The Real Message of Your Compensation Program

By Janie Warner

It’s that time of year – again! The time when Human Resources executives examine their payroll budgets and crunch numbers to determine who, what, when and how much each employee will be compensated over the next year.  It’s a daunting task and one that should take months (not days) to plan and execute.

Often, the emphasis is on “what the market will bear” or “correct market position”.  These are good things – but they are usually NOT the message employees hear when they are given their total compensation package.  Your organization sends a VERY clear message to employees by your pay strategy.  And it may not be the one you think you are sending!

Consider these conflicting messages:

• Company:  “Because we had slower than expected growth in the 4^th quarter, we will not be giving pay increases in January as is our usual custom.”

• What the Employee hears:  “The Company is not doing well.  The company may not be in business next year.  Employees better start looking for another job!”

• Company:  “Thank you to every employee who made this past year so great!  We are pleased to announce that all employees will receive a 3% pay increase beginning with the first payroll of the New Year.”

• What the Employee hears:  “No matter how hard you worked – or how much better you may have performed than some of your co-workers, you do not deserve extra recognition or reward.  You are no better than any other employee and therefore you only get what everybody else gets.” Or “You were a terrible employee, but you still get the same pay increase as the best performer in the company.  You are so lucky!”

• Company:  “We heard you have resigned for a better paying job.  We will pay you more if you will stay.”

• What the Employee hears:  “You weren’t worth as much yesterday because we didn’t think you were good enough for someone else to want you.  We will only offer you more money because you figured out that we pay as little as possible until you decide to leave.”

Sound familiar?  These are very common scenarios in all types of industry.  What can be done?

To be sure, there are very legitimate business reasons why pay raises are not given in any calendar year.  Additionally, it’s very common to give uniform pay raises.  And way too many employers believe they can keep employees longer by throwing more money at the departing worker.  However, how we communicate these realities is usually what makes the biggest difference.  Positioning our pay strategies in order to send the BEST message is paramount – especially in today’s booming economy.

Let’s face it:  the vast majority of employees work because they need the paycheck.  And each time they see that check (or more commonly, that direct deposit), they are getting a message from their employer.  Your job, then, becomes how best to craft that message so that employees are convinced of their value to the organization.  In an article on hrdailyadvisor.blr.com Bridget Miller states, “When employees feel valued, they’re more likely to remain loyal to the organization, even if it’s not perfect.”  Further, she observed one of the best ways to make sure employees feels valued is to “Communicate well and frequently.  Keep them in the loop on what’s happening at the organization. With a high level of transparency, employees will feel trusted and feel as though they’re an important part of the company. (Keeping secrets does the opposite.)” 

Employees need to TRUST the messages you are sending.  When your communications are ambiguous (like the examples cited above), employees will make up their own information and believe that your organization does not value their work and contributions.

Determining pay scales, market rates, relative internal equity and job pricing is actually the easy (but technical) part of the equation.  Being certain the correct message is sent to your employees is the much more difficult.  Spend as much time crafting your communications as you do determining pay rates.  Only then can you rest easy knowing that your “greatest assets” truly understand their worth.

Ultimately, that message will resonate all the way to the bottom line.