Merit Reveal Season Is Here. Are Your Managers Ready to Talk Pay?

Chances are your organization is in the middle of merit cycle season right now, which means your managers are communicating with workers about the good, the bad and the sometimes-ugly news about raises. So, are your managers ready to answer questions like:

• “How was my pay bump determined?”
• “Why didn’t I get a pay increase?” (or “Why didn’t I get a bigger pay increase?”)
• “How can I earn more?”
• “How does my raise compare to what my teammates received?”
• “How does my new salary compare to similar roles in the industry?”

If managers are unprepared for these critical conversations, it can lead to confusion, distrust and lower productivity. If they can effectively handle these talks, though, they can foster a more motivated and engaged workforce. 

How to Share Pay Information

Successful organizations start their pay communication journey by getting realistic about how pay works (i.e., how pay ranges are determined and dictated by job level, tenure and other factors), said Nicole Bufanio, a senior principal at consulting firm Mercer.

“Whatever the approach is, managers need to know what it is, why it is this way and what it means for their direct report,” she said.

According to Ruth Thomas, the chief compensation strategist at compensation software and data company Payscale, there is a “sweet spot” to aim for — the “why,” so employees can understand the philosophy and reasoning behind pay decisions.

“This builds more trust than numbers alone,” she explained.

For guidelines of what to communicate, Thomas recommended that you consider your compensation philosophy, including what factors drive pay differentiation, how market data informs decisions, where employees sit within their pay range and how career advancement connects to pay.

In addition to explaining the “why,” Aleksandra Popovic, the head of HR, and Clare Bonham, the chief product officer, at total compensation software company beqom, said compensation communication guidelines should reflect corporate culture and compensation philosophy, so messages are consistent, clear and authentic. They suggested managers frame their conversations around the following principles:

• Be proactive. Deliver the message before employees see their salary adjustment — or lack thereof — in their bank account or paystub.
• Demonstrate fairness, consistency and transparency in the salary review process. Employees should understand that decisions are not made in isolation, but are part of a calibrated, company-wide process.
• Show appreciation. Even when no increase is applied, employees should feel respected and acknowledged for their contribution.
• Connect compensation to growth. Shift the focus toward impact, scope evolution and ongoing career development, not just the current outcome.

“High-performing organizations ensure merit conversations are a predictable summary of a continuous performance journey rather than a disruptive annual surprise.” 
— Mike Bollinger, VP of strategic initiatives, Cornerstone OnDemand

Training Managers on Talking Points

Organizations should prep their managers with training as well as a pay communications toolbox, said Thomas. This should include:

• Talking points about the organization’s compensation philosophy;
• Role-play scenarios for navigating tough pay conversations;
• Details about the comp plan with job levels, pay grades and total rewards breakdowns; and,
• Guidance on empathy and tone.

“Whatever happens, reiterating management ownership is critical,” she said.

Failing to provide a centralized leadership narrative forces managers to “delegate the pain” of budget constraints and can inadvertently turn frontline leaders into the face of unpopular corporate decisions, fracturing the manager-employee bond, said Mike Bollinger, the global vice president of strategic initiatives at workforce agility and talent management platform Cornerstone OnDemand.

“By integrating workforce intelligence into year-round coaching, high-performing organizations ensure merit conversations are a predictable summary of a continuous performance journey rather than a disruptive annual surprise,” he said.

Bollinger added effective manager training should transition from basic compliance to “continuous readiness,” utilizing scenario-based workshops and reverse role-playing to help leaders navigate complex conversations, and common questions around merit and market lag.

To ensure these insights are engaging and actionable, Bollinger said organizations can deploy micro-learning “nudges” and peer calibration circles that build a manager’s compensation muscle in realtime.

Training should be focused on those who need it, noted Sal DiFonzo, the managing director of compensation and rewards consulting at consulting firm Gallagher, and a member of WorldatWork’s Compensation Advisory Council.

“If the program has not changed, and the manager has been through five identical merit increase cycles, they probably don’t need training,” he said. “Instead, focus the time on new managers or those who want a refresher.”

Make training engaging by grounding it in true-to-life scenarios, Thomas added.

“Think about it as a practice rather than a slide deck,” she said. “Maybe get them to bring the most uncomfortable scenarios they have dealt with as test cases. Practice having conversations when there isn’t a raise to give. Equip managers with the tools like your comp philosophy, pay range details and total rewards breakdowns, and then teach them to use it.”

In the end, training success isn’t just “completing the course,” said Bollinger. Rather, it’s the quality of the post-merit atmosphere. For example:

• Forty-eight hours after merit letters go out, send a two-question survey to employees: “Do you understand how your pay was determined?” and “Do you feel your manager had a transparent conversation with you?”
• Track how many employees bypass their manager to ask HR about their raise. A successful training program results in lower HR ticket volume because managers handled the questions at the source.
• Analyze if there is a spike in turnover among top-rated employees in the 90 days following the merit cycle. If high performers are leaving, the communication (not necessarily the money) likely failed.

Continuous Conversations

Pay is personal, representing recognition, contribution and progression, said beqom’s Popovic and Bonham. Therefore, communicating consistently and frequently about pay is important.

These HR pros explained that people want to know:

• Where they stand; and,
• How they may traverse the path to pay progression (through skills, performance, promotion and company performance).

According to Bollinger, a common mistake organizations make is treating manager development as a one-time annual event rather than a continuous strategy to build both technical compensation fluency and the soft skills required for sensitive pay discussions.

“Prioritizing rigid, policy-heavy training over practical, scenario-based guidance often leaves leaders feeling unequipped to handle the ‘emotional physics’ of money, resulting in conversations that feel robotic rather than transparent,” he said. “When managers aren’t trained to explain the why behind the what, employees fill the silence with their own narratives of inequity, making manager capability a more valuable retention tool than the actual percentage of the increase.”

Thomas agreed, stating employees form opinions about their pay every single day, not just around merit season.

“When [managers] fail to communicate with employees, small doubts become big resentments,” she said. “And when merit season rolls around, it’s no longer a compensation conversation. It’s damage control and it may be too late to save critical talent.”

Thomas cited Payscale’s Pay Confidence Gap Report, which showed 69% of surveyed employees trust their employers’ pay decisions, compared to 93% of surveyed employers that felt their employees trusted those decisions.

“This isn’t a problem with the compensation calculations — it’s a communication problem,” she said. “That doesn’t get solved with a conversation that happens once a year. Organizations need to have more continuous conversations with employees about their compensation. Share total rewards updates as benefits change, and make sure managers are connecting pay to performance early and often. Building trust with employees is an always-on activity.”

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:

• Career Growth
• Employee Compensation
• Total Rewards