Companies that score well on compensation and benefits see 56% fewer departures (Tendances Mondiales du recrutement (Global Recruitment Trends), 2020, LinkedIn Talent Solutions).
Fixed and incentive compensation is a sensitive issue in the relationship between employees and their employers. It evolves according to the experience and individual or collective performance of each employee and is a motivating factor. In the following article, find out how to talk about compensation with your employees.
Adapt to the context when talking to your employees about pay
48% of recruitment professionals surveyed say the top areas for improvement in the employee experience are compensation and benefits (Global Recruitment Trends, 2020, LinkedIn Talent Solutions).
When it comes to discussing compensation with an employee, you have three options: either you tell the employee that they will receive a pay rise, or you inform the employee that the company’s economic situation does not allow for a one, or you refuse an individual pay rise.
For each situation, you have to adapt your language so that the increase is perceived as justified. In this way, you can delay the employee’s expectations so that they can accept a pay rise being granted or refused, without it affecting their motivation.
Announcing a pay rise: not just good news!
When you tell your employee that they are going to get a pay rise, you need to justify the pay rise to make it clear to the employee that it is a reward for the work they have done. It should be clear that the increase is performance-related to encourage the employee and show your appreciation for specific reasons.
Use the feedback from annual reviews, and highlight the targets met and the individual actions of the employee that have helped improve personal performance or initiatives that have helped improve collective performance.
Announcing a wage freeze: a decision that affects the whole group
When the company’s economic situation is fragile, it is sometimes impossible to give employees a pay rise. This is a situation that affects the whole group and has nothing to do with the individual performance of each employee. It is therefore advisable to inform all employees at a collective event, preferably a meeting. Conversely, an end-of-year party or leaving cake, which are moments of togetherness, are not appropriate for announcing bad news, although some people like to mix the two.
Announcing the news to everyone shows that everyone is on an equal footing and that a joint effort is needed for the company’s survival.
However, you have to be careful to justify this decision. You need to be transparent about the company’s economic situation without being too alarmist either. Show the data that justifies the wage freeze but also show how the company can recover in order to encourage your staff.
Refusing a pay rise: an employee’s request for a pay rise is turned down
When you refuse a pay rise, you have to be able to justify it. A pay rise is not a due; it is a reward for performance. You can therefore use the annual appraisal again to list the targets that have not been met.
This is one of the most sensitive situations because you run the risk of discouraging your employee. You need to be tactful and justify your decision with specific points: first of all, be realistic. If you reproach your employee for not meeting their targets, even though the targets were unattainable or you didn’t give them the necessary resources and support to achieve them, your employee may think that you never intended to give them a pay rise and will lose confidence in the company. Just as you justify accepting a pay rise, you must be able to justify a refusal with specific points.
Secondly, give the employee some time to explain your decision. They will accept the situation much more easily if they understand why their performance was unsatisfactory.
Thirdly, point out areas for improvement so that the employee understands that the decision is not fixed for ever. You need to find the right balance to keep your employee’s motivation intact without giving in to all their demands.
Secondly, give the employee some time to explain your decision. They will accept the situation much more easily if they understand why their performance was unsatisfactory.
Thirdly, point out areas for improvement so that the employee understands that the decision is not fixed for ever. You need to find the right balance to keep your employee’s motivation intact without giving in to all their demands.
To talk about pay with your employees, be tactful with the DESC method
The basic difference between being assertive and aggressive is how our words and behaviour affect the rights and well-being of others.” (Sharon Anthony Bower)
From the moment you are about to deliver news that your colleague may not like, deploy the four stages of speech construction from the DESC method by Sharon A. Bower and Gordon H. Bower, namely: describe, express, specify, consequences!
Describe a situation or facts
First of all, start by describing the situation or the facts that justify your decision without making a value judgement: “I can see that the annual delivery targets haven’t been met.”
Express how you feel
Then take the time to express how you feel about the situation. It is advisable to use “I” rather than “we” or “you:” “I’m sorry about this situation because you had to meet these targets to get a pay rise.”
Suggest a solution
Follow up the discussion by suggesting solutions to define a better plan of action: “I suggest that we discuss again together what prevented you from meeting your targets in order to find solutions for improvement (e.g. training, re-evaluation of targets etc.).
Conclude in a positive way
Finally, end your discussion on a positive note to maintain the employee’s commitment, while remaining sincere: “This will allow you to improve your performance in time for the next pay rises.”
Companies with the best pay and benefits records have fewer departures than others.
Some mistakes to avoid when discussing compensation with an employee
In Europe, the most important factor in employee motivation and commitment is pay, earning 47% of the votes (“The Workforce View in Europe 2018,” ADP).
As compensation is not always an easy subject to discuss, employers sometimes make mistakes in their compensation policy. Here are some examples...
Making pay a taboo subject in the company
To avoid a few pitfalls, make sure your employees are informed about the company’s remuneration policy. By clearly informing employees of the conditions for awarding increases, the timeframe to be respected or how they can express their wishes, you make remuneration less taboo and both the company and the employees have the necessary space to discuss it and find common ground.
Postponing the deadline
To justify an increase, you need to have concrete facts. As long as the employee is a good employee in the company, is committed and meet their targets, you have the necessary elements to justify the increase, so grab them! This will give you more credibility if you have to refuse to give them a pay rise the following year because their performance is not “on form.”
That said, if your employee is at the peak of their performance and you keep telling them “We’ll see about that later,” “Keep it up and maybe we’ll think about it,” you risk discouraging them because they will have the impression that their efforts are useless, and their performance will decrease.
Let the employee find out for themself whether they have been given a pay rise or not
As it is important to justify whether or not a pay rise was given, you should take the time to inform the employee. Don’t wait for them to find out on their own from their pay slip. They may be disappointed if the amount of the increase does not correspond to their expectations or if they have spent several months looking forward to an increase only to find out that they haven’t received one.
