How to communicate your compensation approach to employees (according to experts)

Effective employee communication on how compensation works is a must.

It builds trust and understanding in how decisions are made about their compensation package and what future pay progression will look like for them.

Ultimately this supports Rewards objectives on employee engagement and retention. 

In fact, dissatisfaction with compensation is a top driver for employees leaving their jobs – and this is inevitably exacerbated when they lack understanding about how compensation decisions are made.

Plus, with pay transparency regulations ramping up, clear and transparent communication about compensation approach is becoming a compliance necessity too.

But, compensation communication is notoriously hard to get right.

So, we’ve enlisted the help of Eamonn Stanley (Head of Reward at Typeform) and Vaso Parisinou (Chief People Officer at Ravio) to figure out how to design an effective employee education programme on compensation and benefits.

Why is communicating the compensation approach to employees such a challenge?

At Ravio we talk to Reward Leaders all the time, and communicating about compensation with employees effectively consistently comes up as one of the most challenging aspects of the job.

From our conversations, the biggest challenges are:

• Lack of clarity on how compensation decisions are made. It’s very difficult to implement effective employee communication when there’s a lack of structure in place and compensation decisions are case-by-case or inconsistent – it’s going to lead to a lot of follow-up questions, confusion, and misunderstandings.
• The complexities of compensation. Ensuring employees understand key concepts within compensation – like benchmarking, or salary bands, or equity compensation – is crucial. But there’s a lot to learn, so determining the best way to educate employees (and line managers too!) over time can be tricky.
• The sensitivity of the subject matter. Ultimately, compensation for employees is the money they receive each month in return for their work. It’s core to their financial wellbeing and impacts big life goals and decisions like travel plans or or future home moves. Pay has also historically been shrouded in secrecy, so it still feels somewhat taboo to talk about. All of this means that communicating compensation in the right way is vital to dissuade employee concerns. 
• Explaining exceptions. There will always be edge cases that can appear to sit outside of the core structure that you’re communicating. For instance, if there’s a business-critical role being hired for and you’re losing great candidates due to the salary, then you’re likely to increase the starting salary to close the role. In reality, there are principles around how cases like this are approached too, but they’re trickier to explain and employees will often perceive them as unfair.

During our Reward Community Office Hour for February 2025, we asked Reward Leaders what the biggest challenge is in their own organisation. 

The outcome was mixed, but clarity on the compensation approach, employee and line manager understanding of compensation, and the sensitive nature of the topic, came out as the top results.

What does a best-in-class compensation employee comms plan look like?

We asked Eamonn Stanley (Head of Reward at Typeform) and Vaso Parisinou (Chief People Officer at Ravio) for their advice on how to overcome these challenges to build best-in-class employee communication on compensation.

They shared six critical considerations:

1. Gauge where the team is at with compensation knowledge
2. Use the compensation philosophy as the starting point
3. Build compensation understanding incrementally
4. Plan for consistent communication and many touchpoints
5. Lead with empathy, always
6. Highlight how compensation knowledge supports career development.

Let’s take a closer look at each.

Tip 1: Gauge where the team is at with compensation knowledge

For Eamonn, scoping out the team’s existing understanding of how compensation works is an important starting point.

“The level of understanding on compensation usually differs within an organisation,” he says. “Some employees have a good understanding and some don’t, and the same goes for line managers too. So the first step should always be to gauge where the team is at.”

Having this information then enables you to build a communication plan or education programme that is tailored to the needs of your specific team.

Tip 2: Use the compensation philosophy as your starting point

With all the new concepts to share and complexities to explain, knowing where to start can be the first stumbling block.

Both Eamonn and Vaso advise first introducing employees to the compensation philosophy.

“Start with your compensation philosophy,” says Vaso, “and frame it in terms of explaining why the company makes compensation decisions in the way that it does.”

For Eamonn, starting with the compensation philosophy helps to “distill all the complexities down into a set of core principles”.

A lot of the complexity arises because of the nuances in how compensation varies across different roles, departments, locations, and so on – but the core philosophical principles that sit behind that nuance always stay the same. 

Introducing those principles first, in Eamonn’s experience, “helps people to intuitively understand how it actually works.”

Having those core principles in place, and communicating them to the team, also brings structure into play – and structure is vital to ensure employees feel confident that compensation decisions are being made logically, consistently, and fairly.

Having worked in several early-stage startups, Vaso has first-hand experience of what happens when that structure isn’t there. 

“You end up with a lot of confused employees who feel like their compensation doesn’t make any sense and is unfair,” she says, “and it becomes a distraction for everyone – it becomes an urgent pain for employees, meaning that line managers are dealing with noise and difficult conversations, leaning on an overstretched People team for support, who are looking to leadership for strategic direction.” 

“Plus, when you do eventually introduce structured principles, there’s then a huge amount of change management needed to implement them effectively.”

Tip 3: Build compensation understanding incrementally

With the principles as the foundation, it’s then important to build employee understanding with an incremental approach and lots of touchpoints along the way.

“Use the compensation philosophy as the first building block, to then expand on with more and more building blocks over time”, says Eamonn.

And Vaso agrees. “When you try to cover all the complexities from the start it puts pressure on your team, and will only overwhelm employees with too much information to take in – adding to the pressure.”

Instead, she recommends “Start slowly and build from there with frequent and incremental communications. Everything else aside, I’ve found this approach to be much more manageable for myself and my team!”

Vaso also points out that a company’s compensation approach also typically adapts and builds over time. “The same is true for the compensation structure itself,” she says, “starting with the principles and building slowly from there is the best approach.” 

This then helps to shape the communication plan, because each time one of those building blocks is defined, it’s time to communicate it to the wider team. 

To take an example, Vaso recently presented the company’s compensation philosophy to the full team as part of our annual onsite. Equity compensation was only lightly touched on, because changes are planned this year in this area, so further education will follow later in the year on this.

This is something that Eamonn has found important at Typeform too. In early 2025 he rolled out transparent salary bands internally. It’s been a major project and represents a huge change in how compensation is handled within a company, so could easily have been a very challenging launch with lots of employee questions and concerns. 

But Eamonn had already been sharing openly with the team about why it was happening (which includes responding to employee feedback on the subject) and the process his team was going through – which meant only positive reactions when sharing the end product.

“It’s about bringing employees along on the journey with you,” says Eamonn. “Don’t just share the final destination, share how you’re getting there.”

Tip 4: Plan for consistent communication and many touchpoints

An incremental approach naturally means that lots of different comms touchpoints are needed over time to ensure employees have a full understanding of how compensation works, and all of those building blocks that are added over time.

For Eamonn, it’s all about consistency. “Communicating about compensation once a year simply doesn’t work,” he says, “consistent education is needed.” 

When it comes to deciding what the right touchpoints are, Eamonn focuses on defining “the key moments within your company’s Rewards processes” because “those moments are the most important time to be communicating with employees about compensation.”

At Typeform, for instance, Eamonn runs two merit cycles per year. After each cycle, he always makes sure to clearly communicate with the whole team an overview of the decisions made during that cycle (typical salary increase, promotions, etc) and why those decisions were made in the context of those core principles from the compensation philosophy.

Vaso also highlights the importance of documentation, creating educational resources that are available to employees at all times within the company’s employee handbook or Notion system, rather than relying on one-off communications. 

This might include a written version of the compensation philosophy, or a recording of an all-hands session on the company’s approach to compensation reviews, and so on. 

“The goal is that employees understand the key concepts used in Rewards and how decisions are made for their compensation,” she says, “If they don’t understand, then the next best scenario is that they’re able to locate the information in one clear place so that they can self-serve where possible, and learn where to go or who to reach out to next.”

Tip 5: Lead with empathy, always

Compensation will always be a sensitive topic for employees, and it needs to be handled as such – ‘how’ you communicate matters just as much as ‘what’ you’re communicating.

Eamonn advises that when communicating with employees about compensation, whether it’s company-wide education or a 1-2-1 catch up, to “lead with empathy”. 

This is especially important as companies become more open and transparent about how compensation works, because as Eamonn puts it “transparency without empathy can backfire.” That transparency might lead to more questions and concerns about the fairness of decisions simply because they’re out in the open, so it’s important to keep handling those conversations with care (and supporting line managers to do so too).

Tip 6: Highlight how compensation knowledge supports career development

We’ve seen that compensation can be a complex subject matter, and it also feels highly personal for employees too – which can make it feel like more of a negative than a positive on the surface.

In reality, understanding how compensation works is actually also a valuable skill to have for employees. 

“In the early stages of my career I didn’t work in the People function,” says Vaso, “so I had no idea how my own salary was determined or what my future pay progression might look like in my role. I found that moving into the Rewards space gave me more agency as an employee – and I know several members of the team at Ravio have found that too since working in the compensation and benefits space.”

Knowing how compensation works enables employees to advocate for themselves, both in terms of career progression within the company or in future hiring or salary negotiation processes. 

That knowledge and skill is win-win, because as Vaso highlights “the entry-level folks of today will become the managers and leaders of tomorrow.” 

Alongside company-wide communications by the Reward team, line managers play a huge role in communicating about compensation within their 1-2-1 conversations with direct reports. 

“It sparks a trickle down effect,” says Vaso, “because those managers of tomorrow will be able to have more meaningful and effective conversations with their future direct reports because of their understanding of how compensation works.”