counting dollar bills
PHOTO: Sharon McCutcheon

Whether you know it or not, your company is being branded by workers as you read this article. Not only by your current and former employees, who leave comments on websites like Glassdoor, but also by jobseekers who provide feedback on their interview experiences. Sites like PayScale offer tools to help workers check if their salaries and job offers are in line with the market.

"Talent is watching and making value judgments on how organizations craft their pay philosophy and practices. If those don't align with the culture or sit well with employees, they may take their skills elsewhere," wrote Tim Low, senior vice president of PayScale in its "2018 Compensation Best Practices Report.”

To prepare the report, PayScale surveyed 7100 employers in North America and Canada to identify trends and attitudes about compensation, retention and employee engagement. Here are our top takeaways for managers who strive to provide meaningful experiences:

  1. Learn to have COMPversations — talk about pay with your direct reports.
  2. Be transparent — tell employees how pay is determined.
  3. Be fair — look for race and gender inequities and correct them.
  4. Continuously iterate — make compensation an ongoing conversation, not an event, adjust when necessary

Comp-versations Matter

Workers who feel good about their deals have a positive impact on the company's bottom line, according to Low. As a result, managers need to learn to have retention and satisfaction-critical conversations about pay. Yet only 29 percent of organizations provide managers with the needed training, according to the PayScale survey.

And even when the training is provided, it is not what it should be. The survey revealed 74 percent of those trained received information about basic communication style, 66 percent about organization performance, and 65 percent about organization culture. Less than 14.5 percent of managers indicated they had been trained to have specific compensation conversations.

According to the report's authors, this is a problem. To win the war for talent, managers the preparation to have these kinds of dialogues and the power to make adjustments when needed.

"Do you give your managers enough resources and training so that they can do what they need to do to coach, communicate with, and appropriately reward employees? Do you trust them to set the right goals to drive the right behaviors? Are you giving them the freedom to give big increases to their highest performers?” asked the authors of the report.

Be Transparent About Pay

Employees are not all that interested in being told they are being paid a "fair market rate." According to the survey, what they want to know is:

  • How does my employer determine pay?
  • Where does my pay fall in relation to others, and where can it go?
  • Why do you pay me like you do?
  • What can you tell me about everyone's pay?

And while putting compensation data out for everyone to see might seem like one way of achieving the latter, PayScale recommends against it. "Conversations about pay can sometimes matter more than pay itself. Even if your employees have self-service options, they can easily misinterpret the numbers, so it's a good idea to encourage managers to go through the reports with them on a regular basis.”

Make Fair Pay a Practice

While it has always made sense to pay people their fair market value, the reality is it doesn't generally happen in practice. Consider that women are typically paid 80 cents for every dollar their equivalent male counterparts earn. The problem starts when females do not haggle for higher offers for their first jobs because even if they do stellar work later in their careers, their pay increases are calculated as a percentage of their base pay.

Managers need to step up and pay women and other underpaid workers according to the value of their work, wrote the report's authors. One of the best ways to achieve this is to remove bias from the compensation process. Instead of making offers based on current salary, base them on what the job is worth. Some states and cities like New York City have made this easier for companies by making it illegal to ask about salary during the interview process.

Being fair brings rewards, according to the PayScale report. "Organizations in the top quartile for racial and ethnic diversity are 35 percent more likely to have financial returns above their respective national industry medians and those in the top quartile for gender diversity are 15 percent more likely."

Compensation Should Be an Ongoing Conversation

Top employers not only provide their workers with competitive salaries, but also set them up to adjust compensation on the fly via spot raises, bonuses and incentive pay. The PayScale survey found 31 percent of top performing organizations give bonuses and incentives "at least quarterly," and that well-defined variable pay plans pay out "when people, teams and/or the organization succeed."

The most common types of variable pay include incentive bonuses (67 percent), followed by spot bonuses or other discretionary bonus programs, employee referral bonuses and counteroffers.

"Top performing organizations fight to keep their talent. Only 28 percent don't counter-offer if an incumbent gets an offer," according to the survey.

Easier Said Than Done

Almost every manager wants to compensate workers fairly, "but it's seldom feasible," according to Constellation Research vice president and principal analyst Holger Mueller. "Too many variables play a role and may not be shared or understood well enough," he said, pointing to the Zappo's holacracy experiment as an example.

"Fairness matters — but enterprises seldom can afford to play it fair when they need to hire for skill sets that are in high demand," he said.