How to Talk About Pay At Work

Pay is a deeply personal issue for everyone. Dissatisfaction with pay can make a huge impact on employee engagement and how likely they are to stay at your company. Employees can easily search for salary information online or ask friends working at your competitors about their pay and benefits.  With so much (mis)information swirling around, you’re going to need a plan for the next time an employee asks to talk about their salary. This is how to talk about pay at work.

“What did you earn at your last job?”

While this question is still legal in some states, it’s important to know that at least 11 states and 9 counties or cities have banned asking candidates about pay history including California, Oregon, New York (the city and other counties), and more.

This question is getting scrutiny because of the widespread attention on the gender pay gap, with women earning about 82 cents for every dollar male colleague earn (an even larger gap exists in small businesses). Lawmakers believe that when a company decides how much to pay a candidate based on what they earned at their last job, rather than the value of their skills, it may perpetuate a gender pay disparity job after job. Not everyone agrees banning questions about prior pay will help, but it’s a growing trend so here are some things to keep in mind:

• Ask “What salary do you hope to earn in this role?” instead;
• Candidates can volunteer their own prior pay information, as long as you didn’t ask them for it in any way;
• External recruiters have the same restrictions as employers, so if the firm you work with provides pay history be careful that they know the law in your state;
• You may be required to provide the pay range for new positions to candidates;
• Always look up your specific state’s labor code requirements on what you can and cannot ask.

“Why does that new hire make more money than I do?”

The intense competition for talent drives starting salaries higher and higher.  Quickly you’ll find that new hires are earning more than experienced employees who have been with your company longer. Pay disparities between new hires and existing employees need to be addressed before they become a problem.

You’ll get this question most often from employees who participated in the interview process and may have overheard the pay range for the new job. Unfortunately, this question is often asked by your most loyal, and longest tenured employees.  Here are some tips to manage this conversation;

• Don’t panic – The employee might be upset and that makes pay conversations especially uncomfortable.  But they aren’t mad at you;
• Help them understand – The talent market is extremely competitive and starting salaries have to attract the right talent to the company. But the company has merit and incentive programs in place to reward the teams who are already here and keep their pay competitive too;
• Make them feel valued – Listen more than you talk; give them a space to share their frustrations; it might have nothing to do with pay after all;
• Follow-up with their manager – Let them know the conversation happened; encourage them to address any pay concerns that are legitimate through the merit process.

“Why do I make less money than my coworkers?”

Discussing pay is somewhat taboo, but it’s a right protected by the Federal government. You can’t prevent employees from asking and sharing pay information with each other, so you do need to be prepared when these questions come up:

• “I found my job on a salary survey online and I’m underpaid” – Many salary surveys online are “self-reported” and people reporting aren’t verified. This data isn’t very accurate, and you should use caution when looking at it;
• “My friend works at a competitor of ours and makes more money than me” – Total compensation is made up of a lot of things, base pay, bonuses, other incentive pay, benefits, even free food in the office. Be prepared to share your company’s pay philosophy and help the employee understand how your company determines pay.

“My manager promised me a raise this year.”

Undoubtedly, HR plays a critical role in compensation, but it’s too big a job for HR alone. Managers and supervisors should be the first people employees go to with questions about their pay.  Managers need to understand what to say, and what not to say.

• Teach managers how to honestly defer employee questions when they aren’t completely sure about the answer. They can say “that’s a great question, let me find out more and we’ll talk again next week.” It’s okay not to have every answer immediately, just be sure to follow up when that happens!
• Make sure managers are prepared to explain when and why employee pay decisions are made; managers need to feel involved in pay decisions and empowered to discuss pay changes with their employees and not push responsibility for pay decisions back onto HR or upper management.
• Give managers tools to help them with compensation discussions. Examples include: a written compensation philosophy, pay ranges (or pay bands) for the roles on their team, job descriptions, performance tools like individual development plans, etc.

Every conversation about pay with employees is a chance to create a sense of fairness and transparency with your pay practices. Market price for top talent changes rapidly, and through ABD’s SharedHR Compensation Analysis, we can help determine where compensation structures should be – reinforcing your business strategy. When in doubt, listen and help them feel heard; then address their pay concerns with their manager and discuss an action plan if you both agree one is needed.

For more help with handling pay questions or other HR services, check out ABD SharedHR.