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In the recent How Your Pay Raise Practices Affect Employee Turnover study by Payscale, there are a couple of practices that can hurt employee morale, exacerbate employee turnover, and potentially contribute to a toxic workplace culture when it come to making pay increase decisions. It all boils down to pay communication. The release said: “Our data found that when someone’s request for a raise is denied, in most cases, they do not believe the rationale provided by their employer.”
“Additionally, the way an employer rationalizes and then communicates their decision makes a big difference in how workers feel about their future within the organization,” it added.
On that note, here are four tips on how-to communicate a pay raise rejection properly:
#1 Provide a credible rationale to improve employee engagement
The study suggests that the way an organisation communicates information about pay is critically important – especially if it’s negative information. In fact, it found that employees tend not to believe their employer’s rationale when their request for a raise is denied.
Supporting its previous Compensation Best Practices report, Payscale found that there’s a substantial gap around how employees feel about pay vs. their employers – which is only 1 in 5 workers reported feeling being fairly paid. Meanwhile, 43% of employers (HR professionals) think that their workers feel fairly paid.
This study revealed that when there’s no rationale provided for why a request for a raise is denied, or when employees feel that the provided rationale isn’t authentic, they feel burned.
This means they’re more likely to start looking for new jobs where their value is recognised and compensated for. However, employees can handle bad news – and even use it as personal motivation to work harder – as long as it’s communicated in a way that feels genuine and reasonable.
#2 Keep a pulse on your market and make salary adjustments when the market moves
According to the research, those who are already happy with their salary (72%) and those who got a raise before they had to ask (65%) report the highest rate of satisfaction with their employer. These two groups reported higher rates of satisfaction, as compared to those who received a raise when they asked. Meanwhile, 55% of workers who asked for and received pay raises reported being highly satisfied with their employer overall.
To get to this, the study suggests keeping staff compensation plan as an ongoing dialogue with employees vs. a one-off or annual event. When your organisation keeps a pulse on the market, and you update workers’ salaries as you see movement in the market and communicate the reasons for their salary adjustment, workers are likely to feel like they’re paid fairly and be happy with their salary.
#3 Tackle unconscious bias in your people practices
Holding all other factors constant, the research found that people of color (both male and female) are less likely to receive raises when they ask vs. white men. Given the significant size of the sample (over 160,000 workers), this finding indicates that biases are present in performance evaluations and salary increase decisions.
“Unconscious biases are the automatic, mental shortcuts we use to process information and make decisions quickly. We all have them. But if left unchecked, they can harm us at the organizational level,” Payscale said.
In fact, Payscale noted that unconscious bias can cause managers to dismiss great ideas, undermine individual potential, and even create a toxic work environment for their colleagues.
“To ensure that all employees have equal opportunities to advance within your organisation, it is important to become conscious of the biases in your people practices and take action to mitigate their effects on your decisions,” reminded Payscale.
For that, Payscale refers to re:Work to:
- Raise awareness about unconscious bias. Train all employees.
- Hold everyone accountable by creating a culture where employees hold each other accountable when they see instances of biases.
- Gather data and measure decisions.
Evaluate subtle messages that may impact whether certain types of people feel included or excluded.
- Use consistent structure and clear criteria when making decisions (like evaluating employee performance).
#4 Re-evaluate your performance assessment practices
Last but not the least, the study showed that managers are often unaware when they’re making subjective decisions. Unless you take steps to reduce unconscious bias, you run the risk of developing unfair and possibly discriminatory compensation differences in your organisation.
For that, Payscale suggested to make sure that managers use objective, standardised criteria to evaluate the performance of their direct reports. Instead of asking managers to define abstract terms and apply them to the employee through the lens of their biases, focus on questions that deal directly with the manager’s experiences. Here are some examples of questions:
- If [employee] left the company, what would I do?
- What are the top things [employee] does well?
- What are the ways in which [employee] can improve?
“Furthermore, getting a 360 degree view of the employee’s performance by seeking input from multiple perspectives can help ensure that promotion decisions aren’t skewed by the opinion of a single manager,” Payscale concluded.
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