Compensation is often a challenging topic to discuss in the workplace as it's often perceived to be sensitive or taboo. However, it doesn't have to be. Compensation discussions aren't just for new and prospective talent; they also apply to current employees. Failure to discuss pay can leave employees feeling uninformed and undervalued.
While the conversation can be awkward, various tips regarding terms, messaging, and communication channels can help you along the way. Keep reading as we guide you through communicating a new compensation plan to employees.
Why communicating compensation changes is important
Before we dive into how to communicate new compensation plans to employees, let's discuss why it's important to have this conversation. Effective communication about compensation changes is essential to maintaining employee retention and engagement. When employees are well-informed about upcoming compensation changes, they're likely to feel valued, which can impact job satisfaction and increase retention.
Additionally, managing expectations and openly discussing compensation changes creates a culture of transparency and trust between employees and management. Creating an open dialogue around compensation can mitigate misinformation and miscommunication and help employees understand what they can expect. Together, these aspects can create a more positive and productive work environment.
Steps for communicating a new compensation plan to employees
Developing a compensation communication plan helps you effectively and consistently convey changes to employees. Below are the steps to communicate new compensation plans to your employees.
Step 1: Align leadership on changes and strategy
Align with your executive team before your announcement to understand the purpose of the compensation changes and how they'll be rolled out. You should obtain accurate information on why and when employees can expect the changes. For example, if the organization has reached a new milestone and plans to increase salaries, align with your team how much the increase will be and when it will go into effect and be reflected in their paychecks.
Step 2: Develop a clear communication strategy
Connect with stakeholders to decide who will communicate the compensation plan details. This person will handle the announcements and will likely be the point of contact for answering any follow-up questions. This is also the time to outline a clear timeline and plan for communicating the compensation changes to the organization, such as who the target audience is, when you'll announce it to them, and how (e.g., face-to-face, email, Slack, or intranet).
Choose communication channels that are accessible to all team members. It would also be helpful to make the information available on multiple channels.
Step 3: Draft compensation messaging
When developing your communication copy, all details should be clear, consistent, and concise. Establish an appropriate tone and voice for the messaging and maintain it throughout the announcement. Start by sharing specifics on the reason for changes, the company's objectives, and what employees can expect.
There are several reasons that a company may implement a new compensation plan, so be sure to share any necessary information that will make it easier for employees to understand, such as information on profit sharing, equity, and retirement benefits. Emphasize any benefits they bring to the company and/or the team. Some additional tips for writing your compensation messaging include:
- Avoid complicated compensation terminology
- Explain the process for the compensation decision
- Don't discuss individual employee's compensation
- Provide market and industry data to support the updates
Be proactive and brainstorm any potential questions and concerns you anticipate your employees may have, including a list of FAQs in the announcement. Review and make edits once you've drafted your announcement to ensure that it aligns with your company's usual communication strategy and effectively and accurately conveys your message.
Step 4: Send out communications
After finalizing the draft, share it with your employees through various channels, such as Slack and email, to ensure the relevant parties receive the information. You should adapt the messaging for each channel and keep it clear and concise. Encourage your team members to submit feedback or questions about the changes directly or anonymously.
New compensation plan scenarios
Different compensation plan changes require different approaches to communication and justification. Here are various scenarios and how to communicate the changes to your employees.
Scenario 1: Increased base salary with reduced benefits
How to communicate?
- Highlight the financial gain employees can anticipate as a result of the changes.
- Explain the motivation behind the benefit adjustments, such as emphasizing rising costs or lack of benefits usage.
- Provide resources to help employees navigate any changes to their benefits plans (e.g., healthcare provider network updates).
Scenario 2: Performance-based bonus implementation
How to communicate?
- Clearly outline the bonus structure and how performance will be measured.
- Provide specific examples of what constitutes exceptional performance and how it translates to higher bonus payouts.
- Offer tailored training and development opportunities to equip all groups of employees with the skills needed to achieve performance goals.
Scenario 3: Introduction of stock options
How to communicate?
- Explain the concept of stock options and their potential for long-term wealth creation.
- Partner with financial advisors to provide employees with personalized guidance on stock options.
- Emphasize the company's commitment to long-term growth and employee ownership within the organization.
- Create a live calculator to help employees assess potential stock value growth.
Communicating a new compensation plan to employees is a significant change that requires careful execution. Remember, the goal of communicating a compensation plan is to make employees feel informed, valued, and supported throughout the process.
