Convert Comp Conversations from a Calculation to a Collaboration

Compensation is one of the most important conversations employees have with their managers, but it’s also the most sensitive and personal.

According to Lexi Clarke, the chief business operations and HR officer at compensation software and data company Payscale, pay isn’t just a number.

“It’s how employees measure whether they’re valued by their organization, whether they’re progressing and whether their organization is being fair to them,” she said. “That’s a lot of weight on a single conversation.”

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These discussions can feel uncomfortable for both employees and managers, added Sue Holloway, a content director at WorldatWork.

“Employees may hesitate to raise concerns about pay, while managers may worry about delivering messages that could disappoint someone or trigger a difficult reaction,” she said.

Compensation also is complex, Holloway noted. 

“Market data, pay ranges, performance outcomes, internal equity and budget constraints all influence pay decisions,” she said. “Managers are frequently expected to explain these factors, but many have not received sufficient training or preparation to do so confidently.”

Instead, what if you shifted pay conversations from the “mathy” side to the “human” side? It’s a question Sarah Kranau, a senior compensation partner at video game developer Riot Games, posed at a recent WorldatWork Summit session.

Speaking with Workspan Daily, Kranau said fear often prevents productive conversations about an employee’s pay.

“Managers often get caught up in the fear of the unknown (‘What if they aren’t happy with their pay?’ ‘What if they ask questions I can’t answer?’) instead of [listening] to their employees’ questions and concerns,” she said. “The most important thing to remember is that pay conversations should be a collaborative dialogue, not a dissemination of information.”

When Conversations Are Mishandled

According to Holloway, a poorly handled pay conversation can leave employees feeling undervalued, dismissed or misunderstood, even when the actual pay decision is reasonable and well-supported.

“Employees who don’t understand why a pay decision was made may question whether the process was fair,” she said. “That uncertainty can lead to frustration, disappointment and confusion. When managers aren’t prepared to discuss compensation with employees, they may shy away from conversations or shift blame for pay decisions.”

When an employer fails to actively address gaps in understanding about an employee’s pay, Kranau said the employee’s mind often will fill those gaps with negative assumptions. So, it’s important to proactively provide information and context regarding pay to get ahead of those assumptions.

Over time, these negative experiences can reduce motivation, engagement and commitment, said Holloway.

“Employees who don’t feel valued or treated fairly are more likely to disengage and consider opportunities elsewhere, and the organization doesn’t get the workforce performance, business results or optimum return on their reward investments,” she said. “In many cases, it’s not simply the pay outcome that employees remember, it’s how the conversation made them feel.”

Perception also drives turnover risk more than reality does, said Clarke. According to Payscale’s 2025 Fair Pay Impact Report, employees who believe they are paid below market are 46% more likely to seek a new job than employees who believe their pay is fair, regardless of whether they’re actually paid competitively.

“That means even organizations paying at or above market can lose talent if they’re not communicating effectively,” she said.

“The most important thing to remember is that pay conversations should be a collaborative dialogue, not a dissemination of information.” — Sarah Kranau, Riot Games

From Calculation to Collaboration

To move pay conversations beyond just numbers, the shift requires managers to understand more than the outcome, said Clarke.

“They need to be able to explain how market data, internal equity, performance and business needs all factored into a pay decision,” she said. “When managers can walk an employee through that reasoning, the conversation becomes collaborative. When they can’t, it stays transactional at best and adversarial at worst.”

Instead, stop treating compensation as an annual event with a verdict at the end, Clarke said.

“The calculation mindset is transactional: Here’s your number, here’s where you land in the range, conversation over,” she explained. “That approach made more sense when employees had less access to external salary data and fewer expectations around transparency. Neither of those things are true anymore.”

The collaboration mindset treats compensation as part of an ongoing career conversation, Clarke continued.

“Managers who do this well aren’t just explaining this year’s number. They’re connecting it to market context, to the employee’s performance trajectory and to what comes next,” she said. “They’re answering the question employees actually care about: ‘What does success look like for me and how does my pay reflect that?’”

Kranau agreed, stating pay is one piece of the pie in working together toward an employee’s shared career goals.

“Beyond just sharing information, managers should proactively provide broader context around pay philosophy and practices, as well as how an employee’s personal career path ties into the company’s overall goals,” she said.

Once managers understand and can communicate to employees factors, such as pay ranges, market positioning, performance considerations and opportunities for progression, Holloway said the conversation can shift from “Why am I paid this amount or why did I get this increase?” to “What can I do to continue growing my career and compensation opportunities?”

She recommended the following guidelines:

• Collaborative pay conversations focus on the future. Managers can discuss career paths, skill development, expanded responsibilities and growth opportunities that may influence future compensation.
• Effective managers balance confidence with empathy. They explain compensation decisions objectively while also acknowledging that employees may have questions, concerns or emotional reactions.
• Listening is critical. Managers should listen to understand, not simply to respond. Active listening communicates respect and helps to uncover what is really behind an employee’s concerns.

“Even when managers don’t have an answer, it’s perfectly acceptable to say so,” Holloway said. “What matters is following up with accurate information and continuing the conversation. The most successful pay conversations combine preparation, objectivity, empathy and a genuine commitment to helping employees understand their opportunities for growth.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Experience
• Employee Compensation
• Organizational Performance