How to talk with your employee about their salary review results

Salary review conversations are coming up next week. Here is a step-by-step script to guide you through.

Salary review conversations are most effective when the employee gets the information they need, and the manager can answer the employee’s questions adequately. Whether you’re delivering information about a salary raise, or letting an employee know there has been no change, you should come to the table with patience and compassion.  

Do these 5 things before the conversation

1. Practice the conversation script at least once. Even some experienced managers will practice the conversation with their manager to test themselves and to reaffirm they’re both aligned with the outcome.
2. Make sure that you can verbalize the market strategy, competitive set or target market percentile for pay for your employee's role.
3. Write down the pay range for their role and how it was determined based on the market strategy and/or internal fairness.
4. Write down the employee’s position in the pay range (or at least the quartile the employee is in) and how it was determined.
5. Write down the potential for additional pay increases or promotions (i.e. how can this person earn more money?) and the main competencies the person needs to obtain to get there.

Start the conversation by explaining the meeting structure

A great opening gives your employee a clear idea of what to expect. Keep it relatively short and add an opportunity for a potential follow up:

“We will spend 15 minutes today going through your salary review.  If we need more time, or if you have more questions, we can set up another meeting in a few days.”

Benefits to you:

• It relieves pressure to have all the answers immediately. If you don’t know the answer to a question they ask, simply write it down and repeat it back to them to ensure that you got it right. You can say, “We don’t have the time to go into this now, but I promise to cover this in our next meeting.”
• Gives you the opportunity to check in with HR or your manager, as needed.

Benefits to them:

• Provides some time to let the news sink in. 
• Gives them time to think about any questions they have. 

Share the results of the salary review 

“Your new salary is [$$]—which is an increase of [%]—and which puts you in the [1st/2nd/3rd/4th] quartile for this role—meaning that [there is enough room to grow / you’re near the top of what anybody gets paid to do the kind of work that you’re doing].”

In order to talk about the results of a salary review, like salary increase, you need to have this data prepared. Before the meeting, make sure you understand the pay range for a role and the employee’s quartile position, regardless of the salary increase percentage.

Reiterate their value to you and the company

“I can see the contributions you’ve made throughout the year, especially in [name projects] which have been important to the team in reaching [link to the outcomes of the team or organization]. Thank you!”

This part of the script will be easiest to fill out when the employee is receiving a significant salary increase as they will likely have contributed a lot to the organization. But, this might be more challenging for an employee that's receiving a smaller salary increase. Regardless of the increase, it's important to explain the value they bring to the organization. 

Explain the way forward

“I’m looking forward to helping you increase your impact at work. A major area we can work on is [the competency that's important to obtain to move to next quartile or next role promotion].” 

There might be reasons why your direct report doesn’t yet qualify for (much of) a raise. If this is the case, be honest about outlining what gaps exist. It helps your direct report understand what they can do to potentially qualify for a raise later on. Don’t sugarcoat or fluff up your answers. A good employee will generally appreciate the honest feedback and hopefully make the necessary changes.

Ask for their reaction and answer questions 

“How do you feel about the salary review and do you have any suggestions on how to develop in your role to reach your next level?” 

Listen carefully to how your direct report responds and take notes as needed. The remainder of the conversation is best served by being curious. Every salary conversation is an opportunity to uncover what really motivates your employees and how they feel about their salary. 

Close the conversation with a summary and next steps

End the salary conversation with:  

“Let me summarize your key thoughts. From what I understand, you feel . . . ” (If any) “Our open questions are . . .” (If needed) “Let’s schedule another meeting in about 4 days. Make sure you send me any data or other questions you want to discuss in the next 2 days so I have a chance to look closely at them and discuss things with HR/my manager as needed.”

Managers often say that they feel less prepared for salary review conversations when they feel the need to have all the answers on the spot. You should feel ok about scheduling a follow-up conversation—even the most experienced managers will do this from time to time. 

If you need a follow-up, ask your direct report to share any other questions that come to their mind in the lead up to the follow up meeting in advance, so that you can prepare and provide more context from your own research or from HR - if needed. 

Here’s what generally prompts a follow-up conversation: 

• When there are outstanding questions or items to reflect on. For example, you might get some curveball questions that you’re unprepared to answer on the spot such as: “What are other positions in department X that I can apply for?” or “What is the pay range for other jobs in the department?” 
• When the discussion is getting heated: recognize when a conversation has stopped being productive and is making your direct report feel overly frustrated or psychologically unsafe. 

How to handle disagreements regarding the salary review

You might run into a situation where your direct report disagrees with something you’ve said or with how the organization benchmarks their job, earning potential, or pay range. 

Do they feel that there is a different or more accurate market benchmark for their role? If so, what is it? Or do they think that they should be paid higher in their range due to tenure, performance or experience? 

Open up the conversation to understand their perspective. 

Here are some open-ended questions you can ask:   

• “How do you feel about . . . ?”
• “How do you interpret it?”
• “Tell me about that . . .”

Express empathy using statements such as:

• "I'm sensing that this didn't meet your expectations, and so you are feeling frustrated/upset/disappointed."
• "It seems like you are fairly unhappy with this outcome. Am I interpreting that correctly?"
• “I want to make sure I understand you. You said . . . ”

Do’s and don'ts for salary review conversations

DO

• Listen more. The salary review conversation script is only 5 minutes long and so the rest of the time (about 70%) should be spent listening
• Reaffirm the contribution your direct report is making—every employee contributes, no matter how big or small.
• Offer to help your direct report reach their next level.

DON’T 

• Forget the salary data. 
• Say: “If only you knew how hard I worked to get this for you.”
• Promise a pay raise or an extra review in a short span of time (like 3-5 months). If you promise anything, promise to help them bridge skill or knowledge gaps.