by | July 20, 2010

Catherine Dovey is the founder of Compensation Works LLC and offers this guest blog with insights as to how and when to communicate with employees about compensation.


Several surveys show that up to 70% of employees are planning to look for new opportunities after the economy recovers.  Most of us assume that we need to increase pay to increase employee retention.  However, employee satisfaction with pay is directly related to the amount of communication employees receive about their pay.  Research shows no correlation between levels of pay and pay satisfaction.  Theoretically, you can pay on the low end of the market and still have employees who are as happy with their pay as if you increased pay 5 or 10% across the board.

This means you can get more bang for your buck simply by communicating clearly and consistently about pay.  In order to do that effectively, you need to have a clear system in place that is consistently administered and that you can easily communicate to staff.  Employees like receiving information about the organization; it helps them feel they can trust management to keep them up to date on issues which affect them.

Reaffirm your overall compensation strategy and communicate to employees.  Share both good news and bad news.  Even when you are freezing salaries or not increasing pay structures, it’s important to communicate with staff.  Without information, we human beings tend to assume the worst.  In this critical time, don’t make the mistake of reducing your communication to employees about pay.

Let them know throughout the year that you are paying attention and will make adjustments when needed.  You’ll spend a lot less time dealing with employee-generated internet survey data.  You’ll also create trust and commitment that will help with employee retention in the future.