Compensation Corner: How Compensation Communication Can Help Improve Employee Satisfaction and Loyalty

Compensation communication can be a critical link toward improving employee morale, performance, overall satisfaction, and company loyalty – and yet it is often an afterthought. As a Total Reward Solutions strategic partner, we want you to know how damaging poor compensation communication can be, and how to use it effectively to motivate and retain employees. Let’s take a look:

Perception is Reality

Most workers believe they are being paid below market rate regardless of where they actually stand compared to their peers. They might have no real basis in fact for this perception, but when no market rate compensation facts are made available, their perception becomes an entrenched reality. How pervasive is the problem of unreal perceptions? Harvard Business Review reported on a PayScale survey of 71,000 workers grouped into those who were, in fact, being paid above market, at market, and below market. The findings were astounding: some 80% of workers who were really being paid above market believed they were either being paid below market (35%) or at market (45%). In other words, only about 1 in 5 employees at this level truly understood they were being paid above market. Similar results were true for respondents who were actually being paid at market rate, with 64% believing they were being paid below market.

Why is this discrepancy between perception and reality so prevalent (and persistent)? Clearly it comes down to communication – or lack of communication. When employees have to rely on the workplace grapevine, industry rumors, or their own imaginations, their attitudes suffer and so does their performance.

The Solution: Prioritizing and Delivering Compensation Communication

Frankly, correcting this misalignment between employee perceptions about their compensation and market realities is relatively simple, but has two main components: 1) communicating proactively to all employees about compensation programs, and 2) communicating responsively and respectfully to individual employee concerns.

First, don’t let compensation communication be the tail wagging the dog. Make it a carefully crafted and thoughtfully implemented part of your compensation program design. Give employees the bigger picture of the world beyond your corporate walls. Share the results of your recent Market Rate Analysis (you HAVE done one recently, haven’t you?) so employees have an accurate picture of where they stand. If there are reasons your workforce lags behind the marketplace as a whole, explain the reasons or put plans in motion to correct the inequity. With so many workers believing they are underpaid, the truth will either correct their inaccurate perceptions or confirm their beliefs. The result will almost certainly be a net-positive attitude shift.

Next, in real time, be sensitive to the concerns and perceptions of individual employees regarding their compensation. Encourage them to share those concerns with management. And when they do, respond professionally by:

• Truly listening to the concern. Even if you know it to be unfounded relative to the market, the employee probably doesn’t fully appreciate the benchmarks used or other parameters that impact total rewards.
• Asking questions to fully understand the scope of the concern or complaint. Better communication could be the solution, but the problem could also be due to a lack of understanding about the skills, education and aptitudes of the employee. The solution to the employee’s dissatisfaction could lie in making necessary adjustments, charting a more lucrative career path within the company, or both.
• Committing to doing the research and responding in a timely manner – and then doing it! Don’t just watch the employee’s lips move and then nod your head empathetically. Make the commitment to getting answers and then following through when you have them. Keep the employee apprised of progress throughout. Even if the employee doesn’t like the ultimate response, the effort will almost surely be appreciated.

The Bottom Line:

Compensation communication can help you align internal perceptions with market realities. Your employees will know where they stand, and will likely feel they are being heard and respected. The result of proactive and responsive compensation communication could very well be better employee performance, improved morale, and increased company loyalty.

A recent Market Rate Analysis puts you in position to communicate positively with employees. Even so, however, effectively delivering compensation communication requires planning and design unique to your company and its market position. If you are not confident you have a good compensation communication plan in place, or if you are overdue for a Market Rate Analysis, Total Reward Solutions can help. Contact us today at 317.589.8529.

Cassandra Faurote

About Total Reward Solutions:

Have a referral for us? Total Reward Solutions is your trusted partner for compensation and benefit services. As you recall, Total Reward Solutions offers a broad range of compensation, benefits, performance management, and reward/recognition consulting services to help your organization attract top talent, motivate employees and retain top performers. We can partner with you on a project basis, on retainer, or as your total outsourced solutions provider for compensation services.

Call us today at 317.589.8529 to discuss how we can help your organization develop and implement competitive and effective compensation and total reward programs.