Compensation can be a tricky topic, especially within the non-profit sector where many employees feel that they are “overworked and underpaid.” However, when communication about compensation is handled correctly, it can increase employee trust in the organization, improve employee engagement, and decrease turnover. Ultimately all these improvements lead to a higher likelihood of accomplishing organizational objectives.
There are clear advantages to investing in a sound compensation plan and communicating it well, but it can be challenging if you and/or your staff don’t know how to lead these conversations with employees.
Here are 5 tips to help you get started:
Tip #1 – Have a Compensation Plan in Place
This may seem fairly obvious, but it’s hard to communicate well with employees if you don’t have a compensation plan in place. Communication about compensation starts with having a compensation philosophy and strategy, solid market data and an understanding of how your current pay practices stack up against the market, as well as a compensation structure that follows best practice. Depending on your strategy, you might benchmark against other non-profits, private companies, or a mix depending on your workforce.
If you don’t currently have a compensation plan in place, now is the time to get started.
Tip #2 – Decide what you want to communicate/level of transparency
Once you have your compensation plan in place, decide how transparent you want to be at various levels in your organization.
- By this point, your Executives and Leadership Team should already have an understanding of your compensation philosophy, strategy, structure, and how compensation practices are aligned with organizational objectives. Depending on your organization, your Board of Directors might be involved as well. Make sure Executives and Leaders are kept up-to-date and that they have detailed compensation information for any employees they directly supervise.
- Next, think about what is important for your managers to know in order to communicate well with their direct reports.
- Are you comfortable sharing your detailed compensation strategy or do you want to keep the conversation high-level and talk about your organizational philosophy without sharing specifics?
- What do you want employees to know about the market study that you performed?
- Do you want your employees to only know their own pay range? Or, do you want employees to know salary ranges for their department and/or the entire organization?
Communication will be slightly different for every organization depending on how transparent you want to be with employees. Remember that transparency has many levels so you can always increase in transparency over time as you become more comfortable discussing pay at your organization.
Tip #3 – Train your managers to discuss compensation
As much as we’d like to think that employees will come to HR with questions about pay, managers are typically the ones communicating with employees so it’s important to equip them with the right resources to handle these conversations well. Conversations about pay can happen at any point in time, but they typically come up during the annual performance review and/or increase process. Be sure to start developing your manager compensation training a few months prior to annual reviews so you have plenty of time to deliver the material and your managers have time to digest the information as well as come back to you with questions. Some important things to discuss with your managers include:
- The basics of compensation. Make sure your managers understand what a salary range is, how to use ranges with their employees, and the importance of having a compensation plan.
- Specifics about your compensation plan. Depending on your desired level of transparency, you may choose to share more (or less) about this with your managers, but this might include things like your specific compensation strategy, where your market data comes from, how your compensation plan was developed, and how your compensation plan relates to larger organizational goals.
- How increases are calculated. Depending on what your organization wants to reward, your organization might tie increases to performance, where the employee currently falls within their salary range, and/or tenure. Make sure your managers are clear on how these percentages are calculated. If your organization uses a Merit Matrix for increases, this is also a great time to share this information with managers.
- Your compensation policies. If your organization has specific policies regarding compensation, for example, bringing everyone up to the minimum of their range to minimize outliers or not allowing employees to go over the maximum of their range, make sure your managers understand these policies. It’s also helpful to share specifics with managers if they have employees falling below or above range and explain how these situations will be handled.
- How to speak with employees. Some managers may be better at “soft skills” than others so it’s always helpful to remind your managers about some basics of communication. Make sure they think about how their message can best be communicated to different employees depending on the employees’ communication style and encourage your managers to practice active listening during these conversations.
When it comes to successful communication, it’s not just what you say, but also how the message is said and how it is received.
Tip #4 – Have the conversations with employees
Again, this one might seem fairly obvious, but with a busy schedule and lots of competing priorities, it’s easy for managers to push these conversations back if time is short. Make sure to set deadlines for your managers to follow through, and if at all possible, avoid scheduling performance review time during your busy season. For example, if you have a large fundraising event coming up, this might not be the best time for your Development team to have these conversations. Consider your broader organizational schedule and try to do performance reviews and increases during a slower season if possible.
Depending on the situation, having the actual conversation with employees can range from stressful to exciting. If possible, always try to frame these conversations in a positive light, while also being sensitive to the fact that pay is very personal. This is a great time to recognize top performers, discuss their merit increase (if applicable), and talk to them about how they can progress at the organization if their strong performance continues. One particular challenge with top performers is if their pay currently falls at the top of their range. If your organization has a policy to cap pay at the top of the range, consider offering a merit-based bonus so you can still reward your top performers without making adjustments to their base pay.
This is also a great time to encourage employees whose performance or skills might not be quite up-to-par. Handling these types of conversations is what often gives managers (and HR professionals!) a bit of heartburn, but when done well, it can actually be encouraging for employees!
Always start by thanking your employee for their contributions to the organization, and then explaining where you’d like to see their performance/skillset improve. Depending on your policies, they may or may not be eligible for an increase this year so share the specifics with them and then end by telling them exactly what they can do to be eligible for an increase (or larger increase) next year. If your employee is really struggling with performance, it’s also a good idea to make a plan to check in with them in the next month or quarter to ensure they’re on-track.
Tip #5 – Communicate often
When it comes to compensation, the more communication the better. Although it’s important to communicate with your managers and employees at least once a year, this really is a minimum.
The PayScale Compensation Best Practices report revealed that the number one reason why employees leave a company is because they think they are underpaid. Although this might be slightly different for the non-profit sector, here at PayScale we’re seeing a trend that employees at all types of organizations are becoming more concerned about being paid competitively. Many organizations historically have been able to attract and retain talent with a strong mission alone, but this is often no longer the case. With the rise of the Millennial workforce, employees are now looking to work for organizations where they believe in the mission and they can be paid competitively for their work.
If you’ve done your homework and know you are paying employees competitively, but don’t communicate this well, you might still have issues with retention.
Use weekly one-on-one’s with employees, monthly team meetings, and quarterly staff gatherings to reinforce the idea that your organization cares about how employees are paid and regularly reviews your compensation plan to stay current with the market.
Having a strong compensation plan is important, but in today’s competitive market, communication is often the key to retaining your top talent.
Interested in making compensation discussions easier and more data-driven? Get a demo of PayScale Insight Expert today!