How to prepare line managers for conversations about pay (according to experts)

Effectively communicating with employees about the company’s approach to compensation is consistently a top challenge for Reward teams.

One of the trickiest elements is that line managers are typically the ones having regular conversations with employees about their pay and progression.

The Rewards team doesn’t have direct control over those conversations.

But, we can ensure that line managers are well-equipped to share accurate information and have meaningful, empathetic conversations about compensation with their team members.

We asked Eamonn Stanley (Head of Reward at Typeform), Vicky Peakman (Founder of Fair Pay Partners), and Vaso Parisinou (Chief People Officer at Ravio) to share their advice on how to train managers on compensation – as well as how to support them with some of the most challenging conversations that arise during performance and compensation reviews.

What should be covered in compensation training for line managers?

Ensuring that line managers have a strong understanding of key compensation concepts, and how their company specifically approaches compensation is crucial.

This isn’t always the case, though.

In fact, line manager understanding of compensation was one of the top responses when we asked Reward Leaders what the biggest communication challenge is in their company, during our Reward Community Office Hour for February 2025.

For Vicky Peakman, Founder of Fair Pay Partners, rectifying this should be a priority for Rewards teams. “Blaming managers for poor communication can be a bit of a crutch,” she says, “In reality it often indicates that the approach isn’t clear enough or managers haven’t received enough guidance.”

That guidance should always include:

• Educational sessions on the key concepts used within compensation – from benchmarking to salary bands to vesting schedules to pay equity – and how those concepts are used within the organisation’s specific compensation philosophy.
• Manager training on how to communicate effectively about compensation with direct reports. This might include role playing sessions to practice pay conversations, especially with brand new line managers.
• Documented guidance on both of the above, to ensure managers have materials to refer back to at any time. It can be helpful to include templates or examples of the kind of language to use when talking about pay within this documentation too.
• Reminders at key moments during the Rewards cycle, particularly when new roles are being hired or before performance and compensation reviews – both scenarios when conversations about compensation inevitably ramp up. For instance, managers should always receive clear guidelines, training, and support opportunities before a series of calibration sessions kicks off within each merit cycle.

Scope out managers’ current compensation knowledge to build a tailored programme

Eamonn Stanley, Head of Reward at Typeform, recommends “gauging where your team is at as a first step.” 

In his experience, managers tend to have “varying degrees of knowledge about how compensation works”. Taking a step back and understanding what that looks like helps you to then “build a tailored plan based on the specific needs of your management team.”

Bring data into the training to deepen understanding

For Vaso Parisinou, Chief People Officer at Ravio, “bringing data into manager training helps to cement understanding.” 

Data can be helpful in lots of ways. 

For instance, sharing compensation benchmarking data helps managers understand how compensation decisions take market competitiveness into account, or how target percentiles impact typical salaries.

Or sharing employee data (e.g. salary band positions) to demonstrate how pay progression can work in reality for each role – as well as how compensation decisions impact internal pay equity. 

“Having the context of both the external market and the internal reality of compensation equips managers to have better, more informed conversations with their team members,” says Vaso.

Ensure clarity on the role of managers in conversations about pay

Another piece of advice from Vaso is to “be clear about the role of the Rewards team and the role of the line manager when it comes to compensation communication.”

As Vicky highlighted earlier, ensuring managers have the guidance they need on communicating compensation is absolutely the responsibility of the People & Rewards team. 

But, in Vaso’s experience, “even with the most comprehensive manager training programme in the world, there are often managers who have consistently poor conversations with their direct reports about pay and progression.” 

One example is when managers struggle to articulate the reasons behind a low performance rating or no/low salary increase during compensation reviews, and deflect from this by blaming the Reward teams’ process. 

“It’s not uncommon to hear feedback from employees that their manager has said something like ‘I advocated for you to get a pay raise but it was vetoed by the HR team’”, Vaso explains, “it’s confusing for the employee and it reflects badly on the People team who have put so much time and energy into running a smooth pay review.”

“It’s important to be clear with managers that communicating clearly, accurately, and empathetically with their team members about compensation is a core requirement of their role as a team lead,” Vaso advises, “the People team are there to support them however they need, but it’s their responsibility to take that support into effective conversations.”

How can we better prepare line managers for challenging pay review conversations?

As we’ve seen, communicating the outcomes of performance and pay reviews can be some of the most challenging compensation conversations for line managers to handle.

We asked Eamonn and Vicky how they would approach four of the most common challenging scenarios that arise during this time – share this with your managers to help them feel prepared.

Scenario 1: The employee has poor performance feedback and will receive no/low salary increase 

“Start with empathy and active listening,” says Eamonn, “that’s true with all conversations about pay, but especially when it isn’t the best outcome. It isn’t going to be an easy conversation for the employee, so the manager needs to take extra care.”

From there, it’s all about providing as much clarity as possible.

“Explain exactly what the poor performance has been, with clear examples against the documented expectations for the role,” Eamonn advises, “In an ideal world, this shouldn’t come as a surprise because feedback and open communication should be taking place between manager and employee all year round, not just during the merit cycle.”

“Next explain how performance relates to pay within the company’s compensation philosophy, so that the employee has a clear understanding of why their performance is leading to no salary increase for them this time round.”

“And finally explain what improvements the employee can make to ensure a better outcome next time,” Eamonn says, “the manager should be working collaboratively with them to implement goals and development support to help them meet those goals.”

Scenario 2: The employee has performed well but will receive no salary increase due to their high position in band

For Vicky, the first step is to explain the logic and rationale that is behind this decision.

“Ensure the manager is clear about the rules for employees who are at the top of their salary band but still performing highly,” she says, “and that they can explain this to the employee without causing confusion.”

“It’s also worth highlighting the reasons for those rules,” Vicky suggests, “in most cases these limitations are in place to avoid inconsistencies and pay equity issues within the team. We all naturally want to be paid more, but if we can see how it would be unfair to our peers, it’s more likely to be understood.”

In many companies, even if a high-performing employee with a high compa ratio is ineligible for a salary increase, there will be other compensation levers to use to recognise and reward their achievements and avoid regrettable attrition.

“We should be working with the manager in this scenario to offer an alternative reward for the employee,” Vicky advises, “which could be an equity refresh grant or a backward-facing performance bonus, or additional holiday days, and so on.”

“I’d also suggest that a large part of the conversation should focus on growth and development. If this employee is already at the top of their pay band and is still performing highly, then the manager should be working with them on a plan to demonstrate that they have the required skills and experience to be ready for a promotion to the next level and salary band.”

Scenario 3: The employee was expecting a higher salary increase (or bonus, equity refresher, etc) and is disappointed

“Firstly, acknowledge the employee's concerns and frustrations with the outcome,” says Eamonn, “as always, when it comes to communicating compensation, leading with empathy is key.”

Next, provide context for the decision. “Explain why they are receiving the compensation adjustment that they are,” says Eamonn, “whether that’s about their performance, budget limitations, internal fairness, they need to be clear on the rationale.”

“It’s also important to try and understand why the employee was expecting a higher salary increase. If they’re seeing higher salaries for their role within the market, that’s important context for you to know. Equally, if there was a miscommunication somewhere along the line about the approach to pay increases, that’s important feedback too.”

“End with a more positive and future-thinking discussion on the employee’s value to the company, their future earning potential, and plans that they can put in place with their manager to ensure they reach that earning potential.”

Scenario 4: The employees questions the fairness of the pay review outcome

Questions like ‘why am I not getting a pay increase or promotion when they are’ can arise during compensation review conversations.

For Vicky, when fairness is brought into the conversation, the most important thing is to “listen and take the concerns seriously.” 

“There’s always a chance that there is bias or discrimination happening,” Vicky says, “and that should be taken seriously and investigated every time.”

Beyond this, in this kind of scenario it’s particularly important that managers are well-versed on the compensation approach, and particularly how the company ensures consistent and fair pay decisions are made – especially within the context of the pay review process.

“The manager needs to be able to explain how pay increases and promotions are determined,” Vicky says, “and the parts of the process that are designed to ensure these decisions are fair and maintain internal pay equity – like market alignment, compa ratio analysis, calibration sessions, and so on.

“In this particular example, it’s also important to keep the conversation focused on the employee concerned,” Vicky advises, “rather than talking about why other employees are receiving the adjustments that they are.” 

“The aim is to show the employee that they aren’t being treated unfairly in the decision that’s been made. Also highlight that they have the power to influence their own compensation package, through performance and meeting development goals towards promotion.”