Conversations about pay can be uncomfortable for employees. And they’re often no picnic for managers either — especially if you have bad news to deliver. But whether they like it or not, in most organisations, managers are responsible for delivering the results of the annual compensation review to their employees.
While you can’t get away from these conversations, you can make them easier on both you and your reports. In this article, we’ll share five sample scripts to help you navigate pay discussions as a manager, plus everything you need to put your own script together.
The importance of communication about pay
As a manager, the way you communicate about pay matters. If you do it right, employees will leave your conversation with a thorough understanding of their pay and how it’s determined. Even if they don’t like the decision, they’ll understand that it was made according to a fair and consistent process.
But do it wrong, and you could leave employees feeling confused, frustrated and even angry. Over time, that translates to a big problem with employee morale, engagement, productivity and retention.
Do you really need a script to deliver pay information?
When it comes to discussing compensation with your employees, it’s important to be prepared. That means you should fully understand the information you have to deliver and the factors that went into the decision. This both ensures you’re prepared to answer any questions your reports might have and creates a smoother, more positive experience for both of you.
But do you really need a script for these conversations? Well, no — not necessarily. You don’t need to memorise a set speech and deliver it to employees verbatim. You’re a manager, not a robot. However, having an idea of what you’re going to say before you meet with your employees can help you stay focused throughout the conversation and ensure you don’t forget any important information.
Building a script to deliver compensation review results
You can think of it as a script, or a simple set of bullet points to help you stay focused. Either way, here are the steps to follow when deciding how to communicate the results of a compensation review to an employee:
- Start with the headline: If you’ve invited an employee to a meeting to discuss their compensation, they’re unlikely to be able to focus on much else until they know what the deal is. Don’t leave them hanging: tell employees the result of the review straight away at the beginning of your conversation.
- Include details: Next, you should fill in the gaps by giving the employee the important details they need to know. If the employee isn’t getting an adjustment, you should explain why. If they are, you should share their new salary, the percentage increase this represents and the effective date.
- Explain the reasoning: It’s important that employees understand the why behind any compensation decision. That’s why the next key ingredient in your script is an explanation of the various factors at play. Depending on your company’s compensation strategy, these might include the employee’s performance, market benchmarking data and more.
- Invite questions: Finally, your script should end with an opportunity for the employee to ask questions. For example, employees who haven’t been awarded a raise might ask for clarification on how they could improve their performance and secure an increase next time around.
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5 sample scripts to inspire your next compensation conversation
Here are a few example scripts for managers in specific circumstances — feel free to borrow these and adapt them to your situation.
Scenario #1: Employee is getting a pay increase
‘I’m pleased to inform you that you will be receiving a salary increase as a result of the recent compensation review. The company has agreed on a raise of 4%, which takes your salary to €55,000. This will be effective from 1 January.
The increase is based on several factors, including a general increase across the company of 2%, and an additional increase to account for your high performance score since you have exceeded expectations this year.
Do you have any questions?’
Scenario #2: Employee is getting a pay increase, but it’s smaller than expected
‘I’m happy to tell you that you will be receiving a salary adjustment as a result of the recent compensation review. Your new salary will be €28,000, which is an increase of 3%. I know that this may not be the news you were expecting, since last year you received an increase of 5%.
However, last year’s compensation review included a company-wide increase of 2% to help employees deal with rising costs. Since inflation is lower this year, this general increase isn’t happening. That means that you’re only getting a 3% merit increase, which is the same as last year.
Do you have any questions?’
Scenario #3: Employee is not getting a raise due to performance
‘Unfortunately, it was decided during the recent compensation review that you won’t be receiving a pay increase this year. I understand that this is disappointing.
The reason is that your performance didn’t meet expectations this year. At our company, we only award merit increases to employees who receive a performance rating of 8.0 or higher. This year, your rating was 6.5.
Let’s talk about some of the ways we could help you improve your performance and get a raise in the next review. First, do you have any questions?’
Scenario #4: Employee is not getting a raise because they’re paid above market already
‘Unfortunately, you won’t be receiving a salary increase this year because your current salary is already above the market median for your role and level. That means you’re not eligible for an increase in your current position according to our policy.
You have met performance expectations this year, and I think it would be a good idea to talk about how we could help you to move to the next level.
Do you have any questions?’
Scenario #5: Employee is not getting a raise because they recently joined the company
‘Unfortunately, we won’t be raising your salary at this time, although you will be eligible for an increase at the next review depending on your performance.
We are happy with your performance so far, but as you know, you recently joined our company. We hire new employees at a competitive market rate, so we feel that your current salary is fair for your role and level.
Do you have any questions?’
Dos and don’ts when communicating about pay
As we’ve said, conversations about pay are never easy. Here are a few best practices to help you navigate these difficult discussions more effectively:
- Do explain the how and why, not just the what: Above all, employees want to know that your organisation makes pay decisions fairly. Explaining the reasons behind any decision (and not just the results) is crucial to earning their trust.
- Do have pay conversations face to face: Conversations about pay are important to employees. Show employees that you understand this by holding them face to face — in person if possible.
- Do show empathy and understanding: Compensation is a sensitive topic. Try to look at things from your employees’ perspective and show them empathy, especially if you have bad news to share.
- Don’t try to minimise bad news: Humans have a tendency to sugarcoat bad news — but employees aren’t stupid. Show them the respect they deserve by sticking to the facts and expressing them clearly and concisely.
- Don’t blame others: While you may not agree with every pay decision your organisation makes, it’s important to show a united front. Don't rock the boat by bad-mouthing higher-ups in your discussions with employees.
- Don’t make promises you can’t keep: While it’s tempting to try and relieve an employee’s disappointment by telling them they’ll get better news next year, you shouldn’t make promises you can’t keep. Instead, focus on things you can control, like helping employees improve their performance or move up to the next level within their salary band.
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The importance of clear and consistent pay structures
The way you communicate about pay can make a big difference to your employees’ experience of the compensation review process. But let’s be honest: all the communication skills in the world won’t help you if the results you’re delivering are unfair. And compensation decisions can only be fair if they’re backed up by a consistent, logical structure.
As a manager, you may not be able to control everything about how pay decisions are made in your organisation. But you can advocate for fair systems, consistent processes and logical decisions. For example, using salary bands can help to ensure pay is consistent across the organisation — and conducting regular market benchmarking ensures they’re externally competitive.
After all, employees aren’t always going to like the results of a compensation review. Though you might want to give a raise to every employee, the reality is that that’s not always possible. But employees are much more likely to accept bad news if they understand it’s based on a logical system — and not just plucked out of the air.
