How to communicate compensation changes to your employees

In the past, communicating about compensation wasn't exactly encouraged, although it wasn’t forbidden either. How much individual employees earn was long considered personal and private information, with the idea that keeping compensation details under wraps was crucial to employee retention and morale. 

However, the tide is shifting. Today, compensation transparency is becoming the norm. Pay transparency laws and demands from workers require companies to be more upfront about how much people earn within their organization. Compensation communication not only eliminates any perception that the organization underpays talent, or that the pay structure is otherwise unfair, but also helps team members feel valued.

It’s especially important to communicate changes to compensation plans. Surprises are typically unwelcome when it comes to getting paid, and a clear, well-thought-out compensation communication plan ensures that employees are aware of changes, understand how they affect them, and have time to prepare and adjust. Unexpected or unclear changes can undermine employee retention efforts, but the following guide can help you communicate effectively and comply with global transparency requirements. 

Assessing the compensation landscape

Any change in compensation structure and the subsequent communication plan begins with a thorough evaluation of the current pay program and policies. Because most people perceive that they earn less than the typical market rate for their positions, the first step in an effective communication plan is an accurate analysis of where the organization stands compared to industry and market trends as well as specific benchmarks.

Understanding the trends helps identify whether there’s a need for compensation changes within the organization. It also guides the work of calculating the impact on the organization and what you need to do to move forward. 

The data gathered in this analysis can serve as the underpinning of a comprehensive, employee-focused compensation communication program. Sharing information about market trends and how the organization measures up against them can correct any misconceptions about pay and help employees feel more respected and valued. 

Developing a comprehensive plan

An effective compensation change communication plan accomplishes several goals. Not only does it announce the change—which could be anything from an adjustment to the bonus structure to changing the frequency or structure of pay periods—but it also needs to explain the rationale for the change, how it can potentially affect earnings, how to prepare for the change, and what employees need to do. 

The overarching priority for any compensation communication plan is transparency and fairness so that every employee feels respected and valued. This purpose requires addressing several issues. 

Establish clear objectives

The first step in a communication plan is to clearly define and articulate the purpose of the compensation changes and the goals the organization hopes to achieve by implementing them. The objectives of the change need to align with the company’s strategic direction and employee value proposition.

Determine communication channels

Reaching different groups of employees, especially overseas workers, requires using multiple communication channels. Digital platforms allow you to streamline communication and create a resource clearinghouse accessible to everyone, regardless of where they work, but specific, targeted communication is also important. Provide written communication, group meetings, virtual town halls or webinars, and one-on-one communication opportunities to ensure that everyone receives the message and understands the changes. 

Craft key messages

Consistency is key in any corporate communication, but nowhere is it as important as in compensation communication. The success of the communication plan hinges on consistent and transparent messaging to all stakeholders across all channels. This requires crafting key messages that carry across all forms of communication and address everyone’s concerns.

The key messages need to detail the changes to the compensation plan and clearly emphasize the company’s commitment to fairness and equity. The language and messaging should also explain the reasons and rationale for the change and demonstrate how they align with and support the company’s values.

Tailor communication to different audiences

The foundation of all communication outreach is tailoring the messaging to the audience. Understanding stakeholder priorities ensures that the communication plan answers their key questions and concerns. When revealing significant changes to a crucial program like the pay structure, tailoring information to specific groups puts everyone on the same page and empowers them to move forward confidently. 

In most companies, communication plans need to address the priorities of three specific stakeholder groups.

Global leadership team

Leadership needs to be the first to know about any proposed compensation plan changes and have the opportunity to contribute to discussions related to the new programs. Before notifying anyone outside the C-suite about the plans, it’s critical to discuss the proposed changes, articulate their rationale, and prepare for different outcomes. As a general rule, change is met with trepidation and concern, and the leadership team needs to acknowledge the potential pushback. 

Once leadership finalizes the compensation plan, it’s time for a pre-announcement meeting with key stakeholders to address any lingering concerns and get everyone on the same page. Doing so supports a seamless transition. 

People managers

A compensation change communication plan needs to prepare people managers to support employees throughout the transition. The first step is a comprehensive training session to educate managers and give them tools to educate and guide their teams and have critical employee conversations. This legwork includes preparing a full guide with talking points, FAQs, and detailed information to maintain consistent messaging across the organization. 

Managers should feel comfortable talking with leaders and their employees about the new pay structure. The communication plan also needs to include resources and plans to address manager-specific concerns to avoid misinformation and frustration.

Employees

As the group most likely to feel the impact of a compensation plan change, employees need clear and timely communication. A significant compensation plan change isn’t something to announce in a memo or a one-time agenda item in a staff meeting. HR and payroll need to schedule organization-wide communication sessions to provide details about the changes and explain how they will impact different employee groups. Not all employees will feel the effects of the changes the same way, so clearly outlining what the updates mean for all departments, employee classes, and job roles will help to prevent misunderstandings. 

Employees should also know where to find help and additional information when necessary. The communication plan needs to include relevant resources, fact sheets, FAQs, compensation guides, and contact information to support individuals in accessing the information they need to adjust to the new plans.

Support and feedback mechanisms

Even when you put the time into developing a detailed and comprehensive communication plan, there may be times when employees require clarification or have questions about elements of the compensation structure. Establishing clear channels for employees to get information is critical to any successful communication plan.

Effective compensation communication doesn’t happen in a vacuum. Your communication team needs to be open to feedback and provide mechanisms for people to share their opinions, thoughts, and ideas. This should include direct resources, such as designated human resources team members to address individual concerns, as well as tools for more general (and anonymous) feedback. Seeking out and listening to employee feedback can reveal emerging themes related to compensation and ensure prompt and accurate responses.

Continuous engagement and evaluation

Compensation change communication doesn’t stop once the adjustments go into effect. Continuously evaluating the success and the impact of the plan changes can help guide future communication efforts and adjustments to the compensation plan. Seeking employee feedback via follow-up meetings, surveys, and informal discussions helps your organization refine compensation changes and know what’s working and what isn’t.

Conclusion

Making changes to a compensation plan for any reason, such as better alignment with industry trends, compliance with industry regulations, or improved employee satisfaction and engagement, is not easy. Communicating a new compensation plan to employees must be handled correctly to prevent misunderstandings, frustration, and disengagement. A detailed and transparent communication strategy that prioritizes feedback and engagement is critical to a successful transition and happy, loyal workers. 

Need help developing a compensation plan that complies with all applicable regulations at home and abroad, or communicating compensation changes to your organization? Turn to Oyster for expert insight to guide confident decisions that keep your company compliant and competitive in any market.