How Do You Communicate Compensation Changes to Employees?

How Do You Communicate Compensation Changes to Employees?

Navigating the complexities of compensation adjustments can be challenging, so we’ve gathered insights from nine Co-founders, CEOs, and management experts. From explaining compensation philosophy clearly to recognizing individual employee concerns, discover how to effectively communicate pay changes to your team.

  • Explain Compensation Philosophy Clearly
  • Tailor Communication to Change Type
  • Personalize the Compensation Conversation
  • Encourage Feedback on Compensation Changes
  • Provide a Clear Path for Salary Advancement
  • Justify and Explain Compensation Decisions
  • Use Personalized Video Messages
  • Implement a Multi-Step Notification Process
  • Recognize Individual Employee Concerns

Explain Compensation Philosophy Clearly

Compensation changes can be a touchy subject. First, make sure that compensation changes are tied to your overall compensation philosophy, and that you can explain this philosophy to employees in plain language. It should be clear what the criteria are for compensation changes (i.e., comp changes are tied to performance review scores, promotions, etc.). And, most importantly, managers should have the skills and training needed to have compensation conversations with their direct reports.

Liz Kofman-BurnsLiz Kofman-Burns
Co-Founder, Peoplism


Tailor Communication to Change Type

The best way to communicate compensation changes to employees depends on the type of compensation change. Across-the-board increases are best communicated via a company-wide email so that all parties receive the information accurately. Individual merit increases are best communicated in a one-on-one meeting with a supervisor, either in-person or virtual. If the company has a policy of keeping individual salaries confidential, then this meeting would also be an appropriate time to remind employees of this policy.

Dan Morrell, PhD
Professor of Management, Middle Tennessee State University


Personalize the Compensation Conversation

My best tip for talking to your team about compensation changes is to communicate in person or via live video calls if you have a remote team. Adding a personal touch makes a big difference in how your message comes across. Plus, this allows for real-time feedback and the ability to address concerns before they escalate. Emails and other types of direct messages can come off as impersonal, especially when you’re tackling such sensitive matters.

John TurnerJohn Turner
Founder, SeedProd


Encourage Feedback on Compensation Changes

An effective way to communicate compensation changes to employees is by being open to feedback or discussions. Don’t just convey your message and be done with it. Encourage your employees to ask questions if they have doubts and cater to their concerns in a friendly manner. It’s normal for your employees to have doubts in their heads, especially when they see negative changes made to the remuneration. So, be prepared for rebuttals and cater to them in an effective way. This serves as an opportunity for you to gather valuable feedback from your employees, which may help you make better decisions in the future with little or no negative effect on employee sentiment.

Stephanie WellsStephanie Wells
Co-Founder and CTO, Formidable Forms


Provide a Clear Path for Salary Advancement

The key to communicating compensation changes is to explain to employees how they can see a change in their salary. For example, we create a pathway for advancement and invite employees who are interested to reach out so we can explain what this process entails, including what they can expect to see in terms of their compensation. When your team has a clear path and can take action to boost what they earn, they tend to be more motivated, productive, and happier.

Chris ChristoffChris Christoff
Co-Founder, MonsterInsights


Justify and Explain Compensation Decisions

An effective way to communicate compensation changes to employees is to accompany the news with a rationale. You should tell your employees why certain changes have been made and justify your decision. Compensation changes may be caused by different things: the company may be going through a tough time, or an employee may not be performing as per the set expectations. Whatever the reason may be, clearly communicate it to employees when breaking the news to them. Furthermore, you should also share how you’re catering to the situation and if the changes can be reversed in the future. Compensation changes may be a hard pill to swallow, but pairing the news with a justification may help you communicate such changes effectively while minimizing the possibility of a backlash.

Jared AtchisonJared Atchison
Co-Founder, WPForms


Use Personalized Video Messages

An out-of-the-box approach to communicating compensation changes to employees is through a personalized video message. Instead of the traditional email or memo, the HR department can create short, personalized videos for each employee, explaining the compensation changes tailored to their role, performance, and contribution to the company. This approach adds a human touch, showing employees that their individual contributions are recognized and valued. It also allows for clear and transparent communication, addressing any concerns or questions directly, fostering trust, and increasing employee engagement with the new compensation structure.

Andrew SaladinoAndrew Saladino
Co-Founder, Kitchen Cabinet Kings


Implement a Multi-Step Notification Process

We give our employees annual raises, and our process for letting everyone know has multiple steps. First, the team leads of each department talk to the employee about their pay increase and why they received the percentage they did. Then, we send an email about a month before the change is set to occur with the details in writing. At the bottom of this message, we encourage people who have further questions to reach out to HR. I’ve found that this approach ensures everyone gets the news and has time to ask questions before the change goes into effect.

Daman Jeet SinghDaman Jeet Singh
CEO, FunnelKit


Recognize Individual Employee Concerns

Communicating compensation changes to employees is crucial to maintaining trust and morale. Recognize that different employees may have different reactions to compensation changes based on their individual circumstances. Consider providing personalized communication or one-on-one meetings to address any concerns or questions.

Thomas GriffinThomas Griffin
Co-Founder & President, OptinMonster


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