn’t their primary job so we need to make it easier to do that. Often promoted because their great at their function, not at being a manager. HR and Leaders can’t be having the conversation every time. Not sustainable and not the best, they have the best knowledge of their employees and these conversations are an opportunity that they need to have.
- Rusty Help them understand the spectrum, and build the ability to identify what matters most to the employee. Every comp conversation is an opportunity to talk about everything else. But they have to be looking at the whole spectru. Often when they say “I want more money” actually what they mean is “I don’t feel valued”, and it very well could be the path to fixing that is not about money (in fact, it often has the shortest-term impact on feeling valued). Sometimes they just don’t have the language, don’t understand the equation, and so the only thing they think to talk about is pay. But it might not be as much about pay as you would think. It might. But it might not.
- Rusty And sometimes a manager is trying to solve an engagement problem with only a single lever. But activating the emotional energy of an employee is a far more complex equation, and you need to understand the formula that matters for that employee.
- Rusty Everyone has a role, but the timing is different. HR’s role is to get the program ready, continue communicating updates to the Executive team, and to train the management team (which is what we’re doing today). Executives, are responsible for approving the compensation plan, communicating it at a high level to the company, and they are also managers in their own right so they perform a dual role there. Prepare talking points for executives, covering: Compensation philosophy & purpose Compensation plan changes at the highest level Next steps – talk with managers Managers’ role is to understand the program, communicate the information to your employees, and seek support from HR when needed. Employees’ role is to agree to the program and if they don’t, they need to communicate that to you as managers and again, you can seek out support from HR if needed. Managers *CAN* talk comp, when given the tools, resources, and training to do so. With that in place managers can act both as agents of the organization and advocates for employees. “Go ask HR” or “HR won’t let me” undermines their own authority. HR is here to support, not hinder. Prepare tool kit for managers, including: Compensation plan talking points Compensation plan information Details for each employee they supervise Tips for each type of conversation they may have
- Rusty These are basics for communication in general, and also specifically about compensation. Know your audience Maybe you have someone on your team who needs more direct information, get the headline right away, followed by information that supports that main message Others might prefer a lead up to the big headline, where supporting information is given up front leading up to the big reveal Either way, you want to make sure you’re tailoring your communication style to your employees to ensure your message is heard. Next: Watch the jargon – we’ve given you a lot of terms, you can assume your EEs won’t know all of them, so if you use terms like “position in range” be prepared to provide a definition. Don’t present issues without a way forward – make sure employees know how they can improve or increase their earning potential. Prepare as much as possible – though conversations regarding compensation are not always planned, the more you know ahead of time, the better you’ll be able to handle the conversation. Be direct and also empathetic – compensation is personal, it can impact whether people are able to move into a larger apartment, go to a movie an extra night a week, go our to dinner more often. That said, you’ve done a third party study, you’ve done your homework, you don’t need to be apologetic – so do be direct but also empathetic And last, we mentioned this earlier, but be good to your future self, if you see any issues arising, head them off early.
- Mykkah It’s not an on-off switch, there are levels of transparency, and it’s important for every organization to figure out the right level for them The millennial workforce – they grew up with the internet and are used to having information at their finger tips. They typically want higher levels of transparency and are much more public about their pay then the generations before them. While it may not be right for every organization to share everything, we find that if a company shares some information, it fosters more confidence from the millennials in your organization. Side note: if you want to be transparent, you have to clean house first.
- Mykkah
- Mykkah For Live Training: Start by describing what we’re talking about – EE pay is low, or perceived as low What we’re seeing here, this is the range, here is where their range is, it is low in range (4%), you might think it’s low, etc. Considerations: Should it be low, or is that amount appropriate? (did they just start the job, is there proficiency not up to par, still in training)? Is there a budget? If the answer is no, that’s a different conversation (that message is usually delivered by Execs/HR – no increases this year, sorry bout it) You’ll notice the talking points look the same for most of them, but the way you handle the conversation is different Scenario A – the situation is that you have an EE whose pay is low, the market moved up, and they are proficient in the role. And, there is budget to do an increase. So, the best of all cases. Thank you for all your contributions this past year Your position is gaining in market value You are below last year’s competitive range Last year you earned an increase of 3%, which was the organizational average I’m going to give you a bump of 5%, which is above this year’s organizational average increase of 2.5% Keep doing what you’ve been doing and if the market holds you’ll be in good shape next year (that is opening the door, giving them a way to move forward or progress in some way) Scenario B – the situation is that you have an EE whose pay is low, the market moved up, but their proficiency level isn’t quite up to par. The budget is available, but irrelevant due proficiency. So, a bit more challenging to communicate. Thank you for your contributions this past year Your position is gaining in market value, however we don’t feel that your skill set is current to what we’re seeing for similar positions in the market You are currently below range, but I think that’s fair given your current skillset/proficiency. Don’t bother saying what they got last year… I’m giving you a small increase this year of 2%. In order to earn a larger increase next year, I’d like to see…. Let’s check in in another quarter to see how you’re progressing so we can keep you on track for next year. Open the door, no one wants to feel like there is no where to go. Make sure you tell them how they can move forward from the conversation. If they are not getting an increase, tell them how they can get an increase next time.
- Mykkah For Live Training: Explain graph at top right. Review things to consider. Then, scenarios… Are they truly red circled Three check points: Does the org need the work performed Can the org pay for it Does the EE qualify If yes, that’s a different conversation, it’s called a promotion and it’s very fun! Otherwise, there are a few different scenarios we can talk through if they’re really paid high Scenario A – Pay is high, market is steady, performance is stellar, budget is available. Thank you for all your contributions this past year Your position is holding steady in the market You are above the maximum of your pay range. The pay range is determined by the market value of the job. Last year you earned an increase of 4%, which was above the organizational average. Instead of giving you an increase on your base pay, I’m instead going to give you a lump sum payout of 3% to acknowledge your contributions toward XYZ organizational goals. If the market shifts, you will be eligible for an increase again next year if you continue to perform at this high level, otherwise we may be able to discuss another lump sum bonus at that time. Scenario B – pay is high, market is steady, performance is average, and budget is irrelevant here. Thank you for your contributions this past year Your position is holding steady in the market You are above the maximum of your pay range. The pay range is determined by the market value of your job. Last year you earned an increase of 3%, which was the organizational average. Because you are above the maximum of your pay range we will be unable to give you an increase to your base pay. If the market shifts you will be eligible for an increase next year if you perform at a high level. Let’s set some goals for you and if you achieve those next year you will be eligible for a lump sum bonus. Let’s check in in another quarter to see how you are progressing.
- Mykkah For Live Training: The first thing to consider before walking into the meeting is what steps can the employee take to bring their performance up to par. In addition, though it may seem counter intuitive, it’s a good idea to consider what future opportunities the employee has with the organization as they may ask. This is a scenario where you have an employee who has not met expectations on their performance review, so they will not be receiving a pay increase. The conversation with this employee might go something like this: Thank you for your contributions toward X (Successful things) this past year. As we’ve been discussing, your performance in such and such areas can be improved. At this time, your pay is in the bottom third of your job’s range. Because of your performance you are not eligible for an increase this go around. Let’s set some goals and talk about how to bring you up to par with the expectations for your position. If you make significant improvements you’ll be eligible for an increase next year. Let’s get something on the calendar in the next month or so to see your progress toward these goals.
- Mykkah For Live Training: This is a challenge at every organization. Before I talk through the conversation itself, I think it’s important to discuss the idea of “negotiations” during increase / comp review meetings. As Managers, you are advocating for the employees up front, even before the increase is approved If you open the door to negotiation during this conversation, you’re detracting from the main message – “we value you and here’s what we are doing about your pay to reflect that.” Make it clear that this is an increase, you’ve advocated on their behalf, and the conversation is not open for discussion Doing so will help you avoid a vicious cycle of negotiation every little thing. Ultimately, it saves your time and the employee’s morale/satisfaction/engagement Considerations: How will they perceive their adjustment? How connected are they – or how likely are they to talk with other employees about their raise? Make note of any employees you think may not be happy about their raise so you can head off any attempts to negotiate early. It’s also important to note that even if you anticipate an employee will be ecstatic about their raise, they might catch you off guard with their disappointment. If you know your employees are likely to talk to each other after your meeting, then it’s good to be prepared to provide context for why the employee is receiving the exact amount they are receiving. The more specific you can be, the more you help shape their perception of their pay in a positive way. So in an example scenario, let’s say this particular employee already knows what their co-worker received for an increase and is now disappointed at the amount their receiving. Start the conversation by reiterating their accomplishments Focus on what they’ve done and how their pay is linked directly to those accomplishments Explain that individual increases are based on each employees accomplishments relative to their goals It’s also helpful to provide the market context – there is a fair market value for your job Discuss why the pay range is fair, because again, you’ve already advocated for this increase amount and should be able to articulate how it relates to their performance and where they are at in range. Some things to mention might be: Performance Their Experience Their position in range (maybe they’re already at the top and based on your tiered increase policy, their raise may be small) Lastly, as with all compensation conversations, open the door and dig deeper to determine what they’re really concerned about? If you conduct the conversation this way, their concerns may be alleviated. Or, it could be there is a deeper issue for the employee and it’s good to dig for that so you can head off potential ongoing conflict. Note that we are not suggesting at any point that you share with the employee performance or statistics about any other employees. We are also redirecting the conversation to focus on the positives – not discussing what other employees are saying or why they’re saying it. Focus on the employee in front of you and don’t attempt to explain for what another employee shared.
- Mykkah For Live Training: In this particular difficult conversation if you have an employee who is constantly wanting to discuss their pay, especially as it compares to the person down the hall or the employees down the street. This person has brought you every Internet report that exists on how much money they should make. Conflicting Information Online Independent Study Pricing the job vs. the Person We know online, there is a lot of conflicting information That said, even if they go on our site, they may find a different number vs. what we have in the system Good news – you can say you’ve done an independent study The comp plan is based on the value of your jobs in your market based on the work your organization needs done for your jobs All in support of getting your mission accomplished When people go online, they price themselves Pricing the best version of themselves - They may attributed a bunch of skills/certifications to themselves that aren’t relevant to the job (which means you don’t have to pay for them) They may be comparing themselves to New York or San Fran We set this up based on what’s needed for your jobs, that helps us determine the market value for your jobs, and then we build a range around that value. They’re brining this to you because they have concerns about their pay. So start the conversation by appreciating their contributions. Explain the company position – that you’ve done an independent salary study, you’ve determined a compensation strategy that aligns to your overall goals as a business. Provide some information on pricing the job vs. the person Give them a basic overview of the company’s compensation plan, keeping in mind your chosen level of transparency to ensure you’re consistent with what you share with employees. Find a positive way to end the conversation that focuses on the future – what can they do to be eligible for an increase next time around? What can they do to move to the next level or job in their job family? Etc.
- Rusty
- Paige Have data driven conversations so both your Ees and mgrs. Have confidence in why they’re paid what they’re paid. Here’s a place to put your Comp Philosophy so every employee sees it. Pg. 3… Here’s where you are relative to your range and what does it mean to have a range penetration of 40% and why does that make sense. Here’s your wage trends, so how your pay has changed over time and how it might continue to change over time. Pg. 4… If you share market data with them, your argument is even stronger. If you do share the 10th-90th percentile, be prepared to explain why everyone is not going to be paid at the 90th and why you EE are not paid at 90th (could be a good place to tie to performance and next steps). Also a good place to point out pay trends (trending down)
- Paige Left page. Gives context on how they’re doing within their organization. You should only be sharing this if you’re doing it right! If you’re going to be this transparent to the org, don’t shy away from people who are paid low. Right page. Have some talking points prepared for your managers. Things like “why am I being paid more/less than typical Ees in the same role”; “How competitive is my pay relative to the market” “How do I earn more and grow with the company?” Middle…talk through Total Comp. Here’s the potential things you’d want to cover. Most Ees find out how much their medical benefits cost when they get their COBRA statement. That’s the wrong time. Why bother to have awesome benefits if you’re not going to tell people how much their valued.
- Mykkah
- Mykkah Managers often will feel stressed out when they are talking with their Ees because their key fear is losing a top EE. They don’t want to be understaffed or impact morale negatively. The answer is: getting a leg up on setting expectations by being transparent as much as possible, both at the point of offer and increase.
- Mykkah Some other workforce thoughts … depending who you have, you may need to get creative.
- Mykkah Hint: development is different from promotion… sometimes.
- Mykkah