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The Employer Guide to Preparing for Pay Transparency Laws – Part 2: Talking About Compensation with Employees

, , , | Oct 20, 2022 6:00:00 AM | By

This article is Part 2 in a four-part series to help HR leaders get ready for pay transparency, whether legislation is active, pending, or simply on its way. Check out the series or download the full guide, created with our partner, Charter.

Is your company ready for pay transparency?

Whether you want to comply with active or impending legislation, meet the expectations of today’s workforce, or just want to make sure you’re doing things right, we’ve compiled best practices and tips to help you succeed.

For best results, read the series in order. Or download the full guide we put together with the great folks at Charter.

In this installment, Part 2, we’ll break down how to talk about compensation with your teams.


How to talk about compensation with your employees

In Part 1, you learned how to define your compensation philosophy, the formal statement about how your company will pay and reward its employees. Now it’s time to share it.

That means going beyond simply announcing how compensation works. Focus on building trust in your policies by helping employees understand them, advises Ashley Brounstein, OpenComp’s senior director of people. “It all starts with education,” she says. “If you don't understand how decisions are made, then you can't trust the process and you can't trust how your own compensation is delivered.”

Your internal communications plan should take into account your organization’s compensation philosophy, size and stage, and culture. To shape your strategy, start with a few simple questions: Who, what, when, how, and why?

Who?

Think about the major stakeholders in your organization, from the compensation experts to middle managers to entry-level employees. Each of these groups should have their own opportunities to learn about your compensation philosophy, even if the framing and types of information differ from level to level.

Take particular care to bring managers up to speed so they can answer questions from their reports, advises Brounstein. “You want conversations to be seen as a credible source, and you can't do that with managers if they don't understand,” she says. She suggests preparing managers for these conversations with resources like manager-only forums, FAQ lists and fact sheets, and even role-playing opportunities.

What?

Beyond salary ranges for individual positions, what information is shared with candidates and employees? Do you make available your career levels and their associated salary bands? Do you go further and share individual salaries for employees working at the company? And what about bonuses and raises—should you make those formulas available to employees?

At minimum, Fair Pay author David Buckminster, who formerly led compensation at Nike, Starbucks, and Yum! Brands, recommends companies share leveling criteria to accompany any salary-band information. Otherwise, the information will lack context and create confusion and potentially distrust. “When companies post their pay ranges, they also need to be extremely clear about what their leveling criteria looks like,” he told Charter earlier this year. Information about how compensation relates to job responsibilities, seniority, and promotion is necessary context for applicants and employees alike to understand how their own career fits into the structure.

When?

The short answer is: often. Managers should check in frequently with employees to understand their concerns, questions, and motivations related to compensation, tying those discussions to larger conversations about growth and development. “Compensation needs to be an ongoing conversation that you have, just like performance is an ongoing conversation,” advises Brounstein. “The more that you have conversations on compensation, the easier they become.”

The performance-review cycle is also an opportunity to proactively educate employees about your compensation policy. Use that time to go over cycle timelines, market data on salaries, and methodology for determining both salary ranges and raises.

How?

Use a variety of forums to educate your team on your compensation philosophy, and make the information easy to access at any time. In addition to synchronous education sessions like town hall meetings and manager 1:1s, put digital resources on a team intranet or your company’s website. For example, Gitlab publishes its compensation principles, review-cycle timeline, and compensation-calculator formula online as part of its publicly available team handbook.

Why?

Above all, conversations about compensation should come back to the “why.” For Caryn Hubbard, vice president of finance of Buffer, that’s the first step in the shift to pay transparency: “You've got to get the buy-in from your people and have real conversations to talk about the discomfort,” she says. “Talk about the benefits, talk about wage gaps.”

Even with the most detailed compensation philosophy, compensation decisions won’t fully make sense to employees unless they can connect back to your organization’s values, mission, and goals.

 

Best practices: How to talk about compensation and inflation

Even among compensation experts, navigating how to support employees amid rising prices has been tricky. As Buckminster put it in an interview with Charter: “We have literally never planned comp in a high-inflation environment.” He recommended employers consider adding a second pay cycle to monitor and address rising costs of living.

Aside from increasing compensation, either through raises or one-time bonuses and stipends, leaders can also address inflation in other ways. In March, Charter co-founder Erin Grau shared some advice for talking about inflation in HR Brew. Here are her tips:

  • Acknowledge the current economic reality. Make sure employees know you’re attuned to the fact that costs are rising, and share what you’re doing to offset some of them.
  • Have inflation-education programming. Invite an expert such as an economist or financial planner to help employees understand the subject, or compile a list of resources to share. Part of this education should be explaining why tying cost of living adjustments to inflation isn’t necessarily beneficial: Most companies increase salaries by around 3% each year, a rate that’s outpaced over the past decade (last year, it was 1.4%, and 2.3% the year before that).
  • Talk about compensation in terms of the full package. Call out any changes you’ve made over the past year to benefits, retirement plans, and equity.

 

Script: Manager conversations

Don’t just hand managers compensation guidelines and criteria. Help them feel an integral part of the process by providing training that teaches them how to:

  • Apply guidelines and criteria fairly and consistently.
  • Prevent unintentional bias from influencing their decisions.
  • Have conversations with employees about compensation and the decision-making processes behind it.

It’s especially important for managers to touch base with direct reports to address any questions or concerns through 1:1 meetings. These conversations have three goals: To help reports understand the organization’s overall compensation philosophy, to help reports understand their individual compensation, and to tie compensation into a larger discussion about development and growth.

As you navigate these conversations, there may be some employees who feel less comfortable talking openly about their own and others’ compensation. Managers should approach these 1:1s with patience, and can help empower reports to ask questions by proactively bringing up potential questions and concerns. Building this confidence is especially important for workers from historically underrepresented (and underpaid) groups.

Below, you’ll find a list of questions and statements to use as a starting point.

Have you looked at our compensation philosophy? Do you have any questions about how salary bands and individual compensation are determined?

If you could wave a magic wand and change something about our compensation philosophy, what would it be, if anything?

Looking at your individual compensation, your base salary is _________, based on your current level of ____, which has a salary range of __________.

  • To increase your compensation within the band, you will need to ________________.
  • To reach the next level with a salary range of ______________, you will need to___________.

Thinking about your own goals for your growth trajectory, what skills or projects would you like to take on to achieve those goals?

 

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