Compensation Conversations: Tips for How to Talk About Pay
As a kid, you probably learned that some topics were rude to discuss, like religion, politics, money, and which birthday your mother was celebrating. While you might still choose to keep some of these hot topics out of the office, money is a part of business and you’re going to have to talk about it. Whether you’re an employee asking for a raise or a manager being asked to give one, talking about compensation can feel uncomfortable. But there’s no reason having respectful, tactful, and productive conversations about money should feel impossible. With some preparation and talking points, it can be easy to learn how to discuss salary.
Why is Talking About Pay Uncomfortable?
Some people feel too uncomfortable to even mention their paycheck to a coworker or friend, while others have no problem discussing compensation openly. Knowing what others in your industry are making can help you feel more confident you’re being paid appropriately or help encourage you to ask for more. But the risk of finding out you’re being paid less than your peers might be enough to scare you away from asking in the first place.
Even if talking about pay seems uncomfortable, pay transparency is becoming increasingly common. A multinational survey from Glassdoor found that 70 percent of employees believe salary transparency is good for employee satisfaction and 72 percent believe it’s good for business. But in another study, researchers found that 89 percent of employees assume their coworkers would avoid a salary conversation if asked.
Pay transparency can be interpreted differently across organizations. At Whole Foods, staff members can look up any other employee’s salary and bonuses (even the CEO’s) from the previous year. Buffer, a San Francisco based tech company, takes pay transparency to the next level by making all employee salaries available online for anyone. While pay transparency is becoming more popular, 45.8 percent of companies still keep what’s on an employee’s paycheck private information.
Rules for Communication
Company transparency is not the only solution to making compensation conversations more comfortable. HR teams can play a vital part in preparing employees and managers for salary conversations by helping set ground rules for how their organization handles these conversations and making sure managers have the resources they need to conduct them.
How often should you review salaries?
While employees shouldn’t be restricted from asking managers about raises when they feel appropriate, your organization should have an established schedule for evaluating employees’ salaries. Many companies choose to do an annual salary review to make sure an employee’s salary is reflecting current market value and their growth and development over the course of a year. Depending on your industry, it may feel appropriate to conduct salary reviews more or less frequently, but an employee’s anniversary is a great place to start and an easy way to stagger salary adjustments throughout the year
How should you determine pay?
Pay is generally skill based, competency based, or performance based, and your organization will need to establish which system is right for you:
- Skill-based pay is generally used in jobs that provide a career path based on increasing technical skill measured by assessments and certifications rather than moving up the management ladder.
- Competency-based pay is a pay structure that compensates employees on their skill set, their knowledge, and their experience rather than their job title or seniority. Competency-based pay is meant to encourage employees to contribute to the company by improving upon their individual skills.
- Performance-based pay is compensation determined by how well an individual, team, or an entire company performs. This is often used in association with sales or for determining bonuses.
How can you prepare employees?
Once you’ve established how often managers should be discussing salary with employees, you need to make sure they have the tools and skills they need to conduct these conversations. At TodayTix, an online ticket reseller, HR teams prepare managers using role-play. This helps managers understand what is appropriate to discuss during compensation conversations, how to prevent things from getting contentious, and if or when a conversation needs to include HR. While training employees and managers to handle these conversations tactfully, you may want to consider some of the following talking points.
Talking Points for Employees and Job Seekers
There’s no need to be nervous walking into a salary conversation. (Okay you might be a little bit nervous anyway, but that’s okay.) John Meese, Creative Director at BambooHR (and manager to 12 employees) advises, “Don’t be afraid to have the conversation. Money is one of the most important parts of a job. We’re asking you for your work and are paying for your work. It should be one of the most clearly discussed things. Your employer is really clear about your job description, and you should be able to be clear on how you are compensated.”
The number one rule for any type of conversation surrounding compensation is to be prepared. As an employee, whether you are negotiating salary, asking for a raise, or discussing a bonus, you need to walk into the conversation prepared to clearly state what you are asking for and why you think you deserve it. Here are some tips for how you can prepare for compensation conversations you will probably encounter.
At some point in an interview process you will be asked what salary you are seeking. Don’t be caught off guard when your interviewer asks. Indeed outlines three ways to help you prepare for this conversation:
Know Your Worth
If you’re changing cities, positions, or careers for a new job, it can be hard to know what your market value is. Luckily, it is easy to figure out with help from salary calculators on sites like Glassdoor and Payscale. With just a short survey, you can find a general range for how much others with your experience, in your area, and in a position similar to yours are making. This range should give a good baseline of where you should set your salary request.
Give a Range
Rather than give a specific number, you can provide a salary range for the employer to consider. Once they come back with a specific number, then you can negotiate salary, but there is no need to negotiate until you have an official offer. During salary negotiations, be sure to cite specific market research and evidence of your skill that back up your claim on what fair pay is for the position.
If you’re asked about salary expectations before you’re ready to answer, it’s okay to ask for more time if you don’t think you know enough about the position or organization. Explain that you need to understand the position better, but that you are looking for a competitive offer. But you only get one “get out of jail free” card. If you’re asked about salary expectations again, you need to answer to the best of your ability.
Bonus: Ask Questions
Great, now you have a good idea of how much you will be paid, but when will you be paid? In what form? Compensation isn’t just your salary. Will you get benefits, bonuses, or equity in the company in addition to your paycheck? Be sure to ask questions up front during the interview or negotiation phase so you know what to expect as an employee.
You hold a few more cards when you’re interviewing for jobs than you do as an employee seeking a higher salary, so you may have to be a bit more conservative during these conversations. However, that doesn’t mean you shouldn’t ask for what you deserve.
Once Again, Know Your Worth
Have a clear reason why you think you deserve a raise. Some points you may want to include are:
- My responsibilities and/or skill level have increased since my pay was last discussed.
- Others at the organization are doing the same work and being compensated more.
- Others in my industry are being compensated more.
Dive In Right Away
“Don’t try to camouflage a money discussion inside another discussion,” says Meese. Set expectations upfront with your manager that you have asked for a meeting with them to discuss your salary, and dive in with your prepared points. Beating around the bush or burying the compensation question inside another conversation can leave both you and your manager feeling confused and dissatisfied with the discussion.
Choose Timing Carefully
If you recently flopped a big project or even had a bunch of assignments in a row turned in late, it’s probably not the best time to ask for a raise. But if you just had a particularly stellar performance review or nailed a huge presentation, now is the time to make your move. It doesn’t have to be time for your annual or quarterly performance review to ask for a raise. Choose the time that feels most appropriate for you.
“Come prepared with what you’re asking for,” says Meese. “Don’t come with a general ‘I need more.’ You have to make your case. The case is a combination of, ‘This is the work I am doing for us, this is some of my past performance, and these are some of the projects I’ve done.’” Unfortunately, a new baby on the way or an unexpected medical bill are not appropriate reasons to ask for a raise; what happens at home is your business. Focus on accomplishments you’ve achieved at your organization, skills you’ve acquired since your last salary adjustment, and ways you’ve made an impact in the office.
Prepare a Response
Even if you show up with evidence and confidence, you might still be met with a no. What’s going to happen if that’s the response? Will you just accept it and move on? Will you start looking for employment elsewhere? Whatever you do, you should be prepared to ask your managers some questions like:
- What do I need to do to earn the salary I desire?
- Can we review my salary again in six months? A year?
- Are my career goals possible at this company?
- Is a one-time bonus more realistic than a raise?
“No matter what you do from an employee perspective, if your request is turned down or accepted, stay humble about it,” says Meese. “Always be gracious and humble to maintain the best relationship.” Maintaining a positive professional relationship is important no matter the results of the conversation. That means you shouldn’t storm out in a huff if you don’t get what you want and should remember to say “thank you” if you do.
Talking Points for Managers
Any good manager should be trained to have productive, clear money conversations. Managers need to prepare talking points when entering a salary discussion just like their employees should.
It doesn’t matter if you are offering a raise, accepting someone’s request for a raise, or denying a request for a raise, you need to give your employee detailed information to back up your decision. When employees are disappointed by a response, it’s usually because they don’t know or understand the context of the decision. Be very clear about how decisions are made regarding promotions, raises, and bonuses, and don’t over- or under-promise on any of those to your employees.
Your employees probably have some big career goals—do you know what they are? You can’t do much to help them if you don’t. Even if you can’t offer employees the raise they are looking for right when they ask for it, you can help map out their career trajectory at your organization so they know when they can expect a raise or bonus, what type of opportunities are available, and how they can meet the skill and performance requirements for those goals.
Don’t let one conversation be the end of your discussion. If an employee got a raise, ask them if it is being reflected in their paycheck so you’re sure all the changes were made correctly. If you decided against granting a raise for now or made a different compensation plan, make sure they feel like a valuable part of your organization and that their work is appreciated.
Follow the Golden Rule
Everyone has a boss, so treat your employees with the same respect you want to receive when you discuss compensation with your own manager.
Talking about money can be scary for everyone, but hopefully, with the help from some of these tips for how to talk discuss salary, your money chats will go from Poltergeist scary to Hocus Pocus scary. As long as you do your research and walk into compensation conversations prepared (as an employee or a manager), you should have the confidence you need to hold a constructive and respectful conversation, whatever the result.