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In the realm of workplace conversations, the compensation discussion between an employer and employee stands out as particularly delicate and nuanced. Engaging in talks about salary increases or the difficult subject of pay reductions demands a thoughtful and empathetic approach from those in charge.
Typically, this responsibility is shouldered by department managers or supervisors. It's crucial for the representative of the company to meticulously plan these sensitive discussions, ideally in collaboration with an HR team member or with a professional from Axcet HR Solutions if the company lacks an internal HR expert.
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Following these best practices during a compensation discussion is essential for a smooth and effective dialogue:
This guideline applies to any conversation you have with an employee, of course, but it’s especially important when you’re discussing compensation. Use straightforward language to communicate the news, making sure to emphasize how much you value their contributions.
Go into each meeting prepared to navigate an uncomfortable situation, since negative reactions are possible even if you perceive the news you’re delivering is positive. After all, compensation is personal.
Demonstrate empathy for the employee’s position, consciously try to connect on a human level – as opposed to unintentionally coming across like a corporate mouthpiece – and communicate the company’s commitment to fair compensation. Also, take time to ensure all of the employee’s questions are adequately and respectfully addressed.
If you’re cutting pay or raises or bonuses aren’t as large as employees hoped, they will want to know why. Be direct and offer as much information as possible when you explain the rationale behind the numbers since transparency inspires trust and a healthy employer-employee relationship.
For example, if the decision hinged on the company’s recent financial performance or market trends, let the employee know. You might also choose to share the scope of raises or bonuses the organization is offering everyone that year.
Prepare for the compensation discussion by researching salary ranges for similar positions in your industry and geographic area, or have your dedicated Axcet HR consultant handle this for you. This is a way to double-check that your pay scale is competitive and give you reliable comparative data to share with employees.
When employees know their pay is commensurate with what professionals in similar positions earn, they’re more likely to feel fairly compensated. At Axcet, our team of experienced HR consultants
Let the employee know if there are opportunities to increase the level of pay – for example, if the employee were to get trained in a skill the company needs, complete a degree or certification required for a promotion or successfully address documented performance issues.
Employees are more likely to understand the rationale for their current pay when they also understand how they could impact the company’s long-term success and their career trajectories.
Benefits contribute significantly to the overall value of an employee’s compensation. Reminding employees of the complete benefits package they receive provides a perspective that their total compensation includes more than just their paychecks.
This understanding helps to mitigate potential negative reactions, even if changes are occurring in salary or bonuses.
A compensation meeting is an opportunity to discuss the employee’s overall job satisfaction, career goals and reaction to the salary adjustment. The person conducting the meeting should be prepared to hear the employee’s response to the revised compensation and to apply the best practices described above and below if the employee is dissatisfied with the news.
To ensure clarity and empathy during a compensation conversation, keep the following dos and don’ts in mind when it comes to what you should and shouldn’t say:
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Cutting pay is a tough decision that can have a significant impact on employee morale, motivation and loyalty, whether the reduction is because the individual isn’t meeting the job requirements or due to the company’s financial challenges. Therefore, it is especially important to communicate the reasons and the terms of the pay cut clearly and respectfully.
After you ensure the legality of a pay cut – that is, making sure you’re following state advance notice laws – be as open and honest as you can about the reasons for cutting pay.
If the company had to choose between layoffs and cutting pay, for example, say so.
Other steps to take in this situation include:
Explain the business situation that led to the pay cut. For example, you can mention the financial challenges, the market conditions, the competitive pressures or the organizational changes that affected the company’s budget and revenue.
In cases where the pay cut decision is the result of poor job performance, explain what steps the employee can take to work back up to their previous compensation level. A pay cut in this situation shouldn’t be a surprise to the employee. There should be notes from previous poor performance reviews in the employee’s personnel file that you can reference.
Ambiguity in compensation discussions can lead to misunderstandings, lower morale and, in some cases, disputes. Clear communication minimizes the risk of misinterpretation and legal exposure. It also results in more successful organizations and teams.
Constructive dialogue is the cornerstone of conflict resolution. So, clear communication allows employers and employees to effectively address concerns, disputes or disagreements about compensation and find mutually agreeable solutions.
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Navigating the delicate terrain of compensation discussions requires expert coordination and nuanced understanding, especially when it comes to addressing the unique needs and concerns of your team. In these critical moments, partnering with seasoned HR professionals can make all the difference.
Axcet HR Solutions, an award-winning, IRS-certified PEO, has been providing a comprehensive suite of HR services to small and medium-sized business owners since 1988. With Axcet's deep expertise and tailored support, you can confidently handle these sensitive conversations, ensuring they are productive, fair, and aligned with your business goals.
Reach out to Axcet HR Solutions today, and empower your compensation discussions with the guidance and experience of trusted HR experts.
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