Effectively Communicating Your Compensation Philosophy

Mike Beringer, SHRM-CP, HR Business Partner | Jul 30, 2018

Chances are you have a compensation plan or philosophy at your company, but maybe you don’t have it written or documented anywhere…perhaps you don’t even discuss it in any detail. If you’re looking to become more transparent in your pay practices, there are a couple steps you should take:

1)   Identify Factors: Likely the most important part of communicating compensation decisions to employees is having a clear understanding of what goes into a compensation decision. This can include the level of experience an employee has, availability of talent in the market place, the status or authority of the position within the company, and education and experience requirements the position has. Having a clear understanding of each of these factors is the first step in getting organized and being able to itemize your philosophy.

2)   Develop Documentation and Messaging: Documenting provides consistency. Various individuals may explain parts of your compensation plan differently, so having clear documentation should create a consistent message to communicate aspects of the compensation philosophy and plan to employees.

3)   Top-Down Education: Your executive or managers need to understand the compensation philosophy and easily articulate it to their employees. Providing education to them prior to rolling out compensation communication is key.

4)   Roll Out: General communications like companywide e-mails, blog posts or intranet feeds provide a quick and definitive dissemination of the compensation information to a large amount of people. However, because your employees are all different, working in different positions, possibly different locations, you’ll also need to do small group or 1-on-1 meetings to better help connect individuals with the philosophy, and give employees a chance to get general questions about the compensation philosophy or plan answered.

5)   Be Honest: Other than the first step, this is the most critical. Organizations who are not fully honest about their compensation plans or create compensation plans based on less-than-transparent factors, generally struggle to keep people around. Employees will see through this and it will erode trust. Be honest with your employees. If you are making sound, ethical business decisions, your compensation philosophy and plan will reflect these decisions. It doesn’t mean that every employee will like, or agree, with your philosophy. The compensation philosophy is a tool to educate employees and give them an understanding of “how” and “why” compensation decisions are made.

If you or your employees identify some gaps or issues where the compensation plan is breaking down, address them. It doesn’t mean you will change them, and you should be clear with your employees about that, but it means you should genuinely listen to their concerns and look into anything that looks out of place.

Employees who understand the compensation philosophy and plan appreciate the transparency. The philosophy and plan should be rolled into onboarding efforts, annual budget communications and performance management programs. Think of it as an ongoing effort, not just a one-time thing. If you need assistance organizing or communicating your company’s compensation philosophy or plan, please contact The Employer Group.

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