The 4 Times You Should Be Talking About Compensation Throughout the Year

We’ve written a lot at PayScale about compensation communication — especially about WHY talking about compensation is important, and WHO should be talking about pay.

One of the things we haven’t covered as much is WHEN you should talk about comp. When’s the right time for compensation conversations — and what should you be sharing at that time? The bottom line is that if you’re waiting until the annual review to talk pay, you’re waiting too long.

Here are four situations in which you should definitely be talking about pay:

1. New Hires and Promotions:

  • Discuss pay when employees are hired or when they move in to a new role

    – Talk through their new base pay and pay range, and market data for their role if applicable.
    – Let them know how that pay was determined, and when pay ranges or job benchmarks are reviewed.
    – Explain the details of any bonus, incentive or variable pay plan including eligibility, measurement and payout.

  • Talk comp when you are awarding an increase or promotion

    – Discuss all the items above and also include WHY they were promoted or received an increase.
    – Discuss what activities, performance or contribution led to the decision.
    – Explain any other factors that went in to the decision, like market rate for the role, etc.

2. Regularly Scheduled Comp Conversations:

  • Talk future pay when you are talking about current pay

    – Talk about potential future pay, eligibility for pay increase and how base pay increases are awarded.
    – Share info about your company’s increase process, timing and strategy — do you award increases based on tenure, merit, COLA?

  • Talk about compensation when someone is not getting a pay increase

    – Share why their current pay is appropriately aligned with their current performance.
    – Talk about what would make them eligible for the increase.

3. Performance Reviews:

  • When you are having a formal performance review or determining performance ratings:

    – Discuss if and how that performance review/rating will impact pay decisions.
    – Share when any pay decisions will be made based on that performance review.

  • When you are sharing informal feedback about performance:

    – Share your input on their current performance as it relates to recent or upcoming pay decisions and development opportunities.
    – Ask for their input on their performance and prompt discussion about improvement plans and continued growth.

4. Development Conversations:

  • Talk through opportunities for skill development and pay increase opportunity in their current role.
  • Discuss opportunities for future promotion or other potential future jobs or projects in the org.
  • Share, if available, pay ranges for potential future roles.

Above all: talk about comp early and often.

It becomes habit to only discuss compensation once a year. This leads to a lot of stress, anxiety and expectation put on that one-time conversation. Take steps toward making compensation communication part of your culture by weaving it in to ongoing conversations about job performance, skill development and career opportunity. Your employees and managers will thank you.

Tell Us What You Think

How often do you talk about comp with your employees? We want to hear from you. Tell us your thoughts in the comments.

Image:, via Flickr