How Communication Affects Employee Knowledge of and Reactions to Compensation Systems

Scholarly research on communication about pay issues, while somewhat limited, has generally found that the way organizations communicate about compensation matters in terms of how it affects employees’ attitudinal and behavioral reactions to their pay (e.g., Card, Mas, Moretti, & Saez, 2012; Folger & Konovsky, 1989; Futrell 1978; Futrell & Jenkins, 1978). Textbooks and practitioner-oriented reports also remind us that communicating with employees about compensation is very important (e.g., Milkovich, Newman, & Gerhart, 2014). Yet, in a recent survey of compensation professionals, only 50% of respondents answered “strongly agree” or “agree” when asked whether their organizations were focused on increasing their pay communications with employees (WorldatWork, 2012b). Only 29% agreed or strongly agreed when asked whether their organizations were able to effectively communicate the value of compensation (total rewards) to line managers, and only 25% said they communicated this effectively to employees (WorldatWork, 2012b). This area of compensation practice would seemingly benefit from a more evidence-based approach to increasing the effectiveness of pay communication. But what does the research evidence say exactly?.