What to include in your compensation training for managers
Employees are demanding more and more transparency when it comes to their pay. Beyond just their pay and ranges, they are looking to understand how their pay compares to that of other organizations and how the company determines what’s competitive.
Who fields most of your employees’ questions? Your managers.
It’s important to provide your people managers with the knowledge they need to engage in meaningful discussions with their employees about pay. Your managers and supervisors need to be comfortable addressing the questions their employees ask.
One of the ways you can help your managers confidently discuss pay is to provide training. But, what should be included in that training?
Below are the suggested topics to include in compensation training for managers. Feel free to use this as an outline to develop customized training material for your organization.
Setting an objective
As with any good training, it’s best to set the stage by clearly describing what you hope to achieve. By clearly stating your objectives, such as “to give you the tools and answers you need to speak with your individual employees about pay” or “to provide you with a basic understanding of compensation to help have consistent, comfortable conversations.” If you state your objective upfront, you’re helping your trainees adopt the right mindset.
Defining roles and responsibilities
At some point in the training, you will want to clearly state what you expect of the training participants, both in the session and going forward. Be specific about what they are responsible for going forward and when they will need to engage their HR representative for support. In this training, you’ll also want to be clear about the role managers play in determining pay, which would, of course, depend on the process at your company. Be transparent about where they have discretion, what the approval process is, and where there are possibilities for an override by either a higher-up manager or HR.
Explaining the compensation philosophy
Your philosophy is the guidepost behind all of your compensation decisions. When explaining your compensation philosophy make sure you address things like:
- the segmentation of the workforce
- the role of each compensation element and what each is meant to achieve
- peer groups or labor market competitors
- target pay
- any other elements that are relevant
If your organization doesn’t have a compensation philosophy yet, then check out this article first.
Managers will typically have questions, sometimes objections, as to who is defined as your labor market competitors (i.e., peer group) and the target market positioning (e.g., 50th percentile). Be clear as to why you have defined a certain company or industry as a competitor for particular jobs and how you came to that conclusion.
Defining elements of compensation
Define the different elements of pay that you provide employees. Typically, this will include base pay, short-term incentives, and long-term incentives delivered in whatever vehicle your company uses. Beyond just saying “we provide a bonus,” for example, you will want to define the purpose of each element — how it connects the employee to the goals and performance of your organization. For example, you may say that “base pay is meant to represent the competitive wage for the job based on experience and performance of the individual employee” while “short-term incentives/bonuses are to reward the achievement of particular objectives in the past year.”
The following slide provides one example in how to define compensation elements:
Determing pay ranges - the basics
What you include in this training section depends on what you have in place for a compensation management structure at your organization, but there are some common things that you’ll need to explain:
- How market data connects to your pay management structure; for example, you should explain in your training that unless you manage compensation through market reference points, you roll up jobs into the ranges with the appropriate midpoints
- How you determine which job goes in each grade, range, and zone
- What is the difference between external competitiveness and internal value
- What your typical process is to market price a job — show them how it’s done! Be transparent about the “art and science.”
Timing of annual compensation planning
Assuming these managers have the authority to suggest or determine pay for their employees, you should explain to them how to manage within your compensation structure. This should include:
- Advice on how to think of employees’ positions within the salary range
- The weight that performance should play in determining annual base pay increases
- How to think about and address, if necessary, discrepancies between employees in the same job (i.e., pay equity)
- The general process you go through to determine the annual salary increase budget
- If applicable, what they need to consider when determining variable pay recommendations
- How to interpret and use your annual increase guidelines, if provided
- The timeline of your annual increase planning process
Considering promotions
Managers will receive requests for promotions from employees and need to understand how to navigate the process when they seek to promote someone. Additionally, they need to feel comfortable explaining to an employee who is seeking a promotion whether or not it is one you will approve and push forward. Explain to your managers what your organization considers an actual promotion versus skill development or an expansion of an employee’s current role. Also, provide a refresher on the process for submitting a request for promotion and what, if any, approvals are necessary.
Training using role-playing or FAQs
In a training session like this, it’s helpful to get managers involved and have them actually do some role playing. Sure, not everyone will embrace this, but perhaps you select a few who could be willing to show the others how they would handle certain questions from employees. You can either give them a script in advance or have someone play the employee posing particular questions and then coach the manager through how to respond.
A few questions you could have the employees ask include:
- “I do the same job as Sam and, in fact, I do it better. He told me what he gets paid and it’s more than me — why is that?”
- “I feel like I need a promotion and pay raise. I do the same work as the next level up — why aren’t I in that role and getting paid like them?”
- “The company emails say we did so well this year, why are our annual increases so small … ugh, and what about my tiny bonus?”
It could also be helpful to provide managers with a takeaway conversation guide that will serve as a reference for managers as they prepare for pay conversations with employees. If you’d like more information on helping your managers discuss pay then check out this blog.
Clarifying processes and technology training
It’s important in this training to consider timing. In many cases, it makes sense to do this training right before the annual increase process — the knowledge will be fresh in managers’ minds. (However, it’s important to do this training when you onboard people managers, as well. The more often you can get it in front of managers, the better!)
In most cases, there is some sort of technology or tool (e.g., spreadsheet) that you use for managers to participate in the annual planning process. Give them tips on how to do that effectively and efficiently. Obviously, the specific content of this section will depend on what you use for annual increase planning. Even if you use spreadsheets, there are definitely tips and tricks and even screenshots you can provide that will help your managers. (Not everyone is an Excel guru!)
Looking for help?
Compensation training for managers can be a lot to put together, sure. But, there are resources out there for you. Take a look at the World@Work’s resources section or take advantage of the fact that Mercer has done this for many companies! We can develop the training based on your unique organization, take an existing training and help you modify it, present the training for you, or maybe just help you with the communications and tools...we can provide whatever help you need. Give us a call at 855-286-5302 or send us an email at surveys@mercer.com to be connected to a consultant with expertise in your industry.