3 steps to better salary conversations with your staff

Payrise talks can be tricky. Everyone knows money matters, but many people feel awkward discussing it.

Salary and compensation are top drivers for attracting candidates, Jobstreet by SEEK's Hiring, Compensation, and Benefits Report 2024 reveals. Yet, according to recent SEEK research, just 29% of employees feel confident negotiating salary with their manager, and only 29% feel confident asking for a pay rise.

So, as an employer, how can you make payrise conversations more comfortable and constructive – for both parties? Here are three strategies to enable more transparent and productive salary discussions, as well as tips to make that conversation more efficient.

It’s good practice to understand how your organisation determines. In Malaysia, 59% of companies of different sizes rely on salary benchmarking to determine appropriate remuneration. Outlining factors, such as industry benchmarking, tenure in the role, and company performance, can help people better understand how their salary is calculated. In many cases, it isn’t just dependent on individual performance.

As a manager, try to be open and transparent with your team regarding what you require of them to secure a pay rise. It could include meeting Key Performance Indicators (KPIs) or adding value to the organisation outside your direct role.

Employees should understand what they need to do if they wish to receive a salary increase. This open conversation can include recommendations and actionable steps towards improving performance. Even if your employee doesn’t secure a pay rise, a constructive discussion like this can strengthen the relationship and avoid misunderstandings.

If it isn’t possible as a manager to offer your direct reports a pay rise, you can test alternative ways to ensure they feel valued. Jobstreet by SEEK research reveals that the top five benefits outside of salary nominated by Malaysian employees are:

• More flexible working arrangements (with about 50% of Malaysian workers open to quitting if forced to return to the office full-time)

• Increased leave

• Retirement benefits

• Reduced working hours

• Family support

Every employee will have their priorities, so as a manager, you can take the time to understand what your people find most important. For example, it could be additional annual leave, salary packaging providing financial support, or leave for professional development. For instance, many Malaysian companies offer transportation and parking allowances to ease the burden of the daily commute.

As a manager, a conversation about a salary increase is likely less daunting and more exciting. Pay cuts are not a standard practice in Malaysia and can only be done with the employee's consent. However, a few years ago, around 6o% of Malaysia's workforce had their salaries adjusted and work hours reduced, so you still need to be prepared to have these kinds of conversations.

Whether sharing good news or expressing a frustrating development, these tips can make you more empathetic during salary discussions.

Don't beat about the bush. Explain the financial situation and why salary adjustments are necessary at this time. If the economy is doing poorly, don't gaslight the employees into thinking they should be grateful they still have a job. That said, don't be toxically positive either. Be practical and outline the steps the organisation is taking to amend the situation.

Schedule a private meeting in a comfortable and neutral environment. Don't do it during the office's Hari Raya celebrations. Schedule a time when you and the employee can focus without distractions.

You can come to the meeting with a spiel – this way, you can outline the objectives of the discussion and not overlook crucial details. But don't get lost in your script. Give your employees space to react. Allow them to raise concerns, questions, and suggestions. Encourage open communication and ask for feedback.

Explain the company's other benefits beyond financial compensation. You can use the opportunity to discuss career growth and advancement opportunities.

As mentioned, pay cuts have to be approved by the employee in Malaysia. Consider the possibility of compromise to reach a mutually beneficial agreement.

Respect your employee's privacy by keeping the discussion confidential. Avoid mentioning individual salaries or financial details of other team members.

Check up on your employees after the meeting to ensure they're okay, all questions answered, and concerns addressed. You should also set a timeline for future reviews and discussions.

Although salary is hugely important to many employees, feeling valued and appreciated can be equally important to others. Remembering to thank people for their contribution, providing regular feedback, and being respectful of people in the workplace are all additional factors that lead to employee engagement and fulfilment.