Organizational Wellness

How to Hold Compensation Meetings

Last Updated Aug 29, 2024

Time to read: 13 minutes

Pay can pull talent in the door — or draw them to a competitor. And with less than a third of American employees feeling like they’re being paid fairly, that’s a lot of potential turnover.

The good news is you can avoid churn with open communication! This is a situation where silence isn’t golden. Most workers — 68%, in fact — want to discuss their salaries. As an HR manager, you can provide a venue for people to have this conversation and help them feel like their pay is fair. It’s called a compensation meeting.

Unfortunately, only 17% of executives are confident in their managers’ ability to hold these compensation meetings. You can help your team learn how to hold these conversations effectively to make use of these valuable meetings. Discover more about how to prepare and hold these meetings with your teams.

What Are Compensation Meetings?

Compensation meetings are where you sit down with your team members and look at what they’re being paid and how that reflects the work they do. The goal is to ensure that everyone is being compensated fairly for the tasks they perform. These chats are also an opportunity to check in with how someone feels about their entire compensation package.

The Benefits of Compensation Meetings

Compensation meetings are like the secret sauce that makes the workplace run smoothly and stay motivated. Here’s why they’re such a game-changer for everyone involved:

For Employers:

Goal Alignment: These meetings are your chance to make sure everyone’s pay is in sync with the company’s big dreams. You can align salaries with company goals and industry benchmarks, ensuring that pay reflects and supports what you’re trying to achieve.
Boosting Morale: Regularly discussing and fine-tuning compensation keeps employees happy and engaged. When people feel fairly paid, they’re more likely to stick around and bring their A-game.
Clear Communication: Compensation meetings are perfect for clearing up any confusion about how pay is structured. Being transparent about salary and bonuses builds trust and keeps everyone on the same page.
Linking Performance to Pay: These meetings let you connect the dots between performance reviews and pay. Recognizing and rewarding top performers helps drive productivity and motivates everyone to strive for excellence.
Ensuring Fairness: Regular reviews help you stay on top of legal requirements and industry standards, preventing pay discrepancies and making sure everyone’s pay is fair and competitive.

For Employees:

Spotlight on Achievement: Compensation meetings are your moment to shine. You get direct feedback on how your work impacts your pay, and recognition for your efforts can be a huge motivator.
Understanding Your Pay: These conversations offer a clear view into how your salary is decided and what influences raises and bonuses. It’s all about making sure you know exactly where you stand and why.
Career Growth: Use these meetings to explore how you can climb the career ladder and increase your earnings. It’s an opportunity to discuss your goals and get a roadmap for achieving them.
Negotiation Power: You’ve got the floor to talk about your compensation, whether you’re looking for a raise or adjusting to new responsibilities. It’s your chance to make sure your pay matches your contributions.
Aligning Efforts with Outcomes: See how your personal goals and achievements fit into the company’s larger mission. Understanding this connection can boost your motivation and sense of purpose.

In short, compensation meetings are a win-win. They help employers keep the team motivated and on track, while giving employees a clearer view of their value and opportunities. It’s all about making sure everyone’s efforts and rewards are in harmony!

How to Prepare for Compensation Meetings

An effective discussion involves ample preparation. Following four steps can help you have a smooth conversation.

Step 1: Identify Employees Due for Compensation Review

There’s no formula to know exactly how often you should be holding these meetings, but many companies hold them every six months or annually. It may seem like a large time commitment to hold regular discussions, it’s worth the time. With 47% of people quitting their jobs over salary, allowing them a say in their compensation could lead to higher retention rates.

To keep track of when these meetings need to be held, consider developing a regular system, like a spreadsheet or software. Whatever form it takes, include each employee’s name and the date of their last meeting. Consider setting up alerts to automatically remind you when someone needs a review.

Step 2: Set Clear Goals and Objectives

Your overall goal is likely for both you and the team member to feel that their salary is fair and competitive.

However, it’s helpful to prepare goals and objectives for the meeting ahead of time so the conversation has a structure that helps you reach your goal. You might go as far to write up a full agenda, or you might have a few bullet points. However you plan it out, consider having some of these topics in mind:

How is the employee’s current work level reflected in their pay?
What is considered fair for the work, the company, and the industry?
How does the worker feel about their salary?

Step 3: Review Company Policies and Guidelines

Consider reviewing company policies and guidelines on compensation and promotions. For example, your company may have a strict policy in place that employees can only receive raises once a year. If you’re holding semi-annual compensation reviews, that means only one of those meetings can actually lead to a raise. This information can help you guide the review in the right direction and set expectations for employees.

Step 4: Gather Relevant Employee Data and Performance Metrics

The last step to successfully prep for a compensation review is to gather all the data you might need. Here are some suggestions of what information you might want:

Industry data: Consider looking at what other companies in the industry are paying. That can help ensure you’re paying your employees fairly. It can also prompt discussions about raises to help encourage workers to stay at your organization.
Employee performance data: Holding regular performance reviews can give you a good idea of how someone is doing at work. This data can then inform your compensation meeting to make sure their efforts match their pay.
Career advancement data: About 68% of employees said that they would stay with their current employer if the organization would upskill them. To help make your company one of those employers, consider using this meeting to discuss development as well. You can provide information about how someone can advance and back it up with data.

Tips for Conducting Successful Compensation Meetings

Once you have made your preparations, here are some suggestions you can deploy during the actual conversation.

Create a positive and comfortable environment

Despite wanting to talk about pay, most people don’t out of respect for social norms. Sixty percent of Americans don’t talk about money, so these meetings could initially be uncomfortable for many of your employees. However, if you create a comfortable environment during these meetings, it can ease your employees’ worries. For example, you might open the review by discussing the great work someone does. This can ease someone into the conversation and make them feel more comfortable talking with you.

You could also remind workers that these conversations are a chance for them to speak as well. To help people feel like their thoughts are welcomed, consider pausing regularly to give them an opening to speak. You might also ask open questions to get them talking and comfortable.

Communicate with transparency and empathy

Talking about pay can be an emotionally charged situation for some. To help them feel understood, practice empathy. Try to understand where someone is coming from and why they feel a certain way before responding. On top of that, try to practice active listening when a worker expresses their thoughts.

In addition, being transparent about pay has helped increase employees’ perception of fairness and even to boost job performance. As you talk, remember that it could be the best approach to be open about why someone can’t have a raise. For example, if your company doesn’t have the funds to pay someone more, you could tell them that.

When you aren’t transparent, you could find the individual doesn’t trust your reasoning. In fact, 77% of participants in a survey didn’t believe their employer’s rationale for denying a raise. By being honest, you can avoid driving an unnecessary wedge between your company and its employees.

Handle employee reactions and manage expectations

Your team members may come in with certain expectations about what these conversations will entail. If those aren’t met, they could be disappointed. That’s why it could be helpful to manage expectations upfront. For example, if you’re not offering a raise, you might let them know at the beginning of the meeting. Then you’re able to hold a discussion while being on the same page.

When discussing pay, there is a chance an employee could react strongly. If that happens, consider starting with empathy. Try listening to their concerns and what they’re really saying. If that doesn’t work, you might suggest taking a break. That space allows you and the employee to cool down and do research. It could be a good idea to schedule a follow-up meeting to discuss the topic again.

Use Data and Tools

Data is a powerful way to help you understand trends in the industry and how someone is performing. To help you have the information you need, consider finding the right tools like:

HR software: These computer programs can store all of your review information and any notes you gather during industry research.
Data analysis tools: Software like this can perform complex data analysis in minutes to help illustrate what the information actually means.
Salary surveys: Gather information from your team members about how they feel about compensation.

Address Employee Benefits and Perks

Salary is only one half of the compensation coin: benefits and perks also matter. Benefits that focus on supporting employees’ wellbeing are particularly powerful. In fact, 93% of workers consider their wellbeing at work as important to their salary.

That means providing initiatives that improve wellness can satisfy your team members and improve retention — and benefits are likely an important talking point in compensation meetings. You might see how people are using their perks and what else they’d love to see. After you talk to your employees, consider reviewing and updating your benefits packages as needed.

Ways to Navigate Difficult Conversations

There can be some obstacles that make a few meetings harder than others. Here are nine ways you could help mitigate three common challenges:

Challenge 1: Dealing with employee dissatisfaction or disappointment

Everyone wants to make more money, but that isn’t the reality for many companies. While you might want to help support your people, it might not be financially possible.

How to Navigate this Situation:

Listen and repeat what they’re saying. Make sure you understand what the individual actually wants and their reasoning. After listening to them speak, repeat what you understand from their words. That gives the employee a chance to see that you’re trying to be empathetic.
Consider the underlying issue. Sometimes a complaint about pay isn’t really about the money. This worker might be picking up other employees’ slack. Or they might be experiencing family difficulties. Knowing what causes their unhappiness allows you to work toward a real solution.
Offer a compromise. While you can’t always pay an employee more, you could provide something else. For example, you might offer to talk with someone’s manager to help relieve them of some extra work. Or you might suggest that you’ll bring this concern to leadership for further discussion.

Challenge 2: Addressing salary discrepancies and pay equity issues

Even in 2024, there’s still a gender pay gap where women only earn 82% of what men do. This is just one of the discrepancies that could occur for your diverse workers. If your find there could be an equity problem,, consider trying these approaches:

Talk with other employees. Try to determine if this equity issue is widespread. Listen to many different people talk about their compensation and see if you notice a pattern. For example, if it’s primarily women who are unhappy in compensation reviews, it might be time to make a change.
Conduct a pay equity analysis. If your conversations indicate there may be an issue, you’ll likely want real data to guide your action. Consider a pay equity analysis. To do this, perform an audit of everyone’s salaries at your company. From there, research how workers in similar positions are paid in your industry and see how that compares to what your people make. This can crystalize the issue and point you in the right direction to improve the situation.
Reach out to leadership. The people on top can’t help you make changes if they’re in the dark. Consider meeting with those higher up to report on your findings.
Add other structural supports. There are other ways to address equity issues as well that are well within the domain of HR. For example, you might look at the minimum amount you pay or update your parental leave policies.

Challenge 3: Providing constructive feedback for employees to improve performance

Sometimes someone wants a raise, but the issue is their performance. When that happens, it can be uncomfortable for you and the individual. One way to overcome this challenge is to provide constructive and kind feedback. You might show them your performance data and let them tell you about it. Then you could create a development plan that will help them improve over the next few months.

Continuing to Support Employees with Wellness Programs

Compensation meetings are a way for you to align your company’s needs and your workers’ pay expectations. They’re also an opportunity to explore how your team feels about the company’s other offerings, like benefits and wellness programs.

Wellness initiatives encourage people to stay at your company. In fact, 75% of HR leaders say their programs are very important or extremely important to retention, according to Wellhub research. Investing in these types of initiatives are well worth your time: Ninety-five percent of companies tracking program ROI see positive wellness returns.

Talk to a Wellhub Wellbeing Specialist to learn more about our wellness solutions!

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