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Communicating Compensation [E-BOOK]


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Whether you’re rolling out a brand new compensation plan, preparing to make a pitch to your executives about why you need a compensation plan, have recently updated your plan, or just want to learn more about compensation, this is the eBook for you!
The eBook contains FIVE sections:

Section One: Communication Basics
Section Two: Compensation Basics
Section Three: Gaining Executive Support
Section Four: Communicating Compensation
Section Five: Equipping Managers

Published in: Recruiting & HR
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  • Re slide 15 That's so Yesterday - seems to me that many organizations still factor in "COLA" and certainly most Collective bargaining and agreements. As for Broadbanding....the concept provides a viable evoluation from the traditional and limiting model of hierarchy. I have worked in large public, corporate and private organizations...introduced, created and implemented the broadbanding concept to drive organizational change from traditional hierarchy to a more flattened structure, a culture driven by employee contribution aligned to overall organizational strategic objectives and results rather than simply "defined duties". This concept is certainly being embraced by many organizations and I'm not sure modelling based on "points" achieves the "out of the box" objectives...rather it seems to again "limit and restrict" individual skills, abilities, knowledge, capabilities to a pre-defined job descriptions, which in most cases is continuously evolving to respond to organizational needs and demands. Wonder what a hybrid might look that compensation is truly linked to "measurable, "value added", achievements and contributions including innovativeness and creativity in delivering results that have a direct and positive impact on strategic objectives, financial health, sustainability and increased investment/donations and/or growth.
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Communicating Compensation [E-BOOK]

  1. 1. A PAYSCALE PUBLICATION Your guide to tackling tough conversations about pay. Communicating COMPENSATION
  2. 2. Introduction Whether you’re rolling out a brand new compensation plan, preparing to make a pitch to your executives about why you need a compensation plan, have recently updated your plan, or just want to learn more about compensation, this is the eBook for you! At PayScale, we believe the messaging about your compensation plan is as important as the plan itself. That’s why this eBook is full of all sorts of useful tips and tools for getting your compensation communications right. You’ll learn: • Compensation and communication basics • What to consider when developing a compensation communication plan • How to gain executive support for your compensation plan improvements • How to prepare your managers to “talk compensation” with their direct reports • Sample language your executives can use to spread the word about the plan • Commonsense answers to questions such as: How can I tell my high-performing, high-paid worker that she’s not eligible for a raise? Or, How can I motivate my low-paid, low-performing worker? And, what are some ways to sweeten the compensation pot when there’s no money in the kitty?
  3. 3. The eBook contains five sections: Section One: Communication Basics 4 Section Two: Compensation Basics 11 Section Three: Gaining Executive Support 16 Section Four: Communicating Compensation 22 Section Five: Equipping Managers 25 Waddya think? Let’s get started!
  4. 4. Section One Communication Basics
  5. 5. 5 You’ve got all kinds of fantastic ideas about improving your company’s compensation plan, don’t you? (We thought so!) But before you approach the powers that be about any sort of change (you know how they hate change!), make sure you’ve got your communication and compensation basics down pat. Communication Dos and Don’ts You’ll be hard pressed to send the wrong message when you do your communications right. Wow your audience with your communication AND business savvy by following these communication dos and don’ts. • DO know your audience: What’s important to them? How do they prefer to receive communications? (Via e-mail, memos, group meetings, etc.) • DON’T go crazy with the jargon: Break concepts down to simple language. • DO present a way forward: Be sure you’re “getting to yes.” • DO focus on results: Don’t get lost in the details. • DO develop a timeline: Work backwards from your desired end date. • DO be direct and empathetic: Talking about compensation can be downright uncomfortable! Money is a personal topic for many—(although not Millennials, apparently, but more on that later) and impacts an individual’s livelihood and sense of self-worth, even. (Gee, this stuff is heavy, huh?)
  6. 6. Hot tip! When developing appropriate messaging, think PACT. Purpose, Audience, Context, and Technique.
  7. 7. 7 Communication and Conflict Sometimes managers are reluctant to talk about compensation because they fear the conversation could cause conflict, and it might. However, your managers need to know that conflict is a part of the job. It can’t be avoided entirely, only managed. Teach your leaders how to do just that by first recognizing the three stages of conflict: low (latent tension), medium (overt conflict), and high (power struggle). During the low stage of conflict, the goal should be to prevent any further escalation. During the medium stage, you’ll want to resolve the conflict that’s brewing. And during the high stage, you’ll need to contain the conflict before it erupts into full-blown combat. Try and keep your conflict management role in the “yellow area” (see Graphic) by functioning as a provider, teacher, or bridge builder. Once you’re in referee (red) territory, things have gotten out of hand. (Cue scary music.) The take-away? Address conflict early and often for best results. Power Struggle Overt Conflict Latent Tensions Contain Resolve Prevent The Peacekeeper The Referee The Witness The Healer The Equalizer The Arbiter The Mediator The Bridge-builder The Teacher The Provider Adapted from William Ury, Stages of Conflict 10 Roles in Managing Conflict { {
  8. 8. 8 Communication and Transparency Employees know... Managers know... Only their own salary Only their own salary Their range and where it caps out The salary of their direct reports All grade assignments for jobs up to a certain level The salary of all those on their team All grade assignments for all jobs The grade assignments & ranges of their direct reports The ranges associated with grade assignments to a certain level The grade assignments & ranges of all those on their team The ranges for all jobs The grade assignments of all positions up to their level or up to a certain level Everyone’s pay The ranges of all positions up to their level or a certain level All grade assignments for all jobs The ranges for all jobs Everyone’s pay Everybody is talking about transparency these days! Transparent organizations are committed to the free flow of information, from the top on down and all around. However, it may not suit your company for everyone to know everything. That’s okay. Transparency occurs on a spectrum, and there’s a right level of transparency for every culture. Levels of Transparency Whatever level of transparency your company decides is best, be sure that your messaging across the organization is consistent and managers are on board with the decision. For example, if it’s been decided that managers can only share with employees the pay ranges up to the employee’s level, managers shouldn’t share higher level pay ranges as that will detract from a sense of fairness.
  9. 9. 9 Communicating with Executives Communicating with executives involves: • Understanding the executive audience: Put yourself in the shoes of your executives. • Making sure compensation is aligned with business objectives: Present yourself as someone who understands the business. • Incorporating leading edge practices: Your execs need you to keep them abreast of the best of the “best practices.” • Keeping executives up to date with quick “snapshots:” Keep the details to a minimum, please. Listen up! Good listening skills are vital to good communication. Before you can listen well, however, you first have to SELF-REFLECT. What kinds of things may be impacting your ability to listen or consider what you’re hearing? Are you distracted (focus, please) or biased in certain areas? (Don’t worry, we all are. It’s a question of facing and then managing the biases.) Practice ACTIVE LISTENING while COMMUNICATING ASSERTIVELY. Both are important for effective communication. If you’re thinking about your next response while the other party is speaking, or if you’re not speaking at all even when a response is required, you’re missing the boat. (And most of the discussion, too.) As the conversation is winding down, try and come to some sense of agreement and then move forward with action. Self Reflect Listen Actively Agree & Act Communicate Assertively
  10. 10. Hot tip! Good listening requires more than ears to hear! Experts estimate that words make up only 7% of face-to-face communications—the rest is through tone of voice, demeanor, body language, and other behavioral cues. Train your managers to recognize and respond to these other means of communication.
  11. 11.   Section Two Compensation Basics
  12. 12. 12 Comp philosophy, strategy and culture Fixed costs Variable costs Individualized rewards and recognition Compensation is a Keystone Here’s your MANTRA for the day (and all the days to come): Compensation is a keystone. Keystone n. Something on which associated things depend for support. Compensation holds together your business strategy so that your organization can withstand the weight of the competition. (Clever, huh? We like it, too!) Good compensation ensures organizational success. When people aren’t paid right, all kinds of things go wrong. (Think turnover, loss of engagement, loss of productivity, and lawsuits, to name a few!) The Compensation Mix Your “compensation mix” consists of four tiers: compensation philosophy, strategy, and culture; your fixed costs from base pay; your variable costs from variable or incentive pay; and individualized rewards and recognition. Your mix should be unique to your organization and aligned with your organizational goals. For example, it could be that some combination of pay for performance, bonuses, and commissions works best to incentivize your employees to desired performance, but that may not hold true for other companies.
  13. 13. 13 Compensation Terms Need to brush up on your comp terms? (Or want a handy dandy cheat sheet to show your execs?) No problem. We aim to please! Talent (i.e., labor) market: It is described by the industry, size, and location where you compete for talent in both recruitment and retention efforts. Pay range width: The span of a pay range. Encompasses the minimum, middle, and maximum amounts. Range penetration: Where an individual’s rate falls relative to the range. Compa-ratio: Measures the relationship between the salary of an employee and the midpoint of the pay range for that employee. Market ratio: Measures the relationship between the salary of an employee and the value of their position in the market. Red-circled employees: Red outliers (or red circled) are individuals whose pay exceeds the maximum of the pay range. Green-circled employees: Green outliers (or green circled) are individuals whose pay falls below the minimum of the pay range. Pay for performance: Rewards are based on whether an employee exceeds, meets, or fails to meet expectations. Schedules: A group of grades and ranges used to differentiate fair pay to the local market while preserving internal alignment. Differential: Pay premiums on top of base pay based on differences in shifts, holiday hours, etc.
  14. 14. 14 Compensation Plan Design Elements Approach your execs knowing the plan design basics (philosophy, strategies, structure, and policy) and being prepared to get their input. Philosophy: n. A broad set of ideas about how you intend to compensate your employees. What is your compensation philosophy? • “We pay the best because we want the best.” • “We pay to market and hire the best we can.” • “We pay what we can and offer great benefits and a great work environment.” • “We pay below market but are willing to train.” • “We pay some positions at or below market and others above market in accordance with our talent needs and our strategic plan.” • “We (fill-in-the-blanks)” Your compensation philosophy sets the foundation for your compensation policy. Strategy: n. A careful plan or method for achieving a particular goal, for example, defining talent markets, level of competitiveness, and what to reward. What is your specific plan for effecting your philosophy? Structure: n. The way that something is built, arranged, or organized. How will you structure your comp plan? Think about pay grades, pay scales, bonuses, commissions, and other incentives.
  15. 15. 15 A well-structured comp plan: • Provides alignment to business strategy. • Clarifies relative worth of the position both internally and externally. • Ensures fair and legally defensible pay. • Defines a pay range for a position. • Creates clear career paths. • Provides flexibility to rewards based on performance and/or experience. Policy: n. A definite course or method of action selected from among alternatives and in light of given conditions to guide and determine present and future decisions. Your comp policy is an outgrowth of your pay philosophy and should support your organizational objectives. Your policies (and/or guidelines) help you carry out your philosophy, strategy, and structure as intended. Leading Edge Pay Practices Incorporate leading edge pay practices into your compensation plan. These include: • Pay for Performance: Rewards are based on whether an employee exceeds, meets, or doesn’t meet expectations. • Pay Grades and Ranges: Ensures competitive pay to market and internally; gives greater control over costs while providing flexibility. • Targeted Strategy: Workforce segmentation of your organization depending on their value to the organization. That’s So Yesterday! Out-of-date pay practices include cost of living adjustments (COLA), broadbands, and singular strategies.
  16. 16. Section Three Gaining Executive Support
  17. 17. 17 Understand the Executive Audience Your executives got to where they are by learning how to get what they want, so before approaching them you better get your ducks in a row if you hope to get want YOU want. Understand that executives: • Don’t want to be told what to do: Does anyone? • Can be distrustful of change: Change? Yeck! More hoops, more work, and more $$$. • Are used to making decisions: Do your homework to provide several options, then ask for input. It’ll make your execs feel special! • Know they know stuff: Avoid coming off as a “know it all” yourself. Ask the Right Questions The RIGHT compensation policy starts with asking your executives the RIGHT questions. (We’ve provided a few right questions to get you started. Aren’t we the best?) Question: Why do you want to have a good comp program? Answer: To pay people RIGHT. Question: Why do you want to pay people right? Answer: To attract and retain top talent. Question: Why do you want top talent? Answer: To accomplish our business objectives.
  18. 18. 18 Speak So Executives Will Hear As you head into that oh-so-important meeting with your execs to get them on board with your plans, here are examples of what to say and what NOT to say. Example #1 Objective: You want to move from COLAS to pay for performance. Don’t say: “I think it’s time to move to a pay for performance compensation structure.” Your execs will think... “Here we go again! This must be the hot new thing she heard at SHRM! Pay for performance? That’ll mean more paperwork, forms, tough conversations, and maybe even tears! What’s wrong with the way we do things now?” Instead, say something like... “We’ve all been tasked with making sure we’re good stewards of our budgets. Since compensation is our biggest expense, I want to ensure our organization is doing everything we can to get the best ROI from our compensation costs. I’d like to get permission to explore compensation structure improvements.” Example #2 Objective: You want to move from broadbrands to pay grades and ranges. Don’t say: “I’m going to assign all our positions to grades and set ranges for our jobs.” Your execs will think... “You’re going to decide the value of our jobs without our input?” And, “This all sounds very formal. I don’t want my hands tied if I need to pay someone more.” Instead, say something like... “Let’s determine our key organizational needs and use that information to drive the value of positions. From there I can provide tools to enable management to make good pay decisions.”
  19. 19. 19 Example #3 Objective: You want to move from a singular strategy to a targeted strategy. Don’t say: “I’m going to benchmark all the positions against market and create salary ranges.” Your execs will think... “How does he know what the jobs are? Does he think he knows best about our competitors? What IS the market? This all sounds like more rules. Arrrgh!” Instead, say something like... “I’ve noticed [insert business problem in need of a solution here]. I believe it’s important that we decide where we think we want to be with compensation and what is going to serve our business best. I’m going to do some research about where we get and/or lose our talent and present my findings to you so we can decide what course of action to take.” Immediate Actions Here are some things to do right now to improve your compensation plan (as well as improve your chances of getting your executives to support your plan ideas): • Determine the level of transparency acceptable to your organization. • Understand your company’s business goals. • Know your audience. • Review your current pay practices. • Share key information with stakeholders. • Provide managers with expectations, education, the “big picture,” and tools. • Stay flexible! Review compensation for your hot jobs at least quarterly to keep current without having to go into full-blown project mode.
  20. 20. HOT TIP! Keep Your Executives in the Loop Your executives have approved your compensation plans, and you’re feeling pretty good. Well, you should feel good! Congratulations! However, your job isn’t finished just yet! Even after the plan is implemented, they could use your support. Give them the information they need to create and communicate policy intelligently: • Regularly REPORT OUT how the plan is performing. Your information should be high level (avoid too many details) and relevant. Hint: PayScale makes this easy with multiple dashboards. • Give them TOOLS FOR SUCCESS (e.g., reports with relevant information). • Give them INSIGHT into what employees care about. • Give them TALKING POINTS for conversation with employees.
  21. 21. 21 Section Four Communicating Compensation
  22. 22. 22 Communication Roles When it comes to communicating your compensation program, everyone plays a part: Executives, HR, managers, and even employees (who need to provide feedback about the program). The plan clarifies who says what to whom, when and how. • Executive role: Approve the program, communicate program company-wide, and perform manager role (if also a manager with direct reports) • HR’s role: Create the program and/or work with compensation experts to create the program, provide ongoing communication with company executives, train managers, and perform manager role (if also a manager with direct reports) • Manager and supervisor role: Understand the program, communicate with employees, get support from HR, and support executive management and HR • Employee’s role: Understand the program, agree to the program, and communicate with manager/supervisor Developing Your Communication Plan Your compensation communication plan includes a timeline, objectives, and key messages and should cover both pre- and post-implementation phases of the plan AND messaging from your executives and managers. (Yep, it’s a lot!) • Timeline: When will all communications be completed? Work back- wards from your desired end date (make this BEFORE the payroll during which any adjustments will be effected, please)! • Objectives: What do you want employees to know? What is your purpose in communicating certain information? • Key Messages: What are the key messages employees should hear from your leaders? Because they work directly with line staff, managers bear the bulk of the messaging, so we’ll cover those communications in details in the next section (Section V). For now, let’s focus on your executives.
  23. 23. 23 Executive Communication Assist your executives to deliver high-level overview information about your compensation plan (managers will handle the details when they meet with employees individually), by providing them with talking points, including a reminder of the compensation plan philosophy and purpose. A sample message from your executives might sound something like this: We’ll say it again. How your company communicates your compensation plan is as important as the plan itself. Dear Employees of XYZ Company: As you know, we’ve been conducting a market salary analysis to ensure our wages are competitive and equitable both inside and outside the organization. For the most part, our compensation is in line with the market. In some cases, however, adjustments are needed, and these will go into effect with the next payroll. Your managers will provide more detailed information during your next review meeting. ” “
  24. 24. 24 Section Five Equipping Managers
  25. 25. 25 Managers play an important role in supporting and administering the company compensation plan, but they can’t do it well without help from you. Equip your managers to have productive talks with employees about compensation by: • Setting expectations. Ask more and expect more from your managers. • Teaching negotiation skills. • Teaching listening skills. • Helping to prepare them for the compensation review meeting (including talking points). • Presenting compensation basics. Ask More and Expect More PayScale’s 2014 Compensation Best Practices Report found that 73% of leaders don’t have confidence in their managers’ abilities to effectively communicate wage and salary issues with employees. (Ouch!) Managers are agents of the organization. Knowing how to “talk compensation” with employees is a must-have skill. How can you assist your managers to feel more confident and speak more confidently about their compensation decisions, knowing the decisions are sound and solidly link employees’ roles and organizational goals? Your assistance is crucial, because when managers don’t “own” their compensation decisions, employees become demotivated. Come on. How hard would YOU work knowing your manager had no authority to reward your efforts? (That’s what we thought.) And sadly, this kind of apathy can affect an entire organization. Fortunately, there IS a solution. When managers are informed, educated, trained, and supported in compensation matters, they’re better able to handle the tough conversations.
  26. 26. HOT TIP! Bring your execs into your managerial training, and have them introduced. They will be more supportive of the process and get some training themselves!
  27. 27. 27 The Art of Negotiation When managers meet with employees to discuss pay issues, they should expect to: • Sell the organization and put the full package on the table. Your compensation includes not only cash, but group benefits and perks like a casual working environment, free coffee, etc. • Sell the benefits of the offer (whether initial wage or wage increase). Is your employee’s compensation high relative to his or her peers? If so, don’t forget to mention it! • Listen to the ask behind the ask. What REALLY matters to your employees? Listen for what they’re saying in between the lines of what they’re saying. • Meet them and THEN move. What can the employee do to increase his or her value to the organization and earn more money? Don’t end the conversation until you’re given the employee some place to go. PayScale’s Employee Report, including the Total Compensaton Statement, facilitates conversations with employees and makes the conversation go a lot more smoothly.
  28. 28. 28 Preparing for the Compensation Review Meeting Assist managers to prepare for the “dreaded” compensation review meeting by providing talking points and a managerial toolkit and by training managers in performance feedback and proper meeting follow up. Talking Points Talking points for the compensation meeting include any market/study results, your organizational compensation philosophy, your compensation plan structure, the employee’s wage penetration, the employee’s new wage and the rationale for it, career pathways, and an invitation for questions/comments. Manager Toolkit Your managers will appreciate a toolkit that includes all the forms and information they’ll need to have a smart conversation. Suggestions for packet material include the employee’s wage history, the team’s wage history (useful when discussing where this employee’s pay fits within the whole), the employee’s job description, and assigned goals. (Note: PayScale does this for businesses who subscribe to our software with the Employee Report.) Feedback Before the compensation review meeting, give your managers this feedback tip: It’s good to ask for permission. (Yes, we’re serious!) Train managers to ask employees “Is now a good time to share some of my observations with you?” If the employee says no, well... he probably wasn’t going to be listening anyway! Better to schedule the talk for another time. Once permission has been granted, the manager will want to cover the employee’s behavior, the impact of the behavior, and any changes needed. Use the “feedback sandwich.” Start with positive information, delve into the negative, and then end with something positive. Think SPEAK. Specific, Professional, Empathetic, Authentic, and Kind. (We just made that up, by the way!)
  29. 29. 29 No Surprises! A compensation review meeting should never, EVER contain information that’s a surprise to the employee. Instead, the meeting should, in many ways, be a recap of what the employee already knows about her performance. Earn more do more. The compensation conversation should always incorporate how the employee can do more and earn more. Even your most stellar employee could learn something new or contribute in a new way. Follow-up. The meeting follow-up is as important as the meeting itself. Be sure your managers know to sign anything that needs signing, document the meeting outcomes, and (as time progresses) start or continue to provide ongoing feedback. Check Us Out! At PayScale, we feel so strongly about communication that we’ve developed a training plan specifically to instruct managers how best to introduce a new compensation plan. Available as part of our Expert service offers, our Manager Training Program covers compensation basics (such as compensation lingo and definitions) and emphasizes how managers must champion the pay philosophy and understand the rationale for compensation decisions. We show managers how to use the PayScale Employee Report as the basis of their discussions with employees. The training also covers how managers can align pay with performance by assigning SMART (Specific, Measurable, Attainable, Relevant, and Timely) goals and providing direct reports with regular performance feedback. We’ll even teach managers the proper way to calculate pay increases! Finally, we talk managers through how to handle some pretty typical scenarios around communicating compensation, including what to say when someone says, “I found this report on the internet...”
  30. 30. 30 Conducting the Compensation Review Meeting Your compensation plan has been developed, and your execs and managers think it’s grand. Now it’s time to deliver the news to employees. Depending on your organization’s level of transparency, your employees may know a lot or a little about what’s been happening. Regardless, the rubber is about to meet the road, because news of pay adjustments (or not) is on its way. Your managers, in particular, have an awesome responsibility ahead of them. They’ll be meeting with employees individually and delivering the good or not-so-good news about what those employees will be paid going forward. You want your managers to enter these conversations with confidence, say what needs to be said, hear what needs to be heard, and end the meeting knowing they handled it well. A managerial toolkit (See page 28) can help. The toolkit can contain compensation plan talking points, specific information about your compensation plan’s structure, compensation history for each of the manager’s direct reports, and conversation tips, depending on what type of conversation the manager needs to have with each employee. In addition to the toolkit, however, your managers might need some coaching. Our two best coaching tips are lead the conversation and anticipate employee questions and concerns. Lead the Conversation Eighty percent of employees compare pay information. The information they receive can influence: • Desire to stay/leave • Overall job satisfaction • Work effort Put another way, your employees already have some information about their pay, and they definitely have an opinion about their pay. So, train your managers to lead the compensation conversation. If the manager leads the conversation, rather than waiting for the employee to frame the discussion, the manager will be in a better position to ensure the meeting covers what the manager intended.
  31. 31. 31 Anticipate Employee Questions and Concerns What do employees want? The answer will depend on the individual employee, of course, but most employees will want something on this list: • More pay • Promotion • To be paid like their peers • To understand why others earn more than they do • To understand how their own pay was determined Sample Scenarios Of course, in addition to preparing for conversation that could happen, the manager needs to prepare for those conversations that should happen. Consider the following scenarios: Scenario #1 Employee Pay: LOW Employee Proficiency: GOOD OR ABOVE AVERAGE Budget Available for Upward Adjustment? YES Manager Mission: Deliver the good news that this employee is getting a pay increase. Sample Message: “Dear_______. You’ve been doing a great job, and our research indicates that your position is gaining in market value. Last year you got an increase of X%, which was higher than our average of X%. This year your increase will be X%, in recognition of your great performance and the value of your skills in the market. Thank you and keep up the good work!” Easy peasy.
  32. 32. 32 Scenario #2 (NOT easy peasy!) Employee Pay: LOW Employee Proficiency: BELOW AVERAGE Budget Available for Upward Adjustment? N/A Manager Mission: Deliver the not-so-good news that this employee is NOT getting a pay increase. Sample Message: “We appreciate your work on behalf of XYZ company, but as we’ve been discussing, your skill set is not current with what we’re seeing in the market for similar positions. Our research indicates that your pay is low, but we think this is fair considering your skill set. Therefore, you will not be receiving a pay increase this year. However, should your performance improve, you may be eligible for an increase next year. Here are some goals. Let’s discuss your movement toward those goals at the end of the next quarter. Can I answer any questions?” Whew! You made it. Scenario #3 Employee Pay: HIGH Employee Pay: HIGH Employee Performance: AVERAGE Budget Available for Upward Adjustment? N/A Manager Mission: Deliver the not-so-good news that this employee is NOT getting a pay increase. Sample Message: “We appreciate your work on behalf of XYZ company, and your skill set is current with what we’re seeing in the market for similar positions. However, our research indicates that your pay is high for this skill set. Therefore, you will not be receiving a pay increase this year. However, should your performance improve significantly, or should your position gain in market value, you may be eligible for an increase next year. Here are some goals. Let’s discuss your movement toward those goals at the end of the next quarter. Can I answer any questions?”
  33. 33. 33 Scenario #4 Employee Pay: HIGH Employee Performance: ABOVE AVERAGE Budget Available for Upward Adjustment? Yes Manager Mission: Deliver the news that this employee is NOT getting a pay increase, but WILL receive a lump sum reward. (This could be touchy!) Sample Message: “You’re doing a great job, and we appreciate it! Our research indicates that your position value is holding steady in the market. However, our research also indicates that your pay is above the maximum for the range, so we can’t offer you a pay increase this year. However, we can and are pleased to offer you a lump sum payment in the amount of X in recognition for your contributions to the company. Thank you for doing such fine work! Also, I’m always available to talk about career pathways, should you decide that you’d like to transition into another position that offers greater income potential.” That wasn’t too bad, eh? Scenario #5 Employee Pay: AVERAGE Employee Performance: BELOW AVERAGE Budget Available for Upward Adjustment? N/A Manager Mission: Deliver the not-so-good news that this employee is NOT getting a pay increase. Sample Message: “We appreciate your work on behalf of XYZ company, but as we’ve been discussing, your performance is not where we’d like it to be. Therefore, you are not eligible for a pay increase this year. However, if your performance improves significantly, you may be eligible for an increase next year. As a reminder, here are your performance goals. Let’s begin tracking your progress monthly. Do you have any questions?” All done!
  34. 34. HOT TIP! “Hey boss, I found this salary report on the internet, and...” Your employees have access to all kinds of wage information on the internet, including PayScale’s personal salary reports. Some of it’s pretty good (hint), and some of it is NOT so good. What should you do when your employee brings you information from the cloud and then asks for more money? Here are a few tips: • Deal with conflicting information: The report your employee finds may not be relevant to your business, your industry, or the size of your organization. Be prepared to tell him that. • Refer to your own data: Yes, we know it’s a little self-serving, but it’s also TRUE: If you’ve been matching your compensation data against a reliable market data source such as PayScale’s compensation software, you’ll have all the information you need to address your employee concerns intelligently. • Be mindful of position pricing versus people pricing: Organizational needs dictate job requirements and therefore determine the appropriate value and range for the job; employee skills, abilities, and experience dictate position in range.
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  36. 36. 36 Generational Considerations If you believe money issues are private, you’re probably NOT a Millennial (1982-2002). Most likely you’re a Baby Boomer (1946-1964), or possibly an older Gen X’er (1965-1981). Getting stuck on perceived generational differences has its downfalls, but that’s not to say there isn’t some truth to all the brouhaha. Overall, Boomers and Gen X’ers expect to stay at your workplace longer than Millennials, and their career mindset differs a bit, too. (For example, Gen X’ers tend to value work/life balance, while Millennials value flexibility.) Just something to think about as you consider and discuss total compensation with your employees! When More Money isn’t an Option When there’s no money in the budget for compensation increases, but you want to do something to recognize employee performance (or retain employee loyalty), it’s time to get creative. Here are a few ideas. • Know what interests your employee. What motivates him or her? (Everyone is different.) Greater autonomy? The chance to work on a high-visibility project? The chance to contribute to a special project of interest? • Additional/alternative perks. One company we know of brought a Ping-Pong table on the premises. Employees loved it! What about free coffee (the good stuff)? Or fresh fruit? • FWAs. Flexible work arrangements (FWAs) include part-time work, job sharing, compressed workweeks, and alternative hours. Would your business lend itself to any of those? • Staggered increase or offer. A little now and a credible promise of a little later can go a long way. • PTO. Would you employees appreciate more paid leave? You won’t know if you don’t ask.
  37. 37. 37 Immediate Actions Here are some things your managers (and you) can do right now to begin improving employee conversations about compensation. • Connect with employees about what motivates them. An engagement survey might reveal some interesting answers. • Identify the compensation conversations managers need to have with employees. • Develop clear career paths. • Prepare any high-level messages about compensation. • Prepare toolkits for managers to use when communicating with employees. • Assess manager capacity for communicating compensation. • Develop a toolkit for your managers. • Train your managers.
  38. 38. 38 Summary Well, that about wraps things up for now! Need a few KEY TAKE-AWAYS? Here goes: • Compensation is a keystone. • How you communicate the details of your compensation plan is as important as the plan itself. • Your compensation mix consists of: compensation philosophy, strategy, and culture; your fixed costs; your variable costs; and individualized rewards and recognition. Your mix should be unique to your organization and drive your organizational goals. • Most employees value transparency around compensation issues, but there is a right level of transparency for every culture. • Managers and executives need your help in developing a compensation plan that supports your organizational goals and in communicating that plan to employees. • It’s good to review your compensation plan at least annually, and for certain “hot jobs” quarterly might be better. • PayScale is here to assist you with your compensation plan needs! Want to learn how PayScale dashboards and reports can make communication easier? Get a demo of PayScale Insight and see how to get pay right. GET A DEMO
  39. 39. 39 About PayScale Creator of the largest database of individual compensation profiles in the world containing 40 million salary profiles, PayScale, Inc. provides an immediate and precise snapshot of current market salaries to employees and employers through its online tools and software. PayScale’s products are powered by innovative search and query algorithms that dynamically acquire, analyze and aggregate compensation information for millions of individuals in real time. Publisher of the quarterly PayScale Index™, PayScale’s subscription software products for employers include PayScale MarketRate™, PayScale Insight™, and PayScale Insight Expert™. Among PayScale’s 3,000 corporate customers are organizations small and large across industries including Zendesk, Miele, Keen, H&M and Clemson University.