Communicating Pay Increases

communicating pay increasesOnce your company has decided on pay increases, the issue of communicating those raises to the employees becomes paramount.  The natural expectation is that it should be easy, right?  Pay increases are good news, after all.  However, certain considerations should be taken into account when discussing compensation with employees.

Here are the “Dos”

  1. Create a communication plan. Schedule communications before the employee becomes aware of the increase. Rumor and speculation can rapidly get out of hand and skew expectations.  Stay out in front of it by setting a timetable of how and when information is to be released.
  2. Make sure your message is consistent. It is important that managers and employees understand the context of the increase.  Managers should be prepped with short, bullet point discussion points to and trained to keep the wording and messages standard company-wide.
  3. Meet face-to-face if possible. Managers should meet with their employees, one at a time, not only to tell them the amount of the increase and their new salary, but also to give the employee recognition for their contributions and to gauge their level of job satisfaction. Avoid short-cuts like email and voice mail. Personal interaction is key.
  4. Try to keep your conversation brief and focused on the employee’s importance to the company. The communication should be personal and the manager should articulate which behaviors and accomplishments influenced the decision for the pay increase.  Employees need to know that their hard work has been noticed and is valued by the company.  They also need to know where they can improve.  Express your confidence that the employee will continue to contribute meaningfully to the company and thank them for their service.
  5. Inform employees that their compensation adjustment is “personalized” and ask them to keep it confidential.  Although it is an employee’s right to discuss their compensation within the company, comparing pay increase percentages with coworkers can lead to workplace destabilization and impact performance and therefore future compensation.

Here are the “Don’ts”

  1. The main thing you want to avoid is over-promising anything.  It is tempting for managers to ease employee’s minds by alluding to future rewards.  When budgets are tight managers must be selective in allocating rewards and as we all know business priorities, top performers and other factors change over time and we shouldn’t commit over-commit business resources especially compensation.
  2. Do not compare employee increases. You should never compare or discuss other employees performance, pay or benefits with another employee. Such information should remain confidential.
  3. Do not mention that you wish the increase could be more.  This undermines the value of the increase to the employee and can foster discontent in the ranks.

What to do if the Employee Challenges?

Managers should receive training on how to communicate pay increases or the lack of a pay increase. Additionally, HR should prep managers on what to do if the employee challenges or expresses disappointment in either the size of the increase or manager assessment of their performance.  Company policies may vary on responses, but here are some questions employees might ask are:

  1. How can I get a larger raise next time?
  2. Why didn’t I get a pay increase?
  3. Is my pay increase the same as other employees with a similar job title?
  4. What was the range of increase percentages available and what was my increase percentage?

A good general response to these questions is to reiterate to the employee that many factors are taken into account, including the overall company’s performance, business unit performance, individual performance and internal/external benchmarks.  Their increase was carefully considered and in line with their contribution to the company.  Let them know that the company wants this to be a positive message that demonstrates their appreciation and once again thank them for their service.

In the end we get very few chances to communicate with our employees about their pay.  Ensuring you have an executable plan, consistent message and personal conversations can be the difference between and effective and motivational increase or just another raise.