Avoid the 7 Blunders That Paralyze Compensation Discussions

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Discussing pay can make employees and managers uncomfortable—but it shouldn’t. The salary or wage you pay your employees isn’t an elephant in the room. It’s one of the biggest reasons—if not the biggest—that they’re working for you in the first place. 

You probably want to make sure your team members feel like they’re receiving fair pay and benefits. The only way to do this is to have open, honest conversations about compensation. 

But there are several blunders that can cause a conversation to go south. Here are the top 7 pitfalls to avoid during compensation discussions. 

1. Referring to Personal Events

There’s a time and place to talk about personal life events with employees, but compensation discussions are not it. No matter how close you are with them, the last thing you want to do is link their personal stuff with their compensation. 

That’s because you do not want someone thinking that their personal life impacts their pay. It shouldn’t be, so don’t give them a reason to think there’s a connection there. 

Is the employee currently buying a home? Caring for a sick relative? Returning to work after maternity leave? 

Do not mention these personal details during a compensation discussion. 

It’s not a good idea to say anything like, “I know it’s been a busy year for you with the new baby, so this raise will be a big help.” 

From parental and bereavement leave to sick leave and divorces, personal issues are off the table. They have no bearing on pay. 

 2. Second-Guessing the HR Decision 

Under no circumstances should you give your opinion about compensation decisions made by HR. 

Maybe your employee deserves a significant raise but HR only approved a smaller one and you feel like the employee is being robbed. Or maybe they approved the big raise and you’re thrilled for your employee. 

No matter what the case, keep your individual opinion out of the compensation discussion. It’s easy to want to empathize with someone. But if you second-guess the decision, the employee will second-guess it too. And now they can tell people that even their manager thinks the decision is bad. 

It’s easy to see how that could spiral into a larger problem. 

At the end of the day, the way you feel about a compensation decision shouldn’t have an impact on that decision. Don’t give the employee false hope or turn the discussion into an HR complaint session. 

3. No Clear Explanation for the Decision 

Before you walk into a compensation meeting, make sure you’re fully prepared. You never know how someone is going to take the news during a comp discussion. 

Even people getting a raise may not think it’s enough. If someone asks you for the reason behind a raise (or lack thereof), you want objective, consistent, and logical reasons to share. 

So before the meeting, take a look at the employee’s performance reviews. Have they met any new metrics? Do they qualify to move up to a new job classification?

Make a note of their current job classification and the pay ranges your company has set for it. Familiarize yourself with the whys and hows behind the salary ranges if you don’t know them already. 

Be ready to give your employees a thorough explanation for each compensation decision that’s made. 

In the absence of this kind of evidence, employees may suspect bias or ignorance in your decision-making. This can turn ugly very quickly. 

Transparency is valuable, and you should be able to give your employees as much insight into your company’s compensation processes as you can. 

4. Letting Your Poker Face Slip

Remember how we said you can’t always predict an employee’s reaction to a compensation decision? 

It’s true. And their reaction can hit you in the most unexpected ways. 

Maybe you found out that HR was planning to give one of your strongest employees, Employee A, a smaller raise because she didn’t meet a specific performance metric. But you know that in reality, Employee A dropped some of her work to help Employee B. Together, they met a critical deadline that turned out to be too overwhelming for Employee B to do alone. 

So before your scheduled compensation discussion with Employee A, you go to HR on her behalf. You set the record straight, letting HR know that Employee A is the only reason Employee B met one of their metrics. 

You negotiate a better raise for Employee A, and you’re thrilled. 

When you sit down with Employee A and tell her what raise she’s getting, you expect her to be thrilled, too. But she’s not. She sacrificed her own goals to help her colleague and the company. She feels undervalued, and she lets you know it. 

You, in turn, feel crushed. After all your work to save her from a lower raise, her response makes you feel underappreciated. Even though she didn’t know you were advocating on her behalf in the first place. 

How can you keep these feelings of shock and even resentment from playing out across your face? 

By bringing your best poker face to the table. Take a deep breath. Keep your mind open. Understand that your employee could react in a million potential ways, and don’t take any of it personally. 

5. Opening the Door to Deviations From the Budget

If a decision about whether or not to increase a salary has been made, stick with it. 

Employees might try to negotiate for a higher raise. The only reason you should ever engage in negotiation during a compensation discussion is if HR and/or your payroll budget has given you the go-ahead.

It’s worth taking a look at an employee’s total compensation package before you go into each compensation discussion. Ask HR if there’s any wiggle room with: 

  • Salary increases beyond the raise you plan to offer
  • Bonus amounts beyond what you plan to give
  • Upping the number of PTO hours accrued during each pay period
  • Offering flexible scheduling or remote work days
  • Lower healthcare, dental, or vision premiums
  • Increasing employer contributions toward retirement 

If HR approves any negotiations here, make a note of the upper limit and stick to it during your compensation conversation. Deviating from HR’s decisions will only spell trouble. And so will offering to pay more than what your budget allows. 

6. Failing to Explain Important Pieces of Information

We often talk about how important it is for companies to be transparent when addressing compensation. But transparency doesn’t simply mean sliding charts, policies, and the employee handbook under an employee’s nose and expecting them to absorb the takeaways through osmosis. 

Make sure you’ve scheduled enough time in the workday so you can both comfortably discuss compensation for up to an hour or so. Gather the materials you need for full transparency before the meeting. 

Sit down with the employee and walk them through all the data—their performance review and/or metrics. The compensation philosophy. The pay range for each job classification.

Don’t dawdle, but make sure you explain these factors. Then tell the employee what you and/or HR decided would be their raise. Immediately afterward, give the employee a moment to process the information—and invite them to ask questions. 

Answer each question thoughtfully to the best of your ability using the information you’ve presented. If you aren’t sure how to answer, jot down a note and commit to bringing them the answer when you do know. (And then follow up on that later.) 

Employees may ask questions that you feel they should already know the answers to. They might feel nervous, flustered, excited, or anxious. Give them grace, buckle up, and get your explaining hat on. 

7. Asking Employees Not to Discuss Their Compensation With Others

You might be tempted to ask an employee to keep their compensation a secret during a discussion about pay and benefits. 

Don’t do it. 

The National Labor Relations Act protects an employee’s right to talk about their compensation with other employees at the same workplace. Employers can’t write a policy or rule in the handbook about keeping compensation details confidential. 

Employers cannot interrogate employees if they think a compensation conversation has taken place. 

They can’t threaten employees for talking about their pay. They can’t surveil employees with the intention of catching them in the act of talking about their salaries or wages with others. 

So don’t do any of that. Not only is it against the law, but it’s also super shady. 

If you’re worried an employee might talk to another employee, dig down into that feeling. What’s making you worried? Does your company have pay gaps you haven’t addressed? Are people getting raises arbitrarily? Is salary compression widening the divide between company veterans and new hires?

It’s your job to dive into any messes like this and sort them out. Our guides to understanding total compensation, creating a payroll budget, and determining compa-ratio can help.

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