By Claudine Kapel
Do your employees understand why they earned their most recent salary increase or bonus? Do they know what they need to start, stop or keep doing to earn such additional compensation again in the future?
If the answer is “no” – even for just a segment of your employee population – you may not be getting optimal value from your compensation programs. And that’s a good reason to revisit – and potentially enhance – how your organization communicates about compensation.
Think about what happens when an organization has compensation programs that employees don’t really understand.
For example, an organization may have an incentive plan that delivers bonus awards. But if employees don’t understand how the plan operates, what they can potentially earn through it, or what they need to do to achieve a pay-out, the value of the plan will be limited.
Without communication, an incentive plan may yield dollars, but will do little to build employee understanding of business priorities and expectations or help employees see the connection between compensation and results. So the plan will fall short in terms of its capacity to help the organization to focus and motivate employees and drive performance.
The same applies to base pay programs. If there’s no supporting performance management and communication, employees will again not understand what is expected of them and what they need to do to optimize their earnings potential.
Yet many organizations shy away from the notion of pay transparency, perhaps out of concern of what might happen if they open Pandora’s box.
If the thought of doing more communication on compensation causes anxiety, remember pay transparency isn’t about sharing confidential details regarding how individual employees are paid. It’s about sharing more with respect to compensation program designs and the factors that affect how employees are paid.
If you want to do more communication around compensation, however, it is important to first ensure your house is in order. Some signs compensation programs may not yet be ready for prime time include:
- It’s been a while since you last updated the base pay structure and you’re not sure it’s still market competitive.
- There’s no consistency in how employees are positioned in their salary ranges, with some long-service, high performers being paid less than inexperienced new hires.
- There are employees paid below the bottom or above the top of their ranges and there are no clear policies around managing such situations.
- There’s no clear policy or consistency with respect to how pay increases are allocated or which jobs are bonus eligible.
- You’re covered by pay equity legislation but haven’t completed any pay equity analysis in a while to confirm you’re maintaining compliance
It’s important to recognize that compensation design and administration issues can be corrosive, even if the organization does not communicate openly about pay. That’s because the company grapevine is an active communication channel even when there’s no formal communication about compensation.
So employees can become frustrated or demotivated by perceived salary issues – and perhaps even leave – even when there’s no formal communication with respect to pay.
And don’t be discouraged if you know your compensation approach needs to be brought in for maintenance. A review of current program designs and practices can help define what’s needed to get compensation programs firing again on all cylinders.
More effective programs, in turn, create a stronger platform for communicating on pay, so the value of these programs can be fully realized.
Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.