Good Reasons to Share Compensation Information with Employees

One of Astron Solutions’ popular consulting services is administering employee surveys. As we read through the many anonymous responses, we tend to see similar answers when it comes to the question of compensation, including:

• “My pay is too low,”
• “I do more than others in my department but make the same salary,” and
• “I could work at (insert name of rival organization here) and make more money.”

This tells us, as compensation specialists, that employees are often in the dark when it comes to why they make their specific salaries, and what the term “compensation” fully means. As a result, they feel underappreciated and frustrated with their employer. Before you know it, they are looking for employment elsewhere.

“Compensation programs are a vehicle by which an organization communicates to employees its mission, vision, values, and the strategic priorities that must be focused on. How we pay our employees also communicates their perceived value to the organization, regardless if the value is driven by external forces such as supply and demand,” said Michael Maciekowich, National Director, Astron Solutions.

Open communication and comprehensive training with your employees regarding their compensation packages not only increases satisfaction but also increases buy-in. Honesty goes a long way. If, for example, your organization had a difficult year and this fact will be reflected in pay cuts or smaller pay increases, let your employees know. By sharing information, both good and bad, your employees will feel trusted and respected, and will understand why certain compensation decisions have been made.

“Organizations should examine their pay systems and ensure they are well designed, which allows them to be open in communicating about them,” explained Susan Zelinski-Davis, CCP, Manager of Employee Performance and Rewards at Nationwide Insurance, Columbus, Ohio in the Harvard Business School article, “Compensation: What’s the Big Secret?” “As long as you have sound systems and guidelines, even if there remains some management discretion — and I don’t think you can completely remove that — then you should be able to openly discuss pay.”

Maciekowich also added, “The more successful organization will make every effort to communicate the following to its employees:

• the compensation philosophy and strategy of the organization;
• the balance between external market demands and internal job value in determining pay levels;
• the impact of the cost of health benefit programs on determining base pay levels;
• how performance and contribution are to be rewarded; and
• the influence of current fiscal realities on the ability to fund compensation programs.

Each of these elements requires that the organization take the time to ‘treat its employees like adults’ and share critical strategic & financial information so there is a better understanding of how their pay is determined.”

Once you have opened the discussion with your employees, clearly explain the monetary value of the numerous offerings of your complete compensation package including base pay, benefits, incentives, and reward / recognition programs. Also, don’t be afraid to institute pay-for-performance programs that reward high achievers.

Be sure to follow up and encourage on-going feedback. By doing this, you may find that your next employee survey is filled with responses such as, “I know I am appreciated,” “I’m happy with my salary and benefits,” and even “Thank you.”