The Compensation Question: 5 Tips for Handling Pay Conversations With Employees This Year

As we approach the end of a very long and very tumultuous year, many employers are bracing for the inevitable: questions from staff about compensation in 2021. While some companies have actually seen huge positive shifts in their businesses since March, others have experienced significant difficulty and uncertainty, which will likely impact annual compensations plans. 

Regardless of the state of your business, employees are curious. Many are wondering if they’ll get a raise or at least a cost of living increase. Or will they perhaps have to tolerate pay cuts in order to bolster the company’s position heading into the new year?

Now more than ever, questions about compensation must be handled thoughtfully and proactively to avoid causing additional angst, which could kick off a mass exodus or fuel fears about the company’s very survival. 

If you’re not in a fiscal position to offer compensation increases this year, here are five tips to help ease those tough conversations with your employees.

1. Be Proactive in Setting the Tone

Before employees even begin to ask, make it clear that you’re already thinking about this situation. Prepare front-line managers with appropriate messaging to address pay issues when they begin to hear rumblings of concern. Whether you have just one HR person or a large executive team, it’s important to establish a compensation philosophy and ensure companywide alignment by effectively communicating it.

2. Be Honest

Throughout the pandemic, the most resilient companies have found that transparency is a key ingredient for survival, and many CEOs have begun communicating more frequently with their workforces. This candid approach is essential. Even if the news isn’t good, employees will respect and appreciate your honesty, while a vague or secretive approach will only breed suspicion and dissent. Software designed specifically for change communications can help by allowing you to disseminate role-appropriate information throughout the organization with a clear and consistent message.

3. Be Thorough

Explain your position in clear terms and avoid dodgy, vague justifications that lead to more questions than answers. Again, providing front-line managers with the tools, training, and information they need to answer questions and reinforce the company’s position can be extremely helpful.

Many employees don’t understand the full value of their compensation; they consider only their base salaries. Prepare a total compensation statement that provides details on accrued PTO, flex time, stock options, 401(k) contributions, and any other benefits. This provides employees a more comprehensive view of how the company values them from a financial perspective. Having these details can help employees see the total investment you’ve made in their talent, even if a raise isn’t possible right now.

4. Implement Other Recognition or Rewards

As so many employees have shifted to working remotely, the lines between work and home life have blurred, and many are actually working longer hours under more stressful conditions. Giving them back some of that time can be just as valuable as giving them more money.

In lieu of a pay increase, offer additional paid time off or increase the number of compensated holidays observed in the coming year. Consider even shifting to a 4-10 schedule to give employees a long weekend. Surprise them periodically with a paid Friday off, or allow them to pick an extra paid day off each month. 

5. Support Employee Wellness

The COVID-19 pandemic has caused an extraordinary amount of stress for your employees, and many of the coping mechanisms they typically rely on — gathering with friends, yoga classes, gym time, date night — have been off limits. In these trying times, self-care is more important than ever. Consider offering employees a subscription to online yoga sessions, virtual meditation apps, or digital fitness programs, or perhaps even granting a stipend for home gym equipment. Support employees’ diets and immune systems with nutritious meal-delivery services or fresh vegetable deliveries. Money can’t buy happiness, but investing in your employees’ health and well-being when they need it most can be an extremely valuable benefit.

Even if your company can’t afford to offer compensation increases in the coming year, being transparent with your employees can go a long way toward winning their respect and loyalty. Even so, finding some way to reward their talent, commitment, and contributions over an incredibly tough year is essential. By implementing creative, enriching benefits that show your team you care about them as employees and as humans, you can cultivate loyalty even if your budget is tightening.

Michelle Sedlacek is director of people at GuideSpark.