COMMUNICATION     COMPENSATION & BENEFITS 

It's always difficult for managers to break negative news to employees during a crisis. What's worse is having to tell employees they are not getting their variable bonus because the company failed to make a profit.

Are your managers and team leaders capable of breaking the bad news during the bonus payout season without de-motivating employees? Ernst & Young Performance & Reward Singapore practice leader Julia Ann Smith says conducting a difficult conversation is a responsibility managers shouldn't shirk away from. She says "now is not the time for silence" especially when "many employees are tired and frustrated after a difficult year".

Companies need to send out a message that you value your employees and you are open and honest with them. Otherwise, "bad news on the bonus front can be the last straw and seriously jeopardise any achievement of the 2010 business plan," Smith says.

Here are some guidelines, Smith says, would help managers communicate the money issue better:

1.         Tell the truth

Explain the direct impact of the recession on your industry and organisation and say what the firm will need to do to weather the storm. Involve and trust your staff by making sure that they are told news first before anyone from outside the company finds out. If you have to, be totally and brutally honest. If people know that their bonuses will cost themselves or one of their colleagues their jobs, they might realise that receiving a bonus is not that important after all.

2.         Handle the suspicion

Put the hard facts in front of the employees. Let them know the size of their bonus depends on the company's profitability and variable pay means the amount of payout can go up in good years and down in bad years. Explain to them that the company isn't short-changing them, says Smith. Tell employees, "Our base pay is still targeted at the median. You're getting paid fairly." 

Listen with empathy and demonstrate that you are actively listening. An example of what a manager should say is, "I understand that you are disappointed that the bonus isn't larger. I was a bit disappointed too when I got the news about my bonus. However, after giving it some thought, I realised it makes sense, given the current business environment."

Let employees know that there's no hidden money or no slush fund that someone else or senior executives are pocketing.

3.         Paint the long term picture.

Explain to employees how both parties can collaborate through the difficult period, says Smith. Use sentences such as "We're all in this together, and we're all going to get out of this economic slump together." Or "We plan to be around for a long time. We hope you will be with us when our profitability goes ballistic." 

Communicating pay issues is never easy, says Smith, especially in a year when the economy is recovering. She suggests HR to consider holding additional training to ensure managers develop the skill needed to hold tough conversations such as this.

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