Compensation conversation training

Use this guide:

This guide will provide you with the following information to assist you in preparing for your compensation conversations with employees:

• Key elements of compensation conversations
• Do’s and Don’ts & a sample conversation agenda
• Driving our values through conversation
• Managing unsatisfied employees

An employee compensation conversation is a discussion between manager and employee about compensation outcomes and how they're determined. It provides an opportunity to understand and clarify compensation decisions while addressing employees' concerns. As you gear up for employee compensation conversations, we advise revisiting the following content to enhance your preparation: Navigating the Merit Cycle: A Comprehensive Guide.

What is an employee compensation conversation?

Ask for employee feedback

Discuss future opportunities

Share compensation decision

Elements of a compensation conversation

Acknowledge employee contribution

Discuss non-salary benefits

Discuss compensation philosophy

Sample Compensation Conversation Agenda

Introduction and purpose Welcome employee and explain the purpose of the conversation Conclusions from latest performance Provide a brief review of the employee’s achievements, strengths and areas for improvement Compensation review (including non-salary benefits) Discuss any changes or updates to the employee’s compensation package Concluding the conversation Encourage feedback, summarize key points and agreements, outline next steps and timelines, and reaffirm support for the employee's growth

👎Comparison with Peers: Maintain confidentiality by avoiding comparisons or singling out individuals. 👎Sharing Salary Ranges or % of compa-ratio: Offer employees a broad understanding of their position within the salary range, indicating whether they are above, at, or below the midpoint. 👎Don’t Blame Others: Avoid attributing decisions to external factors like management, PX, etc. 👎Don’t Make Promises: Refrain from committing to future adjustments, such as guaranteeing a larger increase in the next review. 👎Do Not Negotiate: Merit confirmation conversation is simply a confirmation of a final decision. Reassure the team about Staffbase's compensation philosophy by highlighting our commitment to fairness, the established process, and the thorough evaluation process.

A Guide to Compensation Conversations

✅Preparation is Key: Review employee’s details, performance and industry benchmark and familiarize with Staffbase’s compensation approach to justify your compensation decision. ✅Schedule a Private Meeting: Share the merit cycle outcome with all eligible employees whether they receive a salary increase or not. ✅Offer A Safe Space: Foster a welcoming environment for open communication and share information with empathy, acknowledging its impact on employees. ✅Foster Clear Communication: Encourage open communication and active listening through the conversation.

When you Grow, we all Grow

We take Ownership

In the context of compensation conversations, managers should emphasize key skills to foster effective communication and alignment with organizational goals and values. Our Values and Leadership Code provide you with the foundation and guidelines to approach these conversations over the coming weeks.

Driving our Values

We Truly Care

Conflict Resolution Approach conflicts with empathy, being able to empathize with employees' perspectives and concerns regarding compensation. Approach compensation discussions as a collaborative process, finding solutions that benefit both the employee and the organization.

Giving Feedback Share individual feedback with each employee regarding their performance and how it contributed to the salary increase decision. Focus on achievements, areas of improvement, and career development opportunities.

Transparency and Openness Create a comfortable, open and transparent environment for employees to express their thoughts and concerns without fear of judgment. Share information with empathy, considering the impact on employees.

We Truly Care

Clarity in CommunicationEmbrace transparent communication to foster a culture of continuous learning. Clearly articulate compensation-related information, ensuring that all details are easily understood. Compensation Ratio Communicate employees' positions within salary ranges in broad terms (above, at, or below midpoint), emphasizing that all positions within the range are considered inline with market data (at compa-ratio). Salary Range Spreads Provide context on the organization's salary range spreads without revealing specific figures, highlighting the influence of factors like market data, job responsibilities, experience, performance, tenure, and market conditions on employees' positions within these ranges.

Growth MindsetRemember that this conversation will in many situations be a valuable opportunity to discuss growth and development. Employees seek to understand what progression looks like and this is a great time to reset expectations on future performance, learning new skills and gaining new experiences. Active listening Cultivate a growth mindset by actively listening to employees' concerns, questions, and feedback, and respond thoughtfully. Adaptability Feel free to tailor your communication style to cater to individual preferences. Encourage a culture of adaptability, recognizing that growth often comes through change.

When you Grow, we all Grow

Openness to Feedback Foster a culture of ownership by welcoming feedback from team members. Empower employees to take charge of their career development and proactively seek constructive input.

Decision Justification Provide employees with a general overview of the merit cycle outcomes and the rationale behind the decisions made. Emphasize the company's commitment to fairness and equity in compensation practices. Avoid attributing the decision to external factors, such as management, PX, or budget constraints. Instead, focus on the current decision and refrain from making commitments about future adjustments, like promising a large increase in the next review.

Strategic Alignment Align compensation decisions with organizational strategies, emphasizing the importance of employees' roles in achieving company goals.

We Take Ownership

Managing scenarios with unsatisfied employees

Compensation conversations can be challenging, and as a manager you should be prepared for scenarios in which the employee may not be receiving compensation aligned to their expectations. Scenarios may include:

• When an employee's performance isn't up to the standards that justify an increase
• When an employee is dissatisfied with the compensation outcome
• When it's not possible to increase compensation due to economic conditions or budgetary constraints

Read on for considerations and actions to take when managing these scenarios.

Managing scenarios with unsatisfied employees

Revisit past conversations

Reinforce process confidence and transparent communication

Provide open dialogue

Click here to view scenario examples

Managing scenarios with unsatisfied employees

Individual understanding

Manage expectations misalignment

Provide a holistic overview

Express support and continued investment

Highlight contributions and future opportunities

Discuss development goals

Explain the decision- making process

A team member is meeting expectations/exceeding expectations and is receiving the recommended merit increase according to the merit matrix. Unfortunately the increase is not what your team member was expecting. You would hate to see this team member become demotivated and would like to look for ways to maintain their engagement. Objective: Ensure team members feel valued, understand the compensation process, and remains engaged, even if their increase is below their expectations.

Prepare with Empathy and transperancy

Acknowledge their feelings and value

Scenario: Not satisfied with compensation outcome

Click here! It's important!

Setting a path for improvement

Close and schedule follow up

Explaining the compensation decision

One of your team members, has been in their role for a little over a year. While they started off strong, their performance has recently declined, with missed deadlines, inconsistent quality of work, and limited collaboration with colleagues. Despite several performance check-ins and development discussions, the team member's performance hasn’t met expectations.This team member has informally mentioned their hope for a raise but based on performance and the recommended merit matrix, you cannot justify a compensation increase at this time. Objective: Provide clear, constructive feedback on their recent performance issues, explain why a raise cannot be granted at this time and collaboratively outline a concrete plan for improvement to support their future growth and success.

Acknowledging contributions

Addressing the performance gap

Scenario: Employee receives no merit increase

XX

XX

XX

XX

XXX Objective: XXX

XX

XX

Scenario: XXX

Starts by recognizing your employee's strengths, such as deliverables, positive project outcomes and professional development achiements and express appreciation for their efforts.

Redirect focus to their long-term career trajectory. Outline skills and projects that can help them grow within the company and potentially lead to larger increases, promotions, or performance-based incentives in the future. “Let’s work together to identify areas where you can grow even further, which could translate into more impactful rewards down the line. Are there skills or projects you’re excited about that we could prioritize?”

Explain clearly, but empathetically, that based on their recent performance, a merit increase cannot be granted this year. Reassure them that this decision is based on current performance and isn’t a reflection of their long-term potential. "I understand you’ve mentioned hoping for a merit increase, but I want to be upfront about where things stand and explain why we can’t approve a merit increase this time."

Step back from individual cases occasionally to share a broader view of the overall situation. Illustrate the context and considerations that influence decisions. Acknowledge any budget constraints or limitations that may impact salary adjustments and discuss alternative forms of compensation, such as professional development opportunities.

Offer transparency into the merit increase process, including how merit matrices are designed to ensure fair compensation across the organization. Emphasize that increases are based on both individual performance and broader organizational factors. For example: “Our merit matrix is designed to balance individual performance with the company’s compensation strategy, helping us provide consistent increases across different teams. This approach helps us maintain equity and reward contributions fairly.”

If the employee's salary expectations are significantly higher than what the organization can offer, focus on career growth opportunities, non-monetary benefits, and future potential for salary increases, remembering that internal mobility (promotion to a new role) is a route to develop against but that the next formal merit review will be at the start of 2025.

Express confidence in their potential to improve and remind them that the door for compensation growth is open once performance aligns with expectations. Schedule a follow-up meeting to review progress and keep communication open. "I truly believe in your potential and I’m confident that with a focused plan, you can make great strides. I’m here to support you as we work toward your goals and future opportunities for growth."

🚨Your employee should not hear about performance concerns for the first time during a compensation conversation 🚨 This scenario is based on the employee already being aware of performance issues. The employee is hopeful for an increase in salary and you are delivering the message that they will not be receiving one.

Reiterate your commitment to supporting their career path and ensuring they feel engaged and motivated. Provide specific steps for ongoing conversations, feedback sessions, or development planning. “I’m here to support you as we continue to build on your strengths. Let’s check in regularly to discuss your progress and any new opportunities that arise.”

Offer transparency into the merit increase process, including how merit matrices are designed to ensure fair compensation across the organization. Emphasize that increases are based on both individual performance and broader organizational factors. For example: “Our merit matrix is designed to balance individual performance with the company’s compensation strategy, helping us provide consistent increases across different teams. This approach helps us maintain equity and reward contributions fairly.”

Redirect focus to their long-term career trajectory. Outline skills and projects that can help them grow within the company and potentially lead to larger increases, promotions, or performance-based incentives in the future. “Let’s work together to identify areas where you can grow even further, which could translate into more impactful rewards down the line. Are there skills or projects you’re excited about that we could prioritize?”

Create a space for employees to discuss and challenge their performance ratings or compensation outcomes. Foster open communication by asking open-ended questions that encourage employees to share their perspectives. For example: "What were your expectations for a compensation adjustment this year?" or "Can you help me understand the reasoning behind your expectations?" This approach allows for a more thorough exploration of employee expectations and concerns, promoting effective communication and understanding.

Emphasize that this increase is just one aspect of their career growth and that their contributions have set a strong foundation for future opportunities. Help the team member see that this conversation isn’t just about this increase, but about ongoing growth and potential for future rewards.

Begin by acknowledging the hard work and achievements that led to their merit increase. Recognize that they may feel disappointed and validate that it’s natural to want to see a financial reflection of their efforts. For example: “I want to start by recognizing your hard work and the impact you’re making on the team. You’re truly valued here, and I understand that the increase might not meet your expectations.”

Transition to the primary issue: the gap between recent performance and expectations. Provide specific, measurable examples of the gap in performance Highlight any past feedback and support that’s been offered and address how those goals have not yet been met. "We recently dicsussed your current performance and I want to take some time today to share my feedback and how it compares to the expectations we set earlier. Let’s start by going over some specific examples together."

Take the time to understand the individual's concerns and motivations. Factor in aspects beyond monetary compensation (Other aspects of total rewards like recognition, personal development, etc.) to address the holistic employee experience.

Reiterate Staffbase’ compensation philosophy, maintain confidence in the established process and explain how decisions were made. Emphasize the fairness and thoroughness of the evaluation process. Offer transparent communication by providing insights into the fundamentals of the compensation approach without compromising confidentiality to the extent appropriate.

Before the conversation, understand your team member’s recent performance, any feedback they’ve received, and how their performance aligns with organizational goals. Be ready to provide clear information about the merit matrix, and practice ways to empathetically address any potential disappointment.

Shift to an action-oriented approach, asking your employee what challenges they feel are preventing them from meeting expectations and brainstorming solutions together. Together, set clear, achievable goals for the next review period and agree on a development plan that might include more regular check-ins, training opportunities, or mentorship "To move forward, I’d really like to understand from your perspective what challenges you’ve been facing and work with you to identify actionable steps to help you succeed."

Before the conversation, understand your team member’s recent performance, any feedback they’ve received, and how their performance aligns with organizational goals. Be ready to provide clear information about the merit matrix, and practice ways to empathetically address any potential disappointment.

Reiterate your commitment to supporting their career path and ensuring they feel engaged and motivated. Provide specific steps for ongoing conversations, feedback sessions, or development planning. “I’m here to support you as we continue to build on your strengths. Let’s check in regularly to discuss your progress and any new opportunities that arise.”

Emphasize that this increase is just one aspect of their career growth and that their contributions have set a strong foundation for future opportunities. Help the team member see that this conversation isn’t just about this increase, but about ongoing growth and potential for future rewards.

Refer back to the discussions held with your employee during the performance and growth assessment. Reiterate the justifications and feedback provided at that time. This reinforces transparency and ensures that the current compensation outcome aligns with the earlier communicated performance and growth factors. This approach helps maintain consistency and clarity in decision-making.

Begin by acknowledging the hard work and achievements that led to their merit increase. Recognize that they may feel disappointed and validate that it’s natural to want to see a financial reflection of their efforts. For example: “I want to start by recognizing your hard work and the impact you’re making on the team. You’re truly valued here, and I understand that the increase might not meet your expectations.”