How to manage salary and bonus conversations

This can be an uncomfortable process, even when you have good news to share. It can also be difficult even more so for line managers who aren’t always 100% involved in setting compensation and pay budgets. Whether it’s your decision or not, one thing is certain: it’s a critical part of a manager’s job to have frank and open discussions with employees about pay. Here at Progress Accountants, we have prepared three tips to ensure that you are correctly managing salary and bonus conversations. 

Do performance evaluations separately

 A good tip for dealing with this is to talk about performance and bonuses or pay separately. This is because an employee’s performance is inextricably linked to their salary and bonus. Discussing the two together can lead to the employee focusing only on the conversation about pay. Discussing these subjects differently ensures that both conversations are heard clearly by the employee, and expectations can be managed, prior to any conversation about compensation. 

Prepare for the conversation

Managers often make the mistake of walking into these conversations without a plan. This is one of the reasons why these conversations can get tough. Managers need to have key information to hand such as pay scales for the various roles across the business, details regarding the potential for pay increases or promotions, and any other key information such as company performance and how this has affected the salary and bonus figures this year, etc. Use empathy to prepare by thinking about how the person is going to receive your message. 

Talk early and often

When you sit down with an employee to talk about salary, there shouldn’t be any surprises. If a salary and bonus conversation is not going well, the manager should spend more time listening to the employee. This should help to clarify where the employee is coming from, what their concerns are etc. The more frequently you have the conversation, the easier it becomes. Start the year by discussing compensation. Talk about what kind of bonus or raise the employee might expect if they meet their goals, or doesn’t. Follow this up by having regular check-ins throughout the year to talk about performance.

There is often a lot to be gained by managers who are curious when it comes to having tough pay-related conversations. For example, they might learn that an employee feels that their job has not been correctly benchmarked against competitors or the wider market.  

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