As 2013 rolls on with an economy that’s slowly on the upswing, it’s possible that expectations for base pay raises in the coming months are going to be high. If employee raise expectations aren’t met, many organizations could stand to lose some of their top performers as they seek better offers elsewhere.
Effective communication is a critical part of any type of compensation administration, but it is especially important in times of change and when moving from one type of compensation program to another (such as movement to a pay-for-performance system).
Employees are aware that the economy is slowly recovering from the 2008 financial crisis. Current surveys also indicate that fewer organizations have hiring and salary freezes in place, and for employees who did keep their positions through the recession, salary growth has begun to tick up again. This situation makes managing employee expectations around compensation more important than ever.
There are two key components of an effective pay communication strategy that account for a large percentage of the impact of pay communication on perceptions of pay fairness: message source and message content. In order to increase the perception of pay fairness, the source of the message should be either a representative of the compensation function (such as HR), or management.
Integrating pay, performance and career development systems and providing the flexibility to differentiate high performers with pay both increase employee perceptions of pay fairness.