How to handle conversations around pay
They can be some of the most fraught office interactions, but remuneration and pay rise meetings needn’t be traumatic. Brought to you by MyHR.
As the new financial year approaches, the topic of annual pay reviews rears its head, bringing with it the potential for unrealistic expectations, accusations of unfairness, and difficulty in deciding who deserves a rise and why.
According to Sylvie Thrush Marsh, lead consultant at leading HR platform for SMEs, MyHR, it can be one of the most stressful times of year for managers of small and medium-sized businesses, and, if not handled skilfully, the fallout can rumble on for months.
“It can be a very lonely, confronting time for managers, especially if they’re looking after the whole pay review process themselves,” she says. “But it needn’t be.”
Here are Thrush Marsh’s five tips to make remuneration discussions a positive, inspiring experience…
1. Be transparent
At an organisational level, explain the factors that you are taking into consideration when setting pay increases, and explain how the process will work. “A shared understanding of things like the effects of COVID, supply chain costs, and general market conditions will help set the scene during pay conversations because your people have the wider context,” she says. “Whether you’ve had a knock-out year or you’re barely breaking even, share that appropriately with your team.”
2. Manage expectations
Nothing in the annual review should come as a surprise – make sure you have a process in place for giving frequent and regular feedback to your employee about their performance during the year. “If there are serious performance concerns, these should be addressed and monitored frequently, so that when it comes to discussing pay, the individual understands the reasons why a pay rise isn’t a given, and that this is consistent with the feedback they’ve received over the year.”
3. Do your homework
It’s very easy for a manager to be caught off guard if their team member complains that pay rates have fallen below the industry average or that the annual increment isn’t in line with inflation. “Before your one-to-one meetings, you must be prepared. Find out what rival companies are paying and the latest cost of living figures. If the company has had a tough year, say so, as it’s relevant. Also, be across the performance of individual teams and whether KPIs have been achieved so you can justify the decisions made.”
4. Understand what motivates
Rewarding a worker isn’t just about how much they get paid. Studies show that if someone thinks they’re underpaid, it will demotivate them, but feeling wellpaid doesn’t give a corresponding boost to morale. “Be creative in understanding what drives your people. It might be opportunities for development, building skillsets, mentoring, or introducing flexible hours. If more cash isn’t an option, there are plenty of other ways to keep them keen.”
5. Agree on next steps
“If they’re disappointed with their pay rise, agree on a plan to get them to the increase that they want. Tell them what’s expected from them and the support you’ll give to help them achieve it. You don’t have to make firm commitments, but you do need to be honest and schedule further chats to keep track of progress.”
As businesses scale up, HR becomes more and more time-consuming in terms of admin and one-on-one interactions. “With integrated HR advisory and easy-to-use HR software, MyHR provides all the functions of an HR department,” Thrush Marsh says. “No one should have to feel lonely and deal with it on their own.”
Find out more
For information on how MyHR can transform your business’ HR and simplify people management, visit www.myHR.works/au