“You don’t talk about money” – is salary still a taboo topic? 

From 2023 onwards, employers in California will have to make salary ranges transparent in their job postings. In other countries, like Germany, potential candidates still have to figure out what the advertised “competitive salary package” might mean. 

And even the employment contract often still contains a non-disclosure clause—which is no longer legal, by the way. It seems employers worry about employees comparing their salaries. While they may have various reasons, their validity has yet to be proven, since they foster neither fairness nor employee satisfaction. 

Depending on which generation you ask, money or salaries tend to be more or less of a taboo topic. People like to joke that they earn far too little, but when it comes to negotiating, arguing and justifying compensation, most people find salary talks uncomfortable—employees and managers alike.

As a leader, what can you do to conduct salary reviews with confidence? How can you make them less unpleasant for everyone involved?

The first step, in being able to approach such a conversation empathetically, is becoming aware of our counterparts’ fears and concerns in this situation:

Discussing salary still a taboo? Percentage indicating how people feel when talking about their salaries.

Bearing these aspects in mind means we can be more empathetic towards our team – putting ourselves in their shoes. Let’s take a look at the following 6 best practices for salary review, helping you master these conversations while making them less awkward for everyone.

1. Best practices for salary negotiations: Show appreciation. 

After all, the other person has overcome concerns and uneasiness to request this interview or bring up the topic in the annual feedback reviews. You can assume that he/she has also prepared for this interview and is pursuing his/her own goals. By the way, this does not necessarily have to be a higher salary. Show appreciation and create a relaxed atmosphere for the meeting.

2. Best practices for salary negotiations: Do not let them pressure you. 

If you cannot be 100% sure of your statement, do not get tempted to make a concession that is potentially out of your scope of negotiation. You are not obliged to make an offer on the spot. Some potential offers may be out of your hands, which is why the following point is so important:

3. Best practices for salary negotiations: Be prepared and set your own goal.

Be aware of your scope of negotiation and check if necessary with human resources, the compensation & benefits team and other stakeholders in order to make a carefully considered offer. This also helps to answer as many questions or desires as possible there and then and giving a realistic outlook. Obviously, this conversation is not about fulfilling all their wishes, but rather an opportunity to discuss your expectations that come with a better compensation. Finally, you should take the team’s overall salary structure and performance into consideration.

4. Best practices for salary negotiations: Give constructive feedback and outline opportunities to evolve.

A salary review always comes with a performance check and hence feedback. What are the tasks that the other person is dealing with, and have they changed over the last months? Does this team member attain the targets and objectives that have been agreed upon? Does this person contribute to team target attainment, and do they support the team’s further development? Which areas show room for improvement? And finally, do you want to incentivize a higher level of performance or show appreciation for something that has been achieved in the past?

5. Best practices for salary negotiations: Know what’s possible and be honest (don’t make false promises).

As mentioned under point 3, you should “do your homework” before conducting a salary review. So what are the overall conditions? Is there a collective wage agreement? What opportunities and benefits are there apart from monetary compensation (company car, more free time, travel budget for further training, etc.)? Ultimately, it comes down to finding out whether it’s really about more money or whether your counterpart would be better off with more flexible working hours, for example. Salary negotiations are not about who is winning or losing, but about creating a win-win situation for both of you under the individual circumstances.

6. Best practices for salary negotiations: Be aware that a pay raise is not a guarantee for a sustainable increase in motivation.

Finding out what the real desire is can have a much more lasting effect on motivation than a simple salary increase. According to a study* by Tim Judge and colleagues, the correlation between salary and job satisfaction is rather low. So it can be assumed that the salary increase is quickly forgotten and motivation is soon back to the level it was at before. So find the deeper reason behind this conversation and tie your own conditions to the optimized compensation.

 

How do you decide on a salary adjustment?

These 6 best practices for salary reviews enable you to let the conversation flow smoothly, if you prepare for it well. If you are unsure whether a salary increase is the right path, take a look at the following factors we compiled to facilitate your decision:

Factors for a salary adjustment. Tasks, responsibilities, performance, contribution to objectives and development, salary structure and bonus options.

Based on this model, you can easily determine whether the expectations and agreements of the individual factors have been met or whether some aspects remain unfulfilled. The best thing to do is to download our free checklist for salary reviews and adapt it to your needs.

How do you feel about salary discussions?

Which aspects cause you headaches or are unpleasant? 

Do you think the salary structure in the team affects the level of motivation? 

Tell us about it in the comments or post your questions here, so we can answer and discuss on this platform. If you prefer to discuss your topic confidentially, schedule your free expert call, in which we will explore initial possible solutions in 30 minutes.