This Is Why You Need to Talk Money With Your Employees
With insightful analytics, companies can establish a compensation strategy that works best for them.
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Compensation is sometimes a taboo topic between employers and employees. It's one of the main motivations for employees at work, yet nobody talks about it. But keeping conversations on pay closed has created an alarming gap in perception, PayScale's 2016 Compensation Best Practices Report found.
Among nearly 7,600 business leaders surveyed in the U.S. and Canada 73 percent said their employees are fairly compensated -- but just 36 percent of employees agreed.
If employees don't consider their pay fair, chances are they may be dissatisfied, disengaged, and looking for greener pastures. It's time to open a dialogue about compensation. Here's how:
Adopt a transparent policy.
A major reason employees may think they're paid unfairly is because they don't know what fair pay for their job looks like. In fact, an April 2016 Glassdoor survey found that nearly 70 percent of the 8,254 employees surveyed globally wish they had a better understanding of what fair pay is for their position and skill set at their company and in their local market.
Related: Money Is Nice, But It's Not Enough to Motivate Employees
But even when employees know the industry standard, they still want to know how their pay is determined within the company -- it's critical to satisfaction. After all, the same PayScale survey revealed that 82 percent of employees would be satisfied with below-market pay, as long as the employer was transparent about the reasons.
Open up conversations about compensation by embracing transparency. Build a communication plan that trains managers how to speak with employees about their salaries. Explain to employees the reasoning behind their salaries, bonus structures and more. The more information shared, the better.
Companies like Buffer, an application used for social media management, even share employees' salaries, pricing models, revenue information, and fundraising processes with the company -- and the outside world.
While every employer doesn't need to be that transparent, some openness is still necessary. Instead of shrouding salary in secrecy, address it upfront with both candidates and current employees.
Provide ongoing feedback.
Performance evaluations are often the determining factor for pay raises and bonuses, but the system is flawed. They typically only happen once a year, and employees aren't give much of a chance to participate in the conversation. In fact, a March 2016 survey of 100 employees from TINYpulse found that 12 percent feel evaluations are one-way conversations.
Related: 5 Tips for Developing a Winning Employee Incentive System
That means employees don't have many opportunities to even discuss their pay with their managers. As part of a transparent culture, employers need to encourage open dialogues about performance, which will then impact compensation rates.
These should be two-way conversations, where employees self-assess, share their perspective on management, outline an action plan that helps build their strengths, and set goals for themselves. Management should also outline new expectations and empower employees to set goals that align with their role and with the larger scale company-wide goals.
This way, employees are involved in the process and feel like they have a voice in the compensation conversation.
Find a fitting strategy.
Strategies for determining and managing pay and benefits shouldn't be one-size-fits-all -- they should fit the company culture and employee needs. The main goals should be to motivate current employees to continue to grow and to attract new hires.
Start with a budget allocation to determine how money will be spent on benefits and other incentives. Define salary ranges that are competitive. Research the local area and industry and benchmark similar roles to create a pay structure. Plan to perform routine salary audits to ensure the ranges offered remain competitive as the industry changes.
Related: 4 Things Leaders Aren't Doing But Should to Increase Employee Satisfaction
Then, use data to determine bonuses and pay raises. Performance metrics are crucial because they provide concrete evidence on how employers and employees are performing their daily job duties. With powerful, insightful analytics, companies can establish a compensation strategy that works best for them.
Performance management platforms help employers find compensation strategies that improve employee engagement and productivity so annual goals are hit.