Top 10 Ways to Change Compensation Structure Without Causing Panic

Business owners often need to make employee compensation alterations for various reasons, whether it’s to adjust for new business goals, launch new incentive programs or simply lower expenses. Unfortunately, many organizations forget to include employees in the process. This can lead to an overall sense of disappointment, anger and frustration with the employer and ultimately, hostility and lower productivity. To help avoid any unwanted surprises and keep a calm and professional working environment, we’ve asked 10 members of Young Entrepreneur Council (YEC) the following question:

“When you find that you need to shift your employee pay structure, how best should you go about doing so without making many waves?”

Tips for Managing Compensation Changes

Here’s what YEC community members had to say:

1. Create Transparency

“Your people should know what you’re doing as soon as you’ve made the decision to do it, if you want a team that’s built on trust. Making waves can’t really be avoided in this case because it’s going to be a big deal to everyone no matter how it’s presented. People are serious about their compensation, and they expect to be informed of changes with time to make any decisions that need to be made.” ~ Adam Steele, The Magistrate

2. Align Pay Shift with Company Strategy

“Use the strategy to illustrate why you are making changes, so they can connect their pay with what they need to accomplish for the organization. They can then see that what they are doing will pay off for the company and themselves.” ~ Angela Ruth, Due

3. Ask Employees for Input and Listen

“Shifting pay structure can be a tenuous process. There is a natural inclination for management and C-suite talent to internalize this process, however, employees themselves can be a goldmine of ideas. Ask the very same employees how they would suggest the situation be addressed and truly listen to and heed the messages you receive. This will instill high morale and trust moving forward.” ~ Ryan Bradley, Koester & Bradley, LLP

4. Hold Personal Meetings

“Salaries are a very personal thing. When we’ve made adjustments in the past, we first had one-on-one meetings with those affected. It can take longer, but it allows employees to have a conversation and ask questions which they may not be able to ask in a group. Post private sessions, have a group meeting to re-discuss together so it’s not seen as taboo, but open for dialogue.” ~ Nicolas Gremion, Free-eBooks.net

5. Communicate Often

“When it comes to adjusting someone’s pay, it’s tough to avoid waves. I’m a big believer in being honest and upfront as soon as possible. If an employee finds out the news before you have the opportunity to inform them, those waves will be tough. Sit your employee(s) down and explain why you have to adjust, then hear them out. Talking it out usually results in a better understanding.” ~ Abhilash Patel, Abhilash.co

6. Send Out a Company Newsletter

“The simplest way is to create a company email/official update regarding your policy and to direct any questions and concerns to your HR team. This keeps things highly professional and will allow for the most appropriate methods to handle concerns, which ultimately should come from HR.” ~ Nicole Munoz, Start Ranking Now

7. Have a Well-Defined Structure

“I think every employee should have an idea of exactly where they are, salary-wise, throughout their career. I think they should be cognizant of the potential industry changes, which may affect their compensation. Within the company, they should have clearly defined goals—reaching these or failing to reach these will impact whether they get a raise, or exactly how much of an increase they will get.” ~ Bryce Welker, Crush The CPA Exam

8. Create a Healthy Competition from the Get-Go

“As an entrepreneur, I don’t ask my customers for a raise. I expand, create, invent. It should be the same for an employee. Provide more in order to make more. When I find myself saying too many times things such as “thank you” or “great job” to an employee, a raise is needed. If I think or talk too much about one specific employee, that’s a sign that I either need to fire or promote that employee.” ~ Adrian Ghila, Luxe RV, Inc.

9. Time It Right

“Everyone plans and budgets accordingly to what they make after tax. Therefore, make sure you do not make any pay structure changes, especially those that affect the take-home salary negatively, in the middle of a compensation cycle. If you are moving a fixed portion of salary to a performance-driven variable or to stock options, explain the reason and the timing. Give enough clarity to instill confidence.” ~ Shilpi Sharma, Kvantum Inc.

10. Offer Goal-Based Compensation

“Having a portion of compensation based on the completion of highly measurable goals is often a way to motivate key employees to choose the right priorities, and align their efforts with what is most important to the company mission. We also find that it is acceptable, as the employer, to reward partial completion, albeit perhaps with a lesser reward.” ~ Joe Beccalori, Interact Marketing

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This article, "Top 10 Ways to Change Compensation Structure Without Causing Panic" was first published on Small Business Trends