Essential topics to cover in your compensation training for managers.

Employees are demanding more and more insight into the organization's pay practices. It’s not just their pay and ranges. They are looking to understand how their pay compares to others and how the company determines what’s competitive.

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 some suggest topics you should include in compensation training for managers. Feel free to use this as an outline to develop material that is customized to your organization.

Objective

As with any good training, it’s best to set the stage by clearly describing what you hope to achieve with this training. By clearly stating your objectives, such as to “share relevant information and tools intended to assist managers who are responsible for making pay decisions” or to “provide you with a basic understanding of compensation to help address employee questions and the tools you need to have consistent, comfortable conversations.” Providing this upfront will also allow the training participants to get in the right mindset.

Roles and responsibilities

At some point in the training, you will want to delineate what you expect of the training participants, both in the session and also going forward. There are things you can expect them to retain and communicate to employees themselves, but also things that you’d rather they bring in an HR representative for and not address on their own. Typically, you’d also address what role managers play in determining pay, which would, of course, depend on the process at your company.

Compensation philosophy

Your philosophy is the guidepost behind all of your compensation decisions. If your organization doesn’t have a compensation philosophy yet, then check out this article first. 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 labour market competitors
• target pay
• any other elements that are relevant .

Managers will typically have questions, sometimes objections, as to who is defined as your labour market competitors (i.e., peer group) and the target market positioning (e.g., 50th percentile).

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. Along with the element, you will want to define the purpose of each — how it connects the employee to the goals and performance of your organization.

Basics of determining pay ranges

The content of this training section is very dependent on what you have in place for compensation management at your organization. You’re going to want to explain the following:

• How market data connects to your pay management structure.
• How you determine which job goes in each grade, range, and zone
• The difference between external competitiveness and internal value
• The typical process you take to market price a job, which should reference your compensation philosophy

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 will need to understand how to navigate the process when they seek to promote someone. Explain to them what your organization considers an actual promotion versus skill development. Also, describe the process for submitting a request for promotion.

Role-playing or FAQs

Oftentimes, it’s helpful for managers to walk through some of the questions you know they will receive from employees and provide them with some ways to respond.

Some of the typical questions from employees 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.

Process 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.)

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.

In addition, if some particular workflows and approvals need to be followed for any other compensation decision throughout the year, explain this to them in your training. Of course, you will have to reinforce it at other times, but take this opportunity while you have a captive audience.

Looking for help?

It’s a lot to put together, sure. But, there are resources out there for you. 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…the options are endless. Give us a call or send us an email at surveys@mercer.com to be connected to a consultant with expertise in your industry.