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The Importance of Communicating With Employees About Pay

Rameez Kaleem

Pay is a topic that demands transparency and honesty, as it not only influences morale and productivity but the overall relationship between an employer and employee. Fostering open dialogues about pay decisions is a delicate undertaking but one that comes with countless benefits.

We need to remember that pay information is more widely available to employees than ever, so pretending that these conversations aren’t happening is no longer an option. This will only lead to speculation and resentment. 

If we begin with gaining a sense of purpose—what Simon Sinek referred to as our ‘why’—we can enter these conversations with greater confidence and understanding.

Well-Communicated Pay Equity

Employees are not as interested in the actual numbers as they are in knowing that they’re being treated fairly. In fact, the perception of fairness is far more important than what we actually pay people. This is why communicating openly and honestly with employees is one of the most important steps in any pay and reward process.

A report by US company Josh Bersin found that well-communicated pay equity is 13 times more important in retaining and engaging your employees than higher levels of pay.

No matter how fair and equitable your approach to pay may be, if people don’t know about it, it will not have an impact. The research uncovered that companies who communicate pay equity effectively are more likely to:

• Meet or exceed financial targets

• Attract and retain top talent

• Innovate effectively

• Achieve higher customer satisfaction scores

Despite this, a recent report by 3R Strategy showed that 62% of organizations have salary ranges but only 23% share these with employees.

Reassuring team members that they are being treated fairly and providing a clear understanding of how pay decisions are made allows them to develop trust. In return, they are more likely to become productive, engaged, and satisfied. 

Methods of Communication

People consume information in different ways. With this in mind, we can’t just put everything on the intranet and expect them to know it’s there. It’s important to realize that there’s a lot of information being sent to employees all year round, so providing them with an easy and engaging way of receiving this will ensure the message is clear.

Generational preferences will play a big part in how your employees communicate, and you can use this to your advantage. For example, Generation Z tend to value quick and entertaining information (think TikTok or YouTube). In this sense, creating an explainer video with graphics and animations may be the best way to share your new policy.

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Once we understand our employees, we can begin to build a varied communications repertoire that uses all of these different platforms.

  • Employee guides
  • Visual one-pagers
  • Explainer videos
  • FAQ documents

These cater to all types of learners, ensuring the organization's communication is inclusive, clear, and transparent.

(For readers in the UK, 3R Strategy is the only consultancy that offers these services.)

The Role of Technology in Employee Pay Communication

We’re getting fairly comfortable with the concepts of remote and hybrid working now. So much so that Forbes has reported that 16% of companies are already fully remote, operating without a physical office. 

With this in mind, the need for digital resources like employee portals to manage and communicate pay information effectively has never been more significant. 

Many employees prefer to navigate their pay details independently before seeking additional clarification from HR. An effective employee portal details an individual's total rewards, including salary, total cash, equity rewards, benefits, and the historical changes to each component.

It is also important to note that one of the most pivotal periods for maintaining trust and clarity about pay comes following pay cycles. To streamline communication, minimize potential human errors, and ensure consistency, companies should leverage tools to automate the creation and delivery of compensation letters. 

Providing employees with access and the tools to understand their pay data fosters a sense of autonomy and leads to more informed, productive conversations about pay.

Tackling Pay Conversations

Internally, most individuals are promoted to management roles due to expertise in their particular job. This doesn’t necessarily mean they have exceptional leadership skills.

While many organizations offer management training, 3R's Global Salary Planning Report found that only 33% of organizations offer any guidance on how to have conversations about pay. 

Role of the Manager

The role of a manager extends beyond just overseeing operations and ensuring productivity. With ongoing culture shifts and the availability of pay data to employees, managers are increasingly expected to engage in open conversations about pay with their team members. 

By embracing these conversations instead of avoiding them, we can provide clarity around pay decisions and career opportunities and help to retain talented people.

Also, managers are the bridge between the organization and its workforce, responsible for conveying the company’s pay policies and decisions. However, this task is not as simple as it sounds. Pay conversations can be sensitive and demanding, requiring empathy, fairness, and a complete understanding of the organization’s pay structure.

The Importance of Pay Conversations

People often find it awkward to raise the topic with their manager, which is why it’s so important to equip leaders with the skills to approach these conversations positively. No matter the situation, it is always better to open up a line of communication than to leave things unsaid. 

Unanswered questions can lead to speculation. Employees can quickly perceive their own pay as unfair when having poorly informed conversations with colleagues in similar roles.  

The Right Approach

Pay conversations should not be a one-time event but an ongoing dialogue. Managers should be trained to discuss pay as part of performance reviews, career development discussions, and in response to any pay-related queries or concerns raised by employees. 

The conversations should be open, honest, and respectful, acknowledging the employees’ viewpoints. Managers should also be equipped to handle difficult conversations, such as explaining why an employee did not get a pay raise or why there is a salary discrepancy between two staff members in similar roles.

Be More Transparent

Whether face-to-face or via Zoom, we should regularly gather feedback from employees, including any questions or concerns they may have. This gives us plenty of opportunities to think about how we can improve our communications process in the future.

Not only that, but it offers insight into changes or improvements that could be made to your approach to pay as well. 

Pay transparency and effective communication can transform organizational culture. Treating people like adults and sharing information can lead to more collaboration, diversity, and productivity in the workplace. Being transparent about pay doesn’t mean we need to publish salaries for everyone to see. It does mean that we need to be clear about the decisions we make.

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