Your HR Pro

A colleague reached out with a dilemma:

“My employees are discussing salaries amongst other colleagues, especially those not in the same position, causing another employee to ask for a salary increase due to comparing herself against another employee. They are at different levels and scopes of roles. What is the most effective way to address employees who are blurting out their salary in the workplace? How do I address the employee who has demanded a raise?”

Discussing Wages Is Protected By Law

Under the National Labor Relations Act (NLRA), employees have the right to communicate about their wages with other employees at their workplace. Wages are a vital term and condition of employment, and discussion of wages is often preliminary to organizing or other actions from mutual aid and protection.

The NLRA is a federal law protecting employees at most employers. This means most US-based employers must not prohibit or restrict communication of wages by employees while at work or outside of work. To do so puts your business out of compliance and can result in stiff penalties.

Communicating regarding wages, benefits, or working conditions is usually seen as the first step toward unionizing or otherwise organizing as a labor pool, which the NLRA protects.

As always, we recommend that employers follow the law.

Why Compensation Matters

Managing payroll is usually one of the most significant line items in a business’s profit and loss statement, making compensation management a considerable concern. There are many different compensation philosophies, and your business should determine your philosophy and structure in advance.

Compensation bands help solve transparency issues. Often compensation bands are developed based on requirements for the position, longevity, skills, scope of duties, impact, and more.

For the employee, their compensation is highly personal and likely one of the most critical factors driving their motivation to work at your company.

A good compensation philosophy helps to reinforce positive behaviors in the workplace. When developing your compensation policies, be careful what you incentivize. If you incentivize specific priorities, you may get behaviors you did not intend.

Determining Your Compensation Philosophy

Your company’s compensation philosophy and structure must be reviewed at least annually. As we’ve seen recently, the labor market has been destabilized considerably. With a marketplace that is changing so rapidly, you’ll need to ensure your complete compensation package can compete so that you can attract and maintain the talent your company needs.

To get started thinking about your compensation philosophy, consider these questions:

1. What are your company’s goals? What do you want to achieve with your compensation structure? Do you want to attract and retain top talent? Do you want to motivate employees to perform at their best? Once you know your goals, you can develop a compensation plan to help you achieve them.
2. What are your company’s financial resources? How much can you afford to spend on compensation? It’s important to be realistic about your budget and to create a plan that fits your financial situation.
3. What are the market rates for similar positions? Research to see what other companies are paying for similar positions in your industry. This will give you a good starting point for setting your salaries.
4. Consider the value of each position. Not all positions are created equal. Some positions are more important to the success of your company than others. When setting salaries, it’s essential to consider the value of each position.
5. Be flexible. Your compensation structure should be flexible enough to accommodate changes in your company’s needs. For example, if you need to hire a new employee quickly, you may be willing to pay a higher salary than you would if you had more time to find the right candidate.

Tips for Creating a Competitive Compensation Structure

In most cases, one of the most considerable inputs for your business comes from your labor pool. Without your employees, you might not be able to operate. Having competent employees in their positions gives your business a competitive advantage. Attracting and retaining these highly capable employees can be accomplished by creating a competitive compensation structure and other workplace initiatives.

Here are tips to help you create a competitive compensation structure:

1. Competitive pay. Businesses need to offer competitive pay to attract and retain top talent. This means paying market rates for similar positions in the industry.
2. A variety of benefits. In addition to competitive pay, businesses should offer a variety of benefits to their employees, such as health insurance, retirement plans, and paid time off. These benefits can help to attract and retain employees, and they can also help to improve employee morale and productivity. Benchmark your benefits program to your competitors to ensure you have an advantage in the marketplace.
3. A clear and transparent compensation process. Employees should understand how their compensation is determined. This will help to create a sense of fairness and equity in the workplace.
4. Regular reviews. Compensation structures should be reviewed regularly to ensure they are still competitive and meet the needs of the company and its employees.
5. Provide options for internal mobility. Compensation can help motivate employees to excel and grow their skills to reach new heights within your organization. This can help to improve employee morale and productivity.

How to respond to an employee who has asked for a raise.

Firstly, listen to your employee and their concerns. It’s essential to allow them to express their concerns and to be heard. To ensure they feel like their concerns have been thoroughly vetted, we recommend you take some time to reflect on their requests and look into financial considerations. Telling the employee you will consider their concerns may help to alleviate some of their feelings of not being seen or valued.

Next, review their job description to make sure it’s still accurate. If the employee has had position creep where they’ve taken on additional duties, it’s probably time to update their job description, and that would include a compensation review.

During your compensation review, determine if the position is still in the correct salary band. The last thing you want to do is create wage compression or other inequities within your company. You’ll want to examine how changes to this person’s compensation will impact other team members.

If, after reviewing all the data, and you’ve found that the employee is appropriately compensated, you’ll need to explain this to the employee. There’s no easy way to have this conversation. The employee will probably be upset to learn that they have no additional compensation. But you can try to explain why the compensation is not due to them. If possible, outline a plan for how they can increase their compensation. For example, if their performance is not meeting expectations, outline your expectations so they have a clear road map to increasing their compensation with your company.

For employees comparing themselves to other roles that are not similar to their own, explain the difference in the level and spectrum of the jobs involved. You can also lay out a path to get to that next level or range so they know how to increase their salary.