It is a manager’s responsibility to have conversations with their employees regarding compensation in order to set pay expectations, communicate pay changes, and respond to employees’ questions about pay.

Setting pay expectations 

It’s typical to begin a new year by setting up performance goals and what kind of compensation an employee can expect if they meet (or don’t meet) the goals set. The expectations you set should always align with your organization’s compensation policy and procedures. It’s also essential to have regular check-ins during the year to see how your employees are performing and gauge how well they’re meeting the goals and expectations set out for them.

Communicating pay changes 

It’s easy to talk to employees when they are performing well and receiving a pay increase. Employers may choose to pay increase discussions during performance reviews.

Conversations about pay reductions are more difficult, especially since employers must consider legalities. 

It’s within an employer’s rights to cut pay due to economic downturns, cashflow setbacks, demotions, or reduction of an employee’s job responsibilities. However, reducing an employee’s pay is illegal if it causes their wages to fall below minimum wage, breaches an employment contract, or is discriminatory or retaliatory. Pay cuts cannot be retroactive. And in many states, employers must provide employees advance notice about reductions in their pay. 

Prior to discussing pay reductions with your employees, consider how they’ll impact retention and morale and be prepared to address resulting employee concerns. 

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Responding to employees’ questions about pay 

Questions around compensation are common in the world of HR, and no matter how tough the questions might be, managers must address them.

Employees rarely question why they got a raise, but they may want to know why their raise is less than expected (or why they didn’t get a raise at all). They may also question why they’re being paid less than a co-worker or why their base salary or hourly rate isn’t higher. 

Though these questions can be uncomfortable, here are some tips to help you have these types of discussions:

  1. Understand that it’s normal for employees to have questions about their pay since it’s directly linked to their livelihood. 
  2. Listen to employees and hear their thoughts to completion. 
  3. If further investigation is required, do everything in your power to find a resolution to an employee’s question. 
  4. Calmly state your case based on your facts and findings. 

Sometimes, the answer to some of these difficult questions is that the company simply cannot increase wages due to financial restrictions. When this is the case, it’s important to communicate gratitude for your employee’s hard work and ensure you’ll compensate them accordingly when the company is in the financial position to do so. This will help you retain top employees through challenging times.

Sometimes you can’t justify an employee’s pay raise due to their inability to meet particular goals or performance issues. In these cases, share with them what they can do to improve and earn increased pay in the future.

Finally, ensure you’re paying your employees fairly. If you don’t, you risk violating pay-equity laws and losing your employees’ trust in your organization. 

Looking for a trusted partner to help with your employee compensation planning? Inova’s HR outsourcing offering provides a full-service team of certified experts that can help you craft a compensation structure to fuel your company’s growth and success for years to come. 

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