Let’s say you’re a business owner or manager of a department with hiring and firing authority; along with the authority to set pay levels for your people.
In all your interactions with your employees about money, you have a problem. It’s the invisible elephant. They all think you’re rich, have plenty of money, and believe you want to keep most of it for yourself.
You may wear old clothes and drive a 10-year-old car. Then they’ll just think you’re rich and cheap – which means (to them) you still want to keep as money as possible for yourself!
When do you have “the talk?”
Now, the best time to have this talk about pay scale is when you hire somebody. If you didn’t do that, then call your people in one at a time now and explain the pay structure to them before they come and ask you for a raise.
Here’s the deal: If you don’t have clear, fact-based reasoning for your pay scale, your people will think you’re just making it up as you go. They will imagine a different rationale for raises (or no raises) like, “You always liked Jimmy best.” Or, “She’s a pretty girl so that’s why she makes more money.” Get the picture?
If you are making it up as you go, now’s the time to stop that.
What do you say in “the talk?”
Here’s the concept: You’re not setting the pay scale for your employees. The marketplace sets the pay scale for any and all jobs. You can go to salary.com to get a good idea of the relevant pay scale for, say, a receptionist.
According to Salary.com, as of February, 2019, the average salary for a receptionist in the USA is $35,721; the pay range is from about $32,000 up to $40,000.
Salary ranges can vary based on many important factors, including (but not limited to):
- additional skills,
- and length of time in the profession.
So you have a definitive source for your salary scale, right? Of course, if you’re paying your receptionist $25,000 a year, you might want to skip any talk of proper pay or you’ll have some explaining to do.
As Salary.com clearly shows, the marketplace in America has set the salary range and the average salary for that kind of work.
If possible, add in other sources.
Another great source of information about local salary ranges might be the local classified ads.
You can also tap into all the online job boards/job sites to really beef up your stats. The more different sources you can develop, the more credibility your research will have.
The key here is, really, that you’re not trying to screw anybody over. You just want to generate rational, fact-based discussions. You’re attempting to infuse this hot topic with some logic and lower the temperature of this kind of conversation. The goal is a cool conversation, not a hot confrontation.
The other part of this rational analysis is you can avoid being taken advantage of yourself. A company has to be treated fairly by its workers
Here’s one big trap to avoid.
You must – at all costs – avoid allowing this discussion to become emotional. You don’t want your employee crying during a money meeting and you don’t want to be crying after the meeting.
When I ran the sponsorship and sales department for an NBA team, most of my department members happened to be single. As time went on, that changed. I had one male employee that constantly tried to use his current status of ‘married’ to gain additional pay or better account assignments.
This guy, Bill, would actually go into whining mode when he was angling for some unfair advantage over other members of my department. It got even worse when his wife got pregnant. You can totally see this, can’t you? (Now he was going to have three mouths to feed.) His arguments were somewhat undercut by his household having two income earners!
Fortunately, we had a very level playing field regarding compensation; everyone had the same base salary and bonus structure. So I was able to leverage that fact in order to completely rebuff his ‘married’ argument.
Use the pro sports concept of “fair market value.”
There’s no audience tougher than a pro sports athlete who believes a team is trying to low-ball him or her in a compensation discussion. In the pro sports world, there’s a concept known as fair market value. This is the approach I recommend for all industries.
This is the approach that all professional sports teams use to set compensation.
Let’s say you want to sign ‘Bill’ to a contract. First, you’d research the pay scale of all other players with a similar number of minutes played, field goal percentage, 3 point percentage, along with other relevant factors. You’re just benchmarking performance. Once you knew what the better and worse competitors made, you’d be in a position to offer ‘Bill’ a proper contract based on his fair market value.
Now, ‘Bill’ may bring a few other things to the table such as in-depth community service or time invested in mentoring younger players that would justify going somewhat above standard market value. Whatever the justification, it just won’t work to stray all that far from your original valuation.
Remember, compensation for any position is set, ultimately, by the marketplace. You have to do your part keeping your workforce focused on fair market value. If anybody is crying during or after the comp discussion, everybody loses.
And, if your employee gets to your office to ask for a raise before you bring it up proactively, the entire discussion will be a whole lot more difficult!
P.S. There is an inordinate power in the written word. When you finish your compensation research, go ahead and create a really good-looking, authoritative written page to show the results of your work, along with your sources. The more formal it looks, the better. Make sure to let your employee look over the sheet as you begin your discussion.
If you’d like to have a way to truly maximize the positive impact of an employee compensation discussion, please continue reading about the powerful methodology of the “Employee Value Ladder.”