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Explaining compensation effectively

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company checkWhen employees understand the process that determines what they earn, they’ll also understand the kind of performance that’s rewarded.

Here’s how to cultivate that understanding:

• Explain the purpose. Employees sometimes feel left in the dark about compensation. To avoid the demotivated performance that usually accompanies such confusion, shed as much light as you can on the subject. In most cases, the only aspect of compensation that should be kept confidential is other employees’ salaries. Under the National Labor Relations Act, it is against the law to retaliate against employees who discuss their salaries, benefits or other working conditions with other employees. This regulation applies to both union and nonunion employees and extends to social media, such as Facebook and blogs.

• Clarify the process. Help your workers understand the system that determines what everyone is paid. The more rational and thorough you show the system to be, the more likely people are to believe their work is compensated appropriately.

• Show how compensation and performance are related. One of the most attention-­getting ways to frame the big picture is to show how rewarded performance contributes to the organization’s goals. Let employees know regularly how better service, higher quality and lower costs add to the organization’s success, and how that success relates to employee compensation.

• Give workers a chance to influence their own compensation. Be very clear about what employees have to do to earn a pay increase or a bonus. Make sure they have the tools, resources and training to learn new skills or increase their responsibilities that would lead to better compensation.

• Follow through. Don’t make discussions of compensation a rare event. If you’ve done a thorough job explaining the process and providing regular performance feedback, no one should ever be surprised about the amount (or lack) of a raise.

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