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According to Mercer's 2024 Global Talent Trends report, 34% of employees believe that pay/promotion decisions are made fairly, equitably, and without bias. Also, less than 1/3 of companies are sharing pay ranges, which may contribute to misinformation or miscommunication.
In this context, this type of mistrust can be linked to how information is shared, and HR teams play a critical role in building/maintaining that trust.
First, let’s explore why communication around pay is an important topic and has greater impact on your compensation programs.
No matter how great your methodology to pay may be, if people are not aware about it, it will not have the expected impact. Communicating how your strategy is aligned with ongoing actions is essential for employees to project themselves into your organization and build trust.
Especially around compensation, employees aren’t solely focused on numbers and are more preoccupied about the perceived fairness of these decisions. This perception can be fueled by interactions with the C-level, line managers, HR teams, or other employees.
Thus, having pay ranges and recommendations allow employees to understand there is a framework on how pay decisions are made, enhancing trust within the organization.
Creating the building blocks of fairness and pay equity will increase the chances of:
Generally, we tend to focus on strategic goals but it needs to go hand in hand with a clear understanding from the employee’s point of view.
When taking decisions around compensation and career path promotions, structuring a compensation program that includes clear guidance along with appropriate training before, during and at the end of pay reviews will maximize the impact of fairness across the organization.
Establishing proactive pay communication starts by involving the organization in the preparation phase (leadership team, HR and rewards, managers) and providing them a clear agenda of what is expected.
More importantly, training your managers on how to approach pay decisions during these events can be critical to increase fairness and consistent decisions. The role of a manager goes beyond their business productivity or efficiency in this case, and employees expect their managers to be transparent and build trust.
Managers should be taking ownership during these decisions, and providing specific training sessions will make them confident as these topics are demanding.
One company in the technology industry implemented a dedicated 1-hour training to line managers on how to communicate compensation planning decisions to their employees. After their cycle, they measured an uptake on employee satisfaction regarding rewards conversations with their line manager, and when benchmarked with similar companies, the company was ranked at the top 25% on this item!
During main compensation events, pay and promotion decisions will be taken based on the policies established (pay ranges, increase recommendations, flags, etc.). This is also the time for HR and rewards teams to advise and adjust some decisions made to avoid any unexplained gaps or confusion.
These decisions are not easy to make for the managers, especially when dealing with a budget and other business constraints, allowing complete understanding of the company’s compensation policies is key.
After a compensation review ends, it would be easy to say that the job is finished. But the last important step is to convey the decisions to employees to keep the conversation going and smooth.
Training your managers to embrace these conversations, provide clarity on the framework used and answer difficult employee’s questions is crucial to make the review successful. Unclear or answered decisions can lead to miscommunication or speculation among their peers, which is something to avoid.
In all cases, clear 1-on-1 to communication compensation review results will strengthen trust to make the right calls.
Pay discussions are not be a one-time thing but an ongoing conversation. Managers and leadership teams should be trained to have pay discussions as part of any concerns raised by employees during their company lifetime. As compensation is correlated to the overall HR policies, it makes sense that these discussions should be open and handled in a trustful environment.
Compensation transparency and effective communication can transform a company’s culture. And you don’t need to publish salaries to be transparent: communication clear policies, owned by the organization and understood by employees is the core to these discussions.
Alongside training and ongoing conversations, providing a way for employees to access compensation policies and outlines their information can further improve this trust.
For instance, an accessible reward statement can provide clarity around the company’s compensation structure and philosophy, while giving more context on pay history over the years.
Recognizing employees the right way is a key factor to better engagement and talent retention.