Why Comp-versations Matter: Communicating Compensation to Employees

Communicating Compensation to Employees

Communicating compensation to employees strategically and managing access to real-time compensation data around your organization can yield significant business benefits.

Communicating compensation to employees is an important component of managing your hiring and employee retention goals.

Having these "comp-versations" can grant you an important advantage in today's labor market, where top candidates are considering multiple offers and even your best employees may be eyeing other opportunities. These conversations can help HR leaders empower managers to communicate compensation information effectively to employees.

Find Real-Time Trend Data

Understanding what's happening in your market is crucial to enabling transparent compensation. Do you pay less, more or as much as your competitors? Could there be gaps, such as compensation equality issues related to gender, that you're not addressing? Compensation transparency is a complex issue that can, for instance, directly inform how you're addressing issues such as gender pay parity.

There are numerous data sources out there to consider, including ADP Research Institute's® (ADPRI) Workforce Vitality Report, Pew Internet's wage studies and the Bureau of Labor Statistics, that can help you determine whether you're offering competitive and appropriate compensation to your employees.

Share Information Across Your Team

Another area of consideration for HR leaders is how well they understand the demographics of their teams. How many employees are on-site vs. remote? Do they work in teams or are they individual contributors? How many hold multiple jobs? Organizations should develop a plan to gather demographic information and share it with HR teams and managers.

These same individuals should have access to the organization's compensation rates for the purpose of comparing them against the industry standard. Understanding and appropriately communicating the facts about whether your compensation is competitive can enable more informed decision-making in general for your business.

Transparency in the Job Search

Transparency around compensation is valued by most job candidates in the current market, but many organizations shy away from including compensation information in their job listings. In an interview with the Los Angeles Times, one Glassdoor executive stated that "less than 10 percent of employers include pay information in job listings, yet 98 percent of job seekers want pay data before applying to jobs, so there is still a disconnect."

In today's tight job market, organizations can look to gain an advantage by publishing salary details. One common concern is that postings with low compensation could scare off a perfect candidate who might otherwise be brought in with some negotiation. Consider publishing a salary range instead of a specific number if you're worried about this.

Be Aware of Important Issues, like Gender Equality

Most people care about working for businesses that pay their talent fairly. Gather real-time data from sources such as ADPRI's "Rethinking Gender Pay Inequity" survey to better understand issues around gender equality and compensation. The survey reveals key trends, including the fact that incentive bonuses for women were only two-thirds the amount that their male counterparts receive. As the report notes, "Considering all exempt employees who received bonuses during the six years under study, the differences in average annual base, bonus, and total earnings between genders are all statistically significant and also across industries."

There were many dimensions that showed a difference between the pay of men and women, including base pay, incentives, benefits and more. Organizations that tackle this issue head-on by conducting an audit, communicating with employees and fixing inequities are likely to enjoy more opportunities to attract and retain top employees.

How to Train Your Managers to Discuss Compensation

Transparency in compensation can be a huge selling point — from assuring employees that they're being fairly compensated to helping address hiring concerns — and it's vital that you help your managers understand the best ways to handle the necessary compensation discussions. Some best practices to consider include:

  1. Working the data: Leverage the data that you've put together on market trends, your own performance and your workforce. Educate managers on what's happening, and give them data points to speak to.
  2. Incorporating legislation awareness: Increasingly, cities and states are passing legislation that affects whether you can ask a colleague or candidate about their salaries. Create an easy-to-read reference guide that provides tips and guidelines on what can be discussed and what cannot.
  3. Educating managers on what matters: Transparent compensation has cultural implications. It can open up organizations to difficult conversations when, for example, a gender pay disparity is uncovered. Provide talking points about what the data shows, what steps are being taken to fix the issue and how to respond to frequently asked questions.

Communicating compensation to employees strategically and managing access to real-time compensation data around your organization can yield significant business benefits. You can help your HR team make more effective strategic recommendations, employment offers and plays to retain employees by taking the time to understand market trends in this regard. From there, you'll be able to better track performance and determine what steps are needed to make compensation sufficiently transparent throughout your business.

Want to learn more? Listen to ADP's webinar, "1, 2, 3, 4; Let's Avoid a Comp War!" — available on demand.