As a manager, making decisions about pay can be fraught and complex.
Even if your organisation has an established pay review process or some degree of salary transparency, it’s often more challenging than it should be to get access to the context you need and ensure you’re treating your team equitably.
In this cheat sheet, we’ll talk through some key considerations for making principled decisions around pay. We’ll also make suggestions that will help you advocate for a clear and consistent approach at a company level.
In an ideal world, everyone in your organisation should understand both the company’s core pay philosophy - the principles that guide decision making around compensation - and what it means in practice. However, in my experience, this often isn’t the case.
There are a few reasons for this. Firstly, given most organisations conduct pay reviews cyclically, it’s a process that’s more likely to atrophy than most. In busy organisations, it’s easy for People teams to panic slightly when compensation reviews are round the corner, pull out what they did last year and rinse and repeat, even if the process is laborious and oblique.
On a slightly more cynical note, we’re currently in a very employer friendly labour market. Voluntary turnover is at a low point thanks to economic and political instability, vulture capitalists using the promise of AI to eliminate jobs and accelerate enshittification and crushing cost of living concerns. To put it simply, organisations are not currently facing much pressure to be transparent about how they make decisions about pay.
For individual leaders who want to make decisions grounded in fairness, this creates an additional burden to seek out and question frameworks for making pay decisions.
If your company’s approach to comp is a mystery, we recommend asking your People team the following key questions:
How do we approach decisions about pay and promotions here? Do we have a clear pay philosophy and a set of practices to bring it to life?
What are the key dates and must-do’s for me to be aware of? (i.e. when are my team members up for review, what is my deadline for submitting proposals, who do I submit them to, when can I expect to receive a result?)
As a manager, what tools and resources do I have to help me put together a case for a pay review/promotion?
What guardrails do we have in place to ensure pay equity? (e.g. salary benchmarking, clear salary bands, internal pay audits, calibration sessions).
Are there any constraints I should be aware of specific to this upcoming cycle? (e.g. tighter than usual budget, poor company performance, more team members expected to be ready for promotion than roles).
Even if the answers to these questions aren’t as complete as you would like, the information you glean should give you a starting point. It might also prompt some internal debate about what’s missing from your organisation's current approach.
Now you’ve got a handle on your company’s overall approach to pay, it’s time to dig into the detail and work out how that approach applies to the individuals within your team.
For every team member who’s up for review, you should ensure you have access to basic information like:
The date of their last pay adjustment and the reason for the change
How their salary compares to others in the same role
Information about their current salary band and the band for the role above (if applicable).
If you have a larger team and decision making around pay is devolved within your organisation, then it’s also important to know whether you have a set budget for making increases.
Finally, you’ll also want to refer to other data (qualitative or quantitative) about your team member’s performance. Try to avoid recency bias here - if your pay review period is 12 months, you should be looking at the last twelve months.
Although managing expectations around pay can be tough, it’s in your interest to give your team members as much information as possible. This goes for the conceptual stuff we mentioned above about how decisions are made and practical information such as decision timelines.
When your team members lack context, there is ample room for assumption and tension. Lack of clarity on timelines also means that ‘the pay question’ becomes a spectre that haunts every one of your 1:1’s, often distracting from other important topics.
By contrast, when you provide transparency and talk about the pay cycle little and often, you take a lot of the heat out of the conversation. Even if your team member doesn’t like the end result, they are likely to find it easier to process.
When it comes to pay, it can be tempting to make decisions in haste. However, it’s important to think through the long-term implications of all comp decisions, both from an equity perspective and to ensure your decisions are financially sustainable.
Common pay pitfalls include:
Awarding increases to those who shout the loudest rather than using objective criteria.
Consistently promoting loyal team members into the bottom of a salary band, whilst offering new hires the midpoint or higher.
Offering piecemeal ‘condolence prizes’ to those who aren’t yet ready for promotion.
Over time, the cost of fixing pay snafus becomes higher and higher, so make sure any outlier decisions are well reasoned rather than making exceptions the rule.
Putting together a pay proposal is often the kind of annoying task that’s easy to put off. Whilst it’s not inherently complex, it’s a heavy admin lift that involves pulling data from multiple sources.
However, leaving it to the last minute is rarely a wise decision. It doesn’t allow for good judgement or the ability to build in feedback from senior leaders.
Whatever the process your organisation has in place, make sure you set aside time for writing up or prepping to ensure your case is watertight.
Pay is an emotional topic - especially when the vast majority of us are feeling squeezed. This means it’s more important than ever that we make compensation decisions from a place of principle, not vibes. We hope that the tips outlined in this article will help you make ethical decisions and encourage those around you to do the same.
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