How to Deliver Bad News About Compensation: A Manager’s Guide

April 12, 2024
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Nobody wants to be the bearer of bad news. But as a manager, that’s a responsibility you can’t get away from. 

This is particularly true when compensation review season rolls around. After all, managers are usually the ones tasked with communicating the outcomes of the review to their reports — and it’s not always good news. 

It might be that an employee’s performance doesn’t meet the standards for a raise, even though they’re meeting their obligations. Or they might simply be at the top of their salary band, with no room for advancement. And sometimes, no matter how much the company would like the dish out raises, the budget just isn’t there. 

Let’s be clear: nobody likes these conversations. Giving your team disappointing news is never fun — especially if you don’t agree with the decision. 

That said, there are a few things you can do to make things easier for both you and your reports. In this article, we’ll share our tips for delivering bad news about compensation in a way that shows employees the respect and empathy they deserve — without compromising your position as a manager. 

Delivering bad news about compensation: 7 tips for managers

If you dread telling employees they’re not getting the raise they hoped for, you’re not alone. These conversations are no fun for anyone, and even seasoned managers sometimes struggle with them. 

But, the way you deliver bad news does matter — and can have a big impact on employee morale. Read on for our seven tips for delivering bad news, the right way.

1. Research and prepare before your conversation 

When you share bad news with an employee, they’ll likely have one question: why? And not knowing the answer isn’t a good look for a manager. That means you need to get your ducks in a row before you speak to the employee by making sure you fully understand the rationale behind the decision, and any context that helps to explain it. 

This is important because it means you’ll be able to properly explain the decision to the employee, and answer any questions they have about it. Although they still won’t like the result, they’re much more likely to accept the decision if they can see that the process behind it was fair. 

2. Do it face-to-face 

Conversations about pay are sensitive, and should be treated with the respect they deserve. That means that delivering this news over the phone (or, God forbid, by email) isn’t appropriate — even if it might be easier for you as a manager. 

Instead, set up a face-to-face meeting with the employee. Ideally, this should be done in person, but a video call is a good alternative if that’s not possible. 

Doing it this way shows the employee that you understand the importance of the decision. It also gives you the opportunity to demonstrate empathy and support through body language — which is impossible to get across on the phone. 

3. Choose the right time and place

After you deliver your news, your employees might have questions — or even just need a bit of space to vent. That means you should schedule your conversation at a time when you’re not going to be rushed, distracted or interrupted. 

If you’re having these discussions in person, it’s also smart to think about where you have them. For example, a glass-walled office that everyone can see into might not be the best choice. 

It also goes without saying that these conversations should always be one-on-one. After all, no one wants to receive bad news in front of their peers, and it’s important to show respect to each employee by giving them your full attention. 

4. Don’t minimise the bad news

As humans, we have a tendency to try to sugarcoat bad news. But in this situation, it’s best to resist this urge as it could leave room for interpretation or lead your employee to believe the decision is up for debate. 

Instead, use clear, direct language that explicitly tells the employee what you’re trying to say. For example, you might start the conversation by saying: 

“Unfortunately, it was decided during the compensation review that you won’t be getting a salary increase this year.” 

It can also be tempting to try and soften the blow by sandwiching bad news with good news — for example by telling the employee that you’re pleased with their performance. 

But, while it’s OK to add context if you think it will help, you should be wary of finding positive things to say just to make the bad news easier to swallow. After all, your employees are adults, and might find this approach patronising or insincere. 

5. Show understanding and empathy 

There’s no way around it: when you tell an employee they’re not getting the raise they expected, they’re going to be disappointed. They may even be upset or angry — and it’s only natural for them to take some of this emotion out on you as a manager. 

Of course, these conversations are no picnic for managers either. But showing empathy and understanding to employees after they’ve received bad news is part of the job. 

That means you shouldn’t get defensive, and should avoid minimising or dismissing the employee’s feelings. Instead, show empathy by acknowledging their disappointment. 

6. …But don’t bad-mouth the company 

That said, as a manager, you’re also a representative of the company. And presenting a united front is crucial to employee morale. That means that, even if you don’t agree with the decision, saying as much to your reports is a bad idea. 

So, while you should absolutely show empathy and sympathy to your employee’s situation, you should avoid bad-mouthing the higher-ups in your organisation or implying that the decision was unfair. 

Instead, focus on helping employees to understand the rationale behind it — and keep your opinions to yourself. 

7. Allow the employee space to respond (if they want to) 

It’s only natural for employees to have thoughts to share when they’ve received a piece of bad news — and listening to them is part of your role as a manager. You may want to end the conversation by asking the employee if they have any questions, or even how they’re feeling. 

However, there is a clear difference between allowing employees to vent and opening up the topic for debate. Be kind, but make it clear that the decision is final. As we’ve mentioned, you should also resist any temptation to align with your employees by agreeing that the situation is unfair. 

It’s also important to remember that some employees won’t want to share their thoughts with you at all, and prefer to reflect on the news privately or talk to their friends about it. You shouldn’t push employees to share their feelings — just make it clear that you’re available if they want to chat. 

Finding the right balance as a manager 

Managers have a dual role to play within an organisation. On the one hand, they’re expected to act as champions and supporters of their reports. But they’re also agents of the company, and they’re usually the ones on the frontline when it comes to delivering bad news. 

You don’t need us to tell you that all of this can be pretty draining — especially if you have several of these conversations lined up in a single day or week. 

Of course, you should be careful not to make the conversation about you by complaining to your reports about how hard it is — we all saw that crying CEO video. But it’s still important to look after yourself and protect your own mental health as a manager. 

First, make sure you plan these meetings so that you’ll have time to decompress afterwards if you need it. That might mean stepping away from work for a quick coffee or a walk, or just taking a break before your next meeting. 

If you’re someone who struggles with these tough conversations, you’re not alone. But although they’re never pleasant, they do get easier with time. 

Learn more 

Want more insights into handling compensation as a manager? Check out these posts from our archive: 

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