For many managers and supervisors, talking with employees about their pay ranks right up there with a root canal on the misery scale. Those conversations haven’t ever been easy, but as wage growth slows and prices for just about everything increase regularly, pay becomes increasingly important to your employees.
Key Findings
For some context, Pew Research Center conducted a survey of over 5000 employees in late 2024 to gather their input about their pay. Some of the key findings include:
- 50% of surveyed employees were extremely/very satisfied with their pay
- 38% were somewhat satisfied
- 12% were not satisfied
On the surface, that looks like good news for employers. But scratching below the surface finds this:
- 76% of surveyed employees believe they regularly go “above and beyond” in performing their jobs
- 2/3 of those who were somewhat satisfied with or not satisfied with their pay feel that their pay does not reflect the work performed
- And 69% of the above group report that they struggle to pay bills. Employees at all levels – not just those in entry or low-pay positions – participated in the survey
There are many similar surveys and information available, but a key takeaway is that employees care about their pay and want to be paid fairly. That means communicating regularly and effectively about compensation.
Unfortunately, there isn’t a 10-step guide to make this easy. But there are some things you can do to improve the process.
Procedures and Communication
Your compensation policies and procedures should always be documented and communicated. This doesn’t have to be complicated – you may not need salary grades and ranges – but you should have written information about how pay and pay raises are determined. When are employees eligible for increases? How are these increases determined (e.g., pay for performance, cost of living, profit sharing)? Is market information used to determine the amount of increases? Are there additional increases employees may be eligible for?
Collecting Relevant Market Data
Collecting and updating market information is important to remaining externally competitive. This can be a relatively straightforward task if all your employees work in a single location, but as you expand to multiple locations and hire remote employees, collecting relevant market data becomes increasingly critical. For example, average pay for corporate accounting positions in the New York City metro area is 36.5% higher than the national average; average pay in Mobile, AL is 14% lower than the national average.
It’s common for new hires to demand—and get—salaries that are higher than those of current employees doing similar work. Often, employees who have been in the same role for a long time are paid at or above market rates and aren’t eligible for the same increases as newer employees. These situations create what is known as salary compression and make pay discussions about internal equity even more difficult.
You may also be subject to legal requirements when talking to your employees about pay. 12 states and the District of Columbia now have some type of pay transparency law, and another 13 states are considering this legislation in 2025. The laws vary and are complex, but the common requirement that employers list salary ranges on job postings often results in employees finding out about pay ranges for their positions by seeing a job posting on ZipRecruiter or Indeed. Check out additional information on pay transparency on our blog. (https://theworkplaceadvisors.com/compensation-hot-topics/)
All of the above information serves as the foundation for a discussion about pay. If you are a manager or supervisor, be sure you understand this context before you sit down to talk with your employees. And when it’s time for the discussion, keep these four things in mind.
1. Clearly communicate the pay decision and the rationale behind it.
This is absolutely critical. If an employee isn’t getting an increase because of poor performance, say so. Then discuss what needs to be done to improve performance and when the employee will be eligible for an increase.
The most difficult discussions are often with employees who feel they go “above and beyond” (that’s the 76% in the Pew survey mentioned above) but are paid at or above market. In these discussions, it’s important to acknowledge the employee’s contribution, but explaining why no increase or a small increase will be given is just as important.
2. Don’t negotiate – ever.
If you’ve made a pay decision based on employee performance within the company’s policies and procedures framework, that’s it.
As pay transparency increases, employees may know the salaries of others and want to discuss them. They may also have salary information from online sources and want to use those numbers to discuss and negotiate. Don’t get involved in these discussions. Your job is to clearly communicate the pay decision and that the decision is final.
3. Listen.
It’s hard to listen when you’re in the middle of a difficult discussion, but listening is important. Listening helps you understand the employee’s perspective of their performance and pay, and can also provide additional information helpful to both of you.
An employee may need additional training or experience to improve their performance. An employee may not have the equipment or information needed to fulfill their job requirements. An employee may want to know what is needed to be considered for promotion. As a manager or supervisor, these are issues that you can sometimes – not always – resolve.
4. Communicate Regularly about Compensation.
One way to accomplish this is through a Total Rewards Statement. These statements help employees understand the true value of working for an organization by focusing not only on compensation and benefits but also on the non-quantifiable perks that your organization may offer. The Workplace Advisors can help you develop a Total Rewards Statement, research market pricing, and much more. Connect with our team for support.
By Susan Palé, Vice President of Compensation, The Workplace Advisors
