I recently heard a friend of mine who is an HR manager talk about employee pay and engagement. She said, “Misunderstood pay can be a huge distraction.” I totally agree with her, she is absolutely right. But, misunderstanding pay is different from being disappointed or frustrated about pay. I’d like to think if an employee doesn’t understand their compensation, it can be resolved with education.
Compensation management is vital for employee motivation. Employees who are recognized for the value they bring are more likely to be motivated, loyal, and higher performing than those who're not. First and foremost, candidates need to know how the company establishes starting wages. Most organizations have a philosophy when it comes to hiring and negotiating starting salaries. They have a range that they’re working with. It’s important to let candidates know whether they’re in the ballpark. Otherwise, the company and the candidate are wasting their time. And the conversation will end up frustrating everyone.
HR must take time to let employees know about all of the benefits and perks they have. I’ve been surprised many times in my career that employees were not aware of their benefits. I felt HR was really getting the word out about a benefit and obviously not. HR has to find a way to remind employees of their benefits. Employees need to understand the relationship between pay, benefits, and perks. There’s more to compensation than the amount of money in an employee’s paycheck. I’ve worked in several industries where the pay was low but the benefits were fantastic. It’s important to speak in terms of total compensation and let employees know how that is determined.
New employees should learn in orientation how pay increases work. If companies are linking pay and performance, then employees need to understand how the system works. This includes when performance reviews happen when employees are eligible for increases, and how the company determines pay increase amounts. If the company offers a bonus program, this also includes bonuses and how they are calculated. Managers can inform employees how performance impacts promotions and transfers. One way that employees can advance their careers (and their compensation) is by accepting a promotion or transfer. Managers will want to let employees know how the process works and the eligibility requirements.
Organizations need to let employees know whether they survey wages. I once worked for a company that told employees, “We survey employee compensation every year.” It didn’t guarantee that wages were going to change, but it did let employees know that the company was committed to staying on top of the data. Organizations could alleviate a lot of frustration if they educate their employees about compensation. Employees who understand the system might take more advantage of company benefits and perks. They could be better prepared to ask for pay increases
But even employees who understand their pay, can be frustrated by it and disappointed. Organizations need to conduct regular surveys to ensure their compensation packages are internally equitable and externally competitive. Misunderstood pay can be a huge distraction – for both the employee and the company. The good news is that it can be addressed with proper communication.