Compensation Communication: Managing Employee Pay Expectations Amid Rising Inflation
Over the past six months, as inflation continues to impact businesses and individuals nationwide, many employees are feeling the strain of the current economy, and their pay concerns are becoming increasingly important to address. These economic hardships also allow employers to lead conversations around the importance of pay transparency and how they provide it.
Most employees (69%) have expressed concerns about their HR leaders’ rising costs of essential products and services. Two-thirds of business leaders worry about rising inflation affecting employees’ pay. To manage their budgets, employers are working to hold crucial conversations around compensation and address pay concerns. While these discussions are often complicated, it’s essential for leaders to efficiently and transparently navigate them, so employees have the best understanding of why they make their current rate and how their organization addresses compensation concerns during challenging times.
Failing to set clear pay expectations can often result in the loss of top talent, a complicated consequence amid today’s competitive labor market. Since it can cost over $4,700 to replace and onboard new employees, if companies aren’t creating further transparency around pay during this time, they may not only lose valuable employees, but it may hurt their bottom line as well.
Building Trust and Retaining Talent Through Pay Expectations
Establishing communication and trust is crucial because employees who don’t have a solid understanding of their total compensation are more likely to feel that their pay is unfair compared to their colleagues and are thus more likely to pursue other job opportunities. In fact, according to PayScale, employees who believe they’re being paid lower than the market average are 49% more likely than those who think they’re making at or above the market average to look for a new job in the next six months.
As organizations review their budget and pay practices, they should determine the salary benchmarks they can realistically offer employees. Salary benchmarks are a critical tool for employers to provide to employees to set standards for pay within the company and ensure they’re offering competitive compensation packages within the marketplace. By analyzing income for each role and comparing that pay to industry standards, employers can show their employees that their salary is fair and provide legitimate data to back it up.
While companies like Verizon and Bank of America have decided to increase pay in hopes of attracting and retaining talent, not all employers can raise wages significantly, as the compensation cost has climbed 4.5% over the past year. However, they can implement many other steps to ease employees’ concerns around compensation. Still, every workforce is different, and companies should not assume they know what their employees need. Considering employee feedback is key to building trust and maintaining expectations.
Taking Employee Feedback Into Consideration When Developing Pay Strategies
To create genuinely transparent pay strategies that address employee concerns, employers must adequately understand how employees feel. Employee feedback helps employers understand what employees think about current pay strategies. Plus, it helps employees feel more valued when their perspectives and input on pay practices are seen and heard by company leaders. After all, recognizing employee frustration and explaining company policies helps employees feel that any of their potential worries will be taken care of and their leaders respect their opinions. But before employers can incorporate employee feedback into new pay strategies, they must obtain it.
There are many ways employers can gather this feedback. For example, managers can speak face-to-face with employees during stay interviews and discuss the organization’s pay practices during that meeting. This can help company leaders learn which parts of their pay strategy are (and are not) favorable and transparent for employees. For employees who feel uncomfortable raising concerns around pay directly to their manager, employers can conduct routine anonymous surveys around pay, with questions on whether the organization needs to implement better communication around compensation offerings, adjust benefits, or change levels of transparency. When employees have several ways to share feedback in real-time, there’s a better chance that their thoughts will be up-leveled to the right leaders.
Implementing Robust Strategies for Transparency and Fair Pay in the Workplace
Today’s employees and job candidates value fair pay, and unlike previous generations, they’re ready to discuss compensation openly. Many (68%) Americans say they would take lower pay if their employer shed more light on salary benchmarks.
Fair and transparent pay is vital amid today’s competitive labor market, where 61% of job candidates are more likely to apply for a role that shares a salary in the job listing. Additionally, fair pay is likely to help retain talent since employees are 50% more likely to step away from their current organization if they believe they are earning below market (even if they aren’t earning less). Therefore, when employers prioritize communication around compensation, employees are less likely to assume that they are making an unfair amount compared to their colleagues.
To retain top talent in today’s market, employers must make meaningful efforts toward pay transparency by setting clear pay expectations, understanding employee feedback on compensation, and openly discussing fair pay with employees and candidates. Although not every employer can make massive changes to compensation to satisfy employees, they risk losing valuable employees and qualified job candidates if they fail to set compensation expectations and seek out employee feedback properly.
Tanya Jansen is the co-founder of beqom.
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