How to manage salary and bonus conversations

Nov 17, 2022


Talking about money with your employees can be uncomfortable. Even when you have good news for an team member, salary and bonus conversations can be difficult or awkward. Here are a few tips for managing discussions about pay and bonuses with your staff.

Separate Pay Reviews from Performance Appraisals

An employee’s performance is inextricably linked to their salary and bonus. However, discussing the two together can lead to the employee focusing only on the conversation about pay. As such, managers should discuss performance in a separate meeting prior to any discussion about pay or bonuses. This ensures that both conversations are heard clearly by the employee, and expectations can be managed, prior to any conversation about compensation.

Prepare in Advance and Focus on the Figures

When a salary and bonus conversation gets tough, it is often because an employee is not getting the information they need or the manager feels that they can’t answer certain questions. Managers need to have key information to hand such as pay scales for the various roles across the business, details regarding potential for pay increases or promotions, and any other key information such as company performance and how this has affected the salary and bonus figures this year.

Stop Speaking and Listen

If a salary and bonus conversation is not going well, managers should spend more time listening to the employee in order to understand where they are coming from and what their concerns are.

There is often a lot to be gained by managers who are curious when it comes to having tough pay-related conversations. For example, they might learn that an employee feels that their job has not been correctly benchmarked against competitors or the wider market. This may or may not be true, and you should be willing to investigate the perceived discrepancy before making a final decision.

More often than not, a challenging conversation around salary and bonus will require a follow up meeting, giving managers an opportunity to come back with more facts and secure a positive outcome with the employee. Ultimately, the goal is to reach a mutually satisfactory decision where your employee feels valued and appropriately compensated by the company, and you are happy with the numbers and how the business’s income and output balances.

Salary and bonus conversations should not be taken lightly, as they can have a tremendous impact on the productivity of your business: whether your team feel undervalued and become demotivated or decide to leave; or your employees are delighted with their new salary and their company advocacy has been given a boost. Put the time into getting these discussions right and your staff will soon be singing your praises to anyone who’ll listen, helping you to attract new talented team members as well as new customers.

What are your top tips for salary conversations with your staff? Let us know in the comments or on Linkedin.


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