Communicating About Off-Cycle Compensation Adjustments: A Manager’s Guide

Most companies have a structured process for adjusting employee compensation: the compensation review. This is a regular opportunity to review salary bands, compare them to market standards, and award raises to those who deserve them. Depending on your company, this may happen once or twice a year.

However, there are some circumstances when you may need to adjust an employee’s salary outside of this scheduled process. Communicating about these changes is a task that usually falls on managers and team leaders — but most receive little to no training on how to have these conversations effectively. Read on for everything you need to know to communicate clearly about off-cycle compensation adjustments. 

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Why off-cycle adjustments are (sometimes) necessary

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To keep things fair and consistent, most compensation increases should happen as part of your official compensation review process. But there are times when it’s necessary to make an adjustment outside of this cycle. 

For example, you may decide to make an off-cycle compensation adjustment if an employee takes on extra responsibilities or gains a new qualification or certification. In fast-moving markets, you may need to adjust salaries outside of compensation review season simply to keep up with the competition. 

While out-of-cycle adjustments shouldn’t be happening regularly, they can be a useful tool for staying flexible with your compensation and ensuring employees are paid fairly and competitively. 

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How to communicate about off-cycle adjustments: 7 tips for managers 

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As a manager or team leader, you’re probably the first person employees turn to when they have a question about their pay. Managers are also typically responsible for delivering updates about compensation — whether it’s good news or bad. 

Even though an out-of-cycle adjustment is typically good news for an employee, the way you communicate about it still matters. Getting it right can help you to maximise employee morale and engagement, and set realistic expectations for the future. Here are our top tips for communicating about off-cycle compensation adjustments. 

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1. Build a team culture of openness and transparency

If you want to communicate effectively about off-cycle raises, you need to lay the groundwork well before any adjustments actually happen. As a manager, you should be doing everything you can to create a culture of openness and transparency in your team when it comes to compensation. 

Of course, managers are often bound by the specific level of pay transparency their company has decided on — and there may be some things you can’t share with your reports. But being as open as possible about compensation helps to build trust, fosters a positive working environment and demonstrates your personal commitment to ensuring your team’s pay is fair and competitive. 

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2. Have compensation discussions face-to-face

Even when you have good news to share, conversations about pay are sensitive. That means it’s important to give these discussions the respect they deserve by holding them face-to-face. Where possible, you should do this with an in-person conversation. But if that’s not an option, a video call is a good compromise. 

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3. Keep communications clear and precise 

The most important thing to remember when it comes to communicating about compensation is to be as clear and specific as possible. This is especially important when it comes to off-cycle compensation adjustments since they happen outside of your normal systems, which could be confusing for employees. 

As a manager, you should clearly explain the rationale behind the adjustment, and emphasise the objective factors that went into the decision. You may also want to explain why the increase is happening now, and not at the usual compensation review time.

Explaining everything clearly is crucial because it avoids setting unrealistic expectations for the future. After all, if an employee doesn’t fully understand why they’re getting a raise, they might expect the same thing next year — and be disappointed when it doesn’t happen. 

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4. Explain the long-term implications 

While an off-cycle compensation adjustment is almost always good news for an employee, it’s important to be clear about what it will mean for them in the future. As we mentioned above, the first step is to clarify that the adjustment is a one-off event based on special circumstances — and not something they should expect every year. 

It’s also worth noting that an off-cycle adjustment could make the employee ineligible for another raise when compensation review season comes around. If this is the case, making it clear in the moment is crucial to avoid disappointment later on. When communicating about off-cycle adjustments, you should reiterate your company’s normal processes and timelines so employees know what to expect moving forward.

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5. Don’t be afraid to ask for more information

Managers typically aren’t the only people involved in adjusting an employee’s salary. For example, the decision may have been made with input from HR, comp&ben, finance and even the company’s leadership. 

This means that, as with all conversations about compensation, employees may have questions that you don’t know the answer to. If this happens, don’t be tempted to guess or make up an answer. Instead, be honest with the employee and promise to follow up with the information they need. 

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6. Don’t forget to congratulate your employee 

Sometimes, managers get so wrapped up in clearly and effectively explaining the rationale behind a compensation decision that they forget one crucial step: giving the employee a well-earned pat on the back. 

After all, if an employee is awarded an off-cycle raise, that probably means they’re doing a great job — and it’s important to acknowledge this. Instead of diving straight into the details, take a moment to celebrate your employee’s achievement.

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7. Follow up with a written confirmation 

Conversations about compensation can be overwhelming for employees — even when it’s good news. And if you’ve done your job right as a manager, you’ve probably gone into a lot of detail about the reasoning behind the raise and the objective factors that went into it. 

Since employees won’t necessarily retain all of this information, it’s important to follow up after your meeting with a written confirmation of everything you’ve discussed. This doesn’t have to be a formal document — an email summarising your meeting will do just fine. The important thing is to give the employee a concrete document they can refer to if they’re unsure of anything after your conversation is over. 

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The role of transparency in employee morale and engagement

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While off-cycle compensation adjustments are sometimes necessary (and can even be beneficial to an organisation), they’re also an opportunity for misunderstandings and miscommunications. Communicating clearly and effectively about why the adjustment is happening is key to setting realistic expectations for the future. 

More generally, building a culture of pay transparency can help to boost employee morale and productivity, enhance a company’s employer brand and even reduce the gender pay gap. Of course, this isn’t something that can be achieved by managers alone — it requires the buy-in and support of your company’s leadership. 

With new pay transparency legislation just around the corner, many companies will soon have to open up about their compensation practices. In the meantime, being as open as possible within your company’s current policies can help build trust with your team and reassure them that you care about their pay. 

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Learn more

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Want to learn more about the importance of clear compensation communication? Here are a few articles from our archive to get you started: 

• Managing Employee Expectations About Compensation: The Complete Guide
• How To Communicate Compensation Decisions To Employees?
• How to Deliver Bad News About Compensation: A Manager’s Guide
• Demystifying Pay Transparency: The Complete HR Professionals' Guide

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