Whether it’s in the job posting, during the interview, or in reference to a possible raise, employers must prepare to discuss compensation with their employees. However, exactly how and when these talks take place is crucial. As an employer, you must be aware of your right and your employees’ rights when it comes to discussing pay, as well as the regulations in place that ensure fair pay.
While talking about compensation can be a delicate or awkward conversation, it’s always best to be direct. Ultimately, your staff works for a wage—there are other motivating factors, but pay can be a reason to stay or a factor in an employee’s decision to move on. With that said, there are five questions to answer when you’re considering compensation for an employee:
“You can’t make money if you dont spend money.”
What is your budget?
You can’t pay someone if you don’t have the money, and by the same token, you can’t make money if you don’t spend money. Employees are your best investment—they’re the ones who carry out and implement the organization’s goals. Your business should set aside a significant portion of its resources to not only pay salaries, but also take into account new hires, bonuses, and raises. Forbes recommends communicating that information during the interview.
What have you promised?
Consider the consequences of listing a salary in the job posting itself. If it’s competitive you will likely attract more qualified candidates. But by listing an amount you may lose leverage during negotiations. If it’s on the lower side, the job may attract less experienced applicants willing to work for less money, but it will also be easier to follow through on the promise.
How much do similar jobs at other companies offer?
Be aware of what your competitors can offer the talent you seek, because it is likely your applicants have done their research. If a direct competitor offers a better package for the same qualifications, you can expect any candidate who knows that will seek greener pastures. However, you can combat that by being proactive and playing up the other benefits of your company, like culture, bonuses, flexibility, or benefits.
How much do his or her co-workers make?
If you’re paying one person more than another in the same position, you better have a valid reason for doing so. Not only is compensation discrimination illegal and unethical, it will also create tension in the office. Co-workers talk, and rumors spread. If your team comes to learn one worker is compensated more than another in a similar job, it could come back to bite you. Fair pay practices are a must for any successful company.
What are the prerequisites for a bonus or raise?
Offering a raise is a great way to keep an employee working toward a goal, when done correctly. But you can’t hand out bonuses and raises all the time because they will lose their effectiveness as motivational tools. Instead, one strategy is to publish one or more tracks which an employee can choose to follow. These can have specifically designated timelines and steps for advancement, and will allow you to provide raises in an unbiased and scheduled way.
An HR team has a lot to keep track of, and wages are just one part. You should also consider adopting an applicant tracking system to help maintain a clean and orderly record of new hires, salaries, and bonuses. Hashing out salaries and discussing money with your employees doesn’t have to be an uncomfortable ordeal as long as you’ve prepared ahead of time and follow the necessary guidelines. For more great tips on discussing salary, check out this blog post, “The Talk: Three Best Practices for Discussing Compensation.”
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