I think that context is always important in talking with people, and it’s doubly important IMO when talking about money, since money is so closely and emotionally linked to “personal value” in our culture.

And people have a lot of fear around talking about money. I’m so impressed by Kate’s story of her interview and your willingness to be authentic. That’s the real key: salary is the employer’s decision, but I think the conversation needs to be two-way. As I said in my post, if my boss had just told me up front why I was getting an insulting raise, at least I wouldn’t have been so insulted.

Here’s what I think is important to be clear about:

1) The standard on which your pay system is based.

Whether you go with “salary grades,” or annual raise of X% plus Y% for bonus, or commission, or whatever, it’s important that there be some starting structure that you can describe clearly, and that applies to everyone. Even if it’s “everyone here starts at minimum wage.”

If your structure is “this is what I can afford to pay right now,” then you still need to be able and willing to explain that. The overall point is being transparent about the criteria.

If someone’s coming in to do the same kind of work as Kate, it’s fairly easy to explain why they are making a different rate of pay — you can compare apples to apples in terms of time/experience on the job, hours worked, etc.

If it’s a different job completely, then you need to be able to explain to both Kate and the new person what criteria you are using to determine the base value of their respective work.

2) How people can advance in pay, and when they should expect to have the next conversation about it.

I really believe in telling people what it will take to get you to pay them more. If it’s tied to the growth of the overall business, great. If it’s tied to individual performance goals, that’s great too. The only requirement is to be clear.

I think it’s important to be open to talking about money anytime, but I believe in structure in these matters. If you’re going to review salary annually, say so right up front. If you aren’t (or might not), say that too — people have a default assumption about annual reviews.

Hmm, I have gone on a while about this. Is it helpful? If I’ve missed the boat and there’s a different quality of input you were looking for, please let me know. And thanks for a great question.

It’s been incredibly helpful- it’s helped us not only have a compassionate and responsive discussion about pay, bonuses, and profit-sharing. But, it means that she’s jumping in to help us make the business work, and she’s got the information she needs to do that.

I feel MORE relaxed and secure sharing the financials with her. Thanks for bringing up this great topic.

Any particular recommendations you have about being open when there is pay disparity? For instance, the next person we hire won’t be working at Kate’s level, and so won’t be receiving the same pay.