Why Employers Are Separating Pay and Performance Conversations

Pay and performance conversations have long been tied together, but that’s quickly changing. Here’s why employers are separating the conversations and how to make the most out of it.

Written by Virgile Raingeard
Published on May. 24, 2024
Why Employers Are Separating Pay and Performance Conversations
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Picture this: You’re in the middle of your annual performance appraisal. Your manager has given you a well-earned pat on the back for the things you’ve done well over the year. And she’s about to go into detail about the steps you need to take to improve. 

The only problem? You can’t focus on any of that, because you know the conversation will end with her telling you whether or not you’re getting a raise this year. 

5 Tips to Advocate for Yourself in Pay and Performance Conversations

  1. Remember the purpose of the performance review.
  2. Seek additional feedback.
  3. Be proactive in your professional development.
  4. Ask for details on how your pay is determined.
  5. Consider factors beyond base pay.

That’s not your fault: compensation is one of the main reasons most of us continue coming to work every day. But your annual performance review is also a hugely important moment in the year, and it deserves your full attention. 

That’s why, in 2024, many companies are now rethinking the link between performance and pay. Some, like former Twitter CEO Jack Dorsey’s company, Block, have chosen to forgo the annual performance review altogether in favor of ongoing feedback throughout the year. 

Others still like the formality and structure of the annual performance review, but separate them from compensation reviews by at least a month to give each conversation the focus it deserves. 

 

Why Pay and Performance Conversations Are Separated

In most organizations, pay and performance are intrinsically linked, but that doesn’t mean you should try to have both conversations at the same time.

For one thing, conversations about pay can put employees on the defensive. That means they’re not a good environment for a productive performance discussion. 

This scenario can also create a culture of competition and blame, as employees are encouraged to throw their colleagues under the bus in the hopes of securing a raise. 

Plus, there are many reasons why an employee might not get a pay rise in a particular year. Company budgets and challenging market conditions mean that sometimes, there’s just not enough money in the pot. 

But when employees feel that pay increases are purely tied to performance, this can feel like a direct attack on their work, even when it has nothing to do with them. 

When companies decide to separate performance reviews from pay discussions, it’s good news for employees. Instead of worrying about pay during your performance review, you’ll be able to properly focus on your manager’s feedback, which can help you to improve your performance in the long run. 

More on Career DevelopmentHow to Ask for a Promotion

 

How to Advocate for Yourself in Separated Pay and Performance Conversations 

Most employees are used to transitioning from a performance conversation into a discussion around their compensation. While separate conversations may feel unusual, giving each one your full attention will help you maximize the experience. If you want to get the most out of your performance reviews and have productive, positive conversations about pay, here’s what to do.

1. Remember the Purpose of the Performance Review 

Your annual performance review is an important moment in the year. But they also cause fear and anxiety for a lot of employees. To avoid stressing yourself out ahead of your review, try to remember what performance reviews are actually for.

In most companies, the whole idea of a performance review is to help you improve and grow as a professional, not to criticize you. Try to go into your review with an open mind and avoid getting defensive. Even if there are problems with your performance, a good manager will use the performance review as an opportunity to help you get back on track.

2. Seek Additional Feedback  

Nothing that happens during your annual performance review should be a surprise. Of course, most of the responsibility here is on managers, who should provide you with relevant and useful feedback on your work whenever they can.

However, employees can also help themselves by looking for opportunities for feedback throughout the year. For example, you could ask your manager to schedule regular check-ins, where they provide feedback on your work in an informal setting. You might also want to ask them for feedback at key moments, such as after the completion of an important project. For example, you could ask questions like: 

  • “Did my work on this project meet your expectations?”
  • “What do you feel I did well during this project, and what could I improve?”
  • “What steps can I take to prepare for the next project?”

You can also ask for feedback on specific elements of your performance that you’ve been working on. Managers do their best to keep track of their team members’ performance, but often get busy with day-to-day tasks, so it can be helpful to remind them. For example, you might say: 

“Based on your feedback after the last project, I’ve tried to work on my communication with the rest of the team. From your perspective, do you feel like I’ve progressed in this area? What can I do to continue improving?”

3. Be Proactive in Your Professional Development

Your annual performance review is an opportunity to find out how you can improve your work, and you should play an active role in that process. 

That means you should ask your managers to be as specific as possible when they provide their feedback. If they identify an area for improvement, ask them to explain exactly what that improvement would look like. 

If you’re looking to move to the next step of your career, your annual performance appraisal is also a good moment to bring this up. A good manager will help you determine the steps you’ll need to take to boost your skills and move to the next level.

4. Ask for details on how your pay is determined 

Keeping pay and performance conversations separate gives you room for a proper discussion with your manager once compensation review season rolls around. And you shouldn’t be afraid to ask them for clarifications or more information about your compensation. 

For example, if you’ve been awarded a salary increase, you may want to ask them what percentage of the increase was based on your performance, and what percentage was due to other factors. And if you didn’t get a raise? Ask your manager why you didn’t qualify, so you know if there’s anything you can do to get the result you want next time around. 

In some circumstances, you may be able to use what you learned during your performance review to negotiate for a higher raise. For example, if your manager told you that your work has exceeded their expectations, you could ask for that to be factored into your raise. 

Of course, whether or not this is successful depends on your company’s policies and processes for determining pay. Some employers only award raises based on strict criteria that don’t leave room for negotiation. But in cases where negotiation is possible, the fact that performance reviews and pay conversations are kept separate gives you the information you need to effectively advocate for yourself. 

You should also keep in mind that your manager might not want (or be able) to answer your questions. Every company has its own internal policies about what managers can and can’t tell their teams about pay. But pay transparency is on the rise, and more and more companies are willing to share behind-the-scenes details in the interest of improving employee morale. 

5. Consider Factors Beyond Base Pay 

No one likes to get disappointing news about compensation. And, if you truly believe you’re being underpaid by your employer, it’s perfectly reasonable to look for another job. Everyone deserves to be paid fairly for their work.

It’s also important to consider everything that your company gives you outside of your base salary. Depending on where you work, that might include bonuses, commissions or equity, and even less tangible things like a positive work environment and a good work-life balance. You should also make sure you’re clued up on the benefits you’re entitled to and use them to their full advantage. 

Of course, it might be that all of that still doesn’t add up to enough to keep you around without a pay increase, and that’s fine. But it’s worth looking at your base salary in its full context before jumping ship. 

More on Career DevelopmentHow to Tell If You Want a Raise or a New Job

 

Why Separate Pay and Performance Conversations Will Become the Norm

Over the past few years, we’ve seen a wave of pay transparency legislation sweeping across the US. And Europe is soon to follow suit, with the EU pay transparency directive set to come into effect by 2026. 

That means that employers everywhere are going to have to get used to justifying every single pay decision they make. In the years to come, we’ll likely see a lot of changes to the way companies handle communication around pay. This separation of pay and performance is just the beginning.

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