Power Tools & Tips for Workplace Leaders
How to Prepare Managers to Talk About Pay
Too often, front-line managers aren't prepared to talk with employees about compensation—or why it's not higher. 

When managers speak with employees about their compensation, they should be prepared to address:

  • The factors that go into setting salaries or hourly wages, as well as variable incentive pay, such as bonuses.
  • Where an employee's compensation falls within his or her position's salary band or pay range and whether similar jobs are grouped in a common band.
  • How they can help employees acquire the skills needed to advance.
Have Focused Conversations

Organizations should first determine what information their managers need to handle pay-related conversations. Researching what peers in other companies are doing and having leaders weigh in on how to best handle these conversations are good places to start. Here are some other suggestions:

  • Implement a quarterly process that not only focuses on pay but on how both the organization and the employee are performing. This can show employees how the organization's performance affects their base pay and any incentives. If an organization is not meeting its goals, it is unlikely to have the financial resources to make significant increases in compensation budgets. This insight can also help inform discussions that managers and employees have about employee performance and pay levels.
  • Develop a pay structure based on performance rankings. This will give managers a discussion guide to help them talk with employees about how their ratings affect their pay.

  • Discuss with employees about how they can improve their prospects for higher pay in the future. For example, when talking with long-tenured employees who might be near or at the top of their pay range, managers can ask if it makes sense for the employees to acquire new skills so they can move to a role that pays more.
Openness About Pay Ranges Varies

Compensation specialists say pay transparency largely depends on corporate culture. In 2020, WorldatWork, an association of total rewards professionals, reported that:

  • 38 percent of employers share with employees the base salary range for their pay grade.
  • 13 percent share base salary ranges for all pay grades or jobs throughout the organization.
  • Just 2 percent share actual pay levels for all employees.
The best way to head off problems with discussing pay is to have a good working relationship with your employees. Consider reviewing your pay practices, and conducting internal surveys that monitor your company's general climate, employee engagement, and compensation perceptions.

Do you still have questions?
If so, we have answers!
Call us today at 605.335.8198!