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Creating a Better Employee Experience Around Compensation

Jen Dewar
May 6, 2021 12:00:19 PM

One in four workers is considering quitting their jobs after the threat of the pandemic subsides. As more people get vaccinated, that time may be coming up quickly. This will create an influx of candidates on the market, but will also lead to higher competition from companies struggling to backfill positions quickly—while also trying to reach growth goals. If you want to avoid this mayhem, renew your focus on the employee experience to help you retain your workforce. 

Compensation is only one factor in the employee experience, among many, but it can be a powerful focus area. One in five job seekers say compensation is the number one reason for leaving their job. While you can’t avoid all turnover, there are many things you can do to create a better employee experience around compensation—and improve retention.

Begin with the manager experience 

Line managers are subject matter experts in their fields—not compensation. And, whether or not they’re involved in compensation decisions, they’re likely still fielding pay-related questions from their team members. The problem is, only 29 percent of organizations train their managers to have effective compensation discussions. The right training and tools can better equip managers to make informed decisions and have more productive conversations with their reports.

Educate managers about compensation principles, including salary ranges and job levels, so they have a foundational understanding around how pay is determined. Depending upon your organization’s level of pay transparency and raise cycle approver chain, you might also provide managers with some useful compensation data. For instance, pay range penetration can help managers better understand where each of their direct reports falls into their salary bands. This can be helpful in determining merit-based raises, explaining compensation decisions to team members, or identifying when a promotion would be necessary to earn a higher pay rate. 

Providing managers with the insights and tools they need to perform their roles can contribute to a better employee experience for them—and their team members. 

Commit to fair pay

Four in five of employees feel they are not paid fairly, and 56 percent agree that unfair pay makes them feel undervalued. Among those who have found out they were earning less than coworkers with the same experience or title, 54 percent reported a drop in motivation and 59 percent looked for a new job within a year. It’s clear that unfair pay practices have a negative effect on the employee experience and leads to turnover. 

Build and maintain salary ranges to guide your team in creating consistent candidate offers and raise recommendations. These should be revisited once or twice a year to ensure they still align with your company’s compensation goals. You should also track compa ratio by tenure to watch for salary compression. As the talent market heats back up, you may find that newer employees are outearning their more tenured counterparts. This is a good sign that it’s time to revisit your salary ranges and adjust compensation for existing team members.

It’s also important to track compa ratio and average salary by gender and ethnicity. Pay equity is not only a legal requirement in many parts of the world, it’s also an important part of the employee experience. In fact, 43 percent of workers say they would leave their current position if they discovered they were paid less than a colleague of a different race or gender doing the same job. 

Committing to fair pay can help all of your employees feel valued, increase retention, and ensure compliance with applicable pay equity laws.

Step up your communication

Issues around compensation can sometimes be due to a lack of communication—rather than the compensation itself. Employees should understand why they earn what they do, and how they can earn more—and managers should be enabled to have those conversations with their team members. This is crucial at the point of hire, and during your regular review cycles. 

For example, if you’re hiring someone at the lower end of your salary range because they still need to master a few key skills, tell them. Create a development plan and set goals to help them attain those skills. If you reward employees with a raise or bonus during your next compensation review cycle, let them know that as well. A Total Compensation Letter can be a great tool to help managers communicate compensation changes with their team members. 

Setting up career ladders can also be useful in helping both managers and their team members understand what it takes to earn promotions and higher levels of pay. Opportunity for advancement is a powerful way to show employees you care about them—and elevate your employee experience. 

Get feedback

If you want to build a truly exceptional employee experience, collecting and acting on feedback is key.

Include questions around compensation in your employee surveys to learn how it might be affecting the employee experience—and how you can improve. For example, use engagement surveys to ask employees if they agree or disagree that they are paid fairly, have opportunities for salary increases, and can go to their managers with questions or concerns. Use exit surveys to learn the primary reason each employee is leaving, and other factors that influenced their decision. As you make changes, use short Pulse surveys to quickly measure progress toward improving your employee experience.

Solicit manager and leadership feedback after your regular review cycles, while evaluating new software, and as you address feedback. As key stakeholders in your compensation program, their feedback and experiences should be considered in your decision-making process.

Final thoughts on building a better employee experience

Your team is your competitive advantage. Hang on to your best talent by focusing on the employee experience as a whole, and make sure your strategy includes compensation. It’s not always the compensation itself that matters—the way it’s delivered can be even more important.

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