Good Reasons to Share Compensation Information with Employees

---

One of Astron Solutions’ popular consulting services is administering employee surveys.  As we read through the many anonymous responses, we tend to see similar answers when it comes to the question of compensation, including

• “My pay is too low”
• “I do more than others in my department but make the same salary”
• “I could work at (insert name of rival organization here) and make more money.”

This tells us, as compensation specialists, that employees are often in the dark when it comes to why they make their specific salaries, and what the term “compensation” fully means.  As a result, they feel underappreciated and frustrated with their employer.  Before you know it, they are looking for employment elsewhere.     

“Compensation programs are a vehicle by which an organization communicates to employees its mission, vision, values, and the strategic priorities that must be focused on.  How we pay our employees also communicates their value to the organization, regardless if the value is driven by external forces such as supply and demand,” said Michael Maciekowich, National Director, Astron Solutions. 

Open communication and comprehensive training with your employees regarding their compensation packages not only increases satisfaction but also increases buy-in.  Honesty goes a long way.  If, for example, your organization had a difficult year and this fact will be reflected in pay cuts or smaller pay increases, let your employees know.  By sharing information, both good and bad, your employees will feel trusted and respected, and will understand why certain compensation decisions have been made.

The benefits of sharing fiscal information with employees can garner impressive results. WorldatWork’s 2002 Knowledge of Pay study, which surveyed more than 6,000 managers and employees in the United States and Canada, revealed that increased knowledge regarding an organization’s pay system not only improved retention, but also increased employees’ willingness to refer friends and family to the organization.  By eliminating the “us and them” mentality, employers found that loyalty increased as well as their status as an employer of choice within their communities.

"Organizations should examine their pay systems and ensure they are well designed, which allows them to be open in communicating about them," explained Susan Zelinski-Davis, CCP, Manager of Employee Performance and Rewards at Nationwide Insurance, Columbus, Ohio in the Harvard Business School article, “Compensation: What’s the Big Secret?”  "As long as you have sound systems and guidelines, even if there remains some management discretion — and I don't think you can completely remove that — then you should be able to openly discuss pay."

Maciekowich added, “The more successful organization will make every effort to communicate the following to their employees:

• the compensation philosophy and strategy of the organization;
• the balance between external market demands and internal job value in determining pay levels;
• the impact of the cost of health benefit programs on determining base pay levels;
• how performance and contribution are to be rewarded; and
• the influence of current fiscal realities on the ability to fund compensation programs.

Each of these elements requires that the organization take the time to ‘treat their employees like adults’ and share critical strategic and financial information so there is a better understanding of how their pay is determined.” 

Once you have opened the discussion with your employees, clearly explain the monetary value of the numerous offerings of your complete compensation package including base pay, benefits, incentives and reward / recognition programs.  Also, don’t be afraid to institute pay-for-performance programs that reward high achievers.   

The Changing World of Compensation states, “Today's workers are loyal to themselves first and the company second. Such a workforce requires a very different kind of compensation.” When meeting with your employees, be sure to ask for feedback to find out what they would like to see in their compensation package.  You may be surprised to find that some employees value additional time off as much, if not more, than extra pay.  Others may have child care needs or be concerned with having a good family dental plan.  Be open to new ideas in compensation and explore the possibilities of incorporating them into your organization’s plan. 

Once you open the lines of communication with your employees, be sure to follow up and encourage ongoing feedback.  By doing this, you may find that your next employee survey is filled with responses such as, “I know I am appreciated,” “I’m happy with my salary and benefits,” and even “Thank you.””