Both managers and HR professionals need to be aware of the fraught nature of discussing salaries and pay. Currently, only a handful of states have pay transparency laws on the books, and it’s still taboo in many circles to discuss what equal or equitable pay looks like.
Unfortunately, these taboos incentivize companies to shortchange their employees, and this unfairness disproportionately affects minorities, according to the EEOC. Therefore, it’s important for folks affected by negative cultural and economic forces to be given the space to express disappointment or frustration with certain practices that aren’t equitable.
Further, it means that your more aggressive negotiators will take home higher pay than their quieter counterparts, irrespective of job performance or experience. Without creating a more level playing field when it comes to these compensation conversations, you may be missing out on rewarding staff members who deserve higher bonuses, commissions, or take-home pay.
A good manager following best team management principles can empathize with these concerns and seek to find the best solutions for their employees. Not only will a supportive and aware leader keep their direct reports happy, but they’ll also be advocates for team members, bringing compensation needs and research about compensation best practices to decision makers and C-level executives.
Why it’s important to have open communication about compensation
It’s important to connect each employee’s request for a raise to a business case. At the same time, ensure you’re not asking for an employee to “prove their worth” — if they’re a best-in-class employee, you and they will know that they’re doing a great job. However, to make it easier for an HR or departmental approval, ask them to outline their accomplishments, their peers’ recognition, and how they’ve gone above and beyond their current role (and therefore their current compensation).
Also, compare and contrast these wins with what was initially expected from their original job description. If you can clearly show that they’re performing above and beyond their role, you’ve got a great argument for not just higher compensation, but also for a potential promotion or new prestigious title.
It’s in HR’s best interest to retain high performers in teams — and direct managers are those who are in the best positions to make the business case for PeopleOps professionals. According to SHRM, retention is human resources departments’ number one business problem. Further, when it comes to employee turnover, it’s much more expensive to rehire, train, and get new team members proficient than it is to simply retain those who already have business and process institutional knowledge.
Keep in mind: we all understand that it can be uncomfortable to talk about pay — but creating an environment where you can discuss difficult subjects means that you’re ensuring openness, feedback, and psychological safety. These are all key aspects of a positive employee experience, which is what determines engagement, retention, and satisfaction overall.
The business case for competitive pay structures for employees
We’ve discussed creating a safe environment for pay discussions, and we’ve talked about how managers can help their teams advocate for equitable compensation. Now, let’s go over the business case for opening the door to comp conversations.
Improve talent acquisition and market position
First off, let’s discuss the elephant in the room — the best-in-class talent pool demands best-in-class compensation packages. If you’re not ready to provide competitive salaries to team members, then you’ll want to reset your expectations.
On the other hand, if your goal is to grow and plant a stake in the ground for your organization, then you’ll need to build competitive compensation structures into your budgets.
And once you do, you’ll be rewarded. Employee compensation is one of the greatest investments in your company you can make. Paying above-average salaries comes with greater retention, and better overall performance and efficiency. This applies to frontline employees as well, as Costco’s business model has shown dramatic profitability growth. Offering bonuses and top-tier compensation packages can also turn businesses around from bankruptcy.
Create more just environments concerning pay equity and wage gaps
Following best practices and enacting or helping to enact policies to level the playing field is essential for managers to encourage. Consider helping to start an employee resource group for minorities, which can be a powerful internal force to enact grassroots change from employees themselves. Further, support wherever possible moves to greater transparency in regard to compensation. Buffer is a great example here, as they publicly disclose how much their employees (including their C-suite) make and how they equitably calculate the salaries of their team members.
What’s the business case for this? Research shows that diverse teams lead to more creative, innovative, and profitable solutions. You can attain a diverse team through equitable pay structures. Do so, and you’ll be ahead of the game.
Set yourself up for successful long-term financial benefits
HR and employees should be on the same team — they should both be interested in the business case for maintaining best-in-class team members to extend their organization’s capabilities. Since it can cost up to 33% of a worker’s salary to rehire (Employee Benefit News), is it really worth it for an HR department to argue over a few percentages when discussing an employee’s raise?
It’s also important to understand that top-tier human capital and sustainable people operations are business investments. Boosting your business is not only about making sales or increasing product production — a workplace strategy that retains skilled employees means that you’ll keep industry veterans in your company. You’ll have the exponential experience and wisdom of those performers for yourself, keeping them away from competitors, recruiters, and poachers. While it may be harder to quantify the value of holding on to those experts from a budgetary perspective, assume that success includes qualitative x-factors like the right teams made up of just the right people.
How to enable employees to have effective conversations about their pay
Managers can serve as great coaches to their employees when it comes to job or work-related skills, but they can also coach their team to be effective advocates for themselves. According to Jenny Chang, five ways to effectively ask for a pay boost include:
- Highlighting the services you bring to the organization
- Connecting value to core skills
- Connecting value to non-core skills
- Being clear about accomplishments and wins
- And if the settings and scenarios are right, presenting offers from other organizations
Of course, leveraging each of these requires experience, tact, and timing. A skilled manager can do some research on internal budgets, the current headwinds among the HR team, and other factors that can increase positive outcomes for staff members.
One takeaway here is encouraging your team to keep track of their successes. Logging these “wins” could be a regular part of a 1:1 or standup meeting, and you could make this logging a part of a weekly assigned task to “journal your accomplishments.” Then, during annual promotion reviews or quarterly performance reviews, take out this log or journal and see what progress is being made.
As your employees add to these journals, these accomplishments can be presented as portfolios for HR or departmental approval as an “evidential case” for why a team member has earned a higher salary.
In short, ensuring that employees can have open and honest communication around compensation is a sign of a profitable organization that creates space for best-in-class employees. The most competitive and successful organizations allow for open feedback, and they provide the best pay and benefits packages for their rockstar staff. Ensure you’re following these steps to stay at the front of the pack.
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