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Compensation conversations with employees: Negotiation tips for employers

Compensation conversations with employees: Negotiation tips for employers

It’s one thing when annual reviews and salary discussions roll around; it’s an entirely different thing when an employee wants an unscheduled review. When ambitious workers want to talk it means one of three things:

  • They’re leaving
  • They want a raise
  • They’ll leave if they don’t get a raise

Two out of three times, of course, they want a raise — and that’s actually good news. While other employees are headed out the door, loyal employees simply want more money. That’s why you need to brush up for compensation conversations with employees.

The experts say it’s an opportunity for both employer and employee to benefit. Here are their tips on salary negotiations.

Prepare for the negotiation discussion

In general, the negotiation process is a high anxiety experience for both parties involved. But employers don’t need to fear because they make the ultimate decision about whether to raise a worker’s wages. As long as you know what you’re talking about, you can win-win your compensation conversations with employees. Here are a few tips when it comes to preparing for the discussion:

Know the market. What’s going on in your market in general? Examine companies with a similar industry, size, and location. Are companies giving three percent raises? Or are they in the hazy, minimal-raise days? Have reliable market data for each position on your team. An HR or compensation professionals can provide you with this information.

Know the organization. How is your organization performing as a whole? What has your organization decided around raises this year? Has the budget been determined? What are the business priorities for your organization and what are you trying to reward? Is it employee performance? Tenure? Loyalty?

Know your team. This will help you determine who should get above average raises and who should get less. Be able to articulate, at least for yourself, why each person is getting above or below and make sure you have a concrete rationale.

Know the employee. How long has the employee been with the company? Does their performance meet or exceed expectations? Do they perform a job that has high intrinsic value to the company?

Listen actively, communicate assertively

When you sit down for compensation conversations with employees, try to pick a time and place that minimizes distractions and interruptions. Make sure that your employee feels like you have listened. That will also help the employee hear you. Here are a few other tips to keep in mind during the discussion.

Listen actively. Most employees who deserve a raise have put time and effort into their reasons. Hear them out. They may be asking for the moon, but if they can show you their contributions and accomplishments, listen. Sometimes, in their anxiety to get through salary negotiations, managers forget the simple step of listening to their employees; you can’t expect them to listen if you don’t do the same. Plus, their presentation may help you find out more about them than you did during the performance review.

Communicate assertively. When it’s your turn to talk, be clear about what you can and can’t do. Many managers are people-pleasers, eager to get their employees what they want. Yet it’s important to be firm, direct, and honest about what’s possible. If it’s within your organizational culture, share the market data both overall and for the position. Consider sharing the organization’s budget for overall increases. If appropriate, explain the business process for determining salary adjustments to them.

Own your decision on compensation

As a manager, you’re often one of the largest influencers of employee compensation, whether you’re making the decision yourself or passing along information about performance or skill-level to others. Even if you’d like to do more or less for a staff member, but are overruled, you still need to understand that you own the final decision.

However the exact salary adjustment is determined — or not — back it up and communicate it to the employee as though it were your own. It will help the employee accept the decision and may gain you management points with the higher-ups.

Follow up with employees’ requests

Whatever you talk about in your compensation conversation with employees, be sure to follow up. If questions were raised, get the answers. If concerns about the process were communicated, pass those along to HR or your compensation folks. And most importantly, if you agree to give employees a raise, make sure it shows up on their paycheck.

Whether you’re a manager who has a lot of flexibility or the person who decides salary increases for each employee, you can expect that your employees will be looking to you for answers. You may decide not to give everybody the raise they want when they want it, but the next time they come in they know you will be prepared to listen and to respond to their requests.

Compensation conversations with employees should be rewarding

Employers should approach raise reviews like their employees depend on it — because they do. The good news is that there are professionals you can turn to for guidance. With expert employment insights and resources, Monster Hiring Solutions can help turn compensation conversations into rewarding talks for everyone involved.