Dive Brief:

• Most managers (85%) claim they know how to explain pay decisions to employees, but a new PayScale study found that only 37% of organizations agree. And that's a problem, PayScale says, because effective conversations about pay can build trust, increase retention and drive engagement.
• There's also a disconnect around employees' perceptions, according to the report. As many as 67% of managers think employees are fairly paid, while only 21% of employees think their pay is adequate.
• In other results, 60% of organizations said they're very concerned about worker retention in 2018, but 73% expect wage increases to remain at or under 3% as they were in 2017; employers will rely more on bonuses than they did in the previous two years than pay increases. And while employers are concerned about workplace inequality, 63% of top-performing companies don't plan to conduct audits of their pay practices to look for ethnicity and gender gaps.

Dive Insight:

Employees might not always agree with pay decisions, but they're much more likely to be satisfied when compensation is fully explained. In fact, an earlier PayScale study revealed that pay perception may be more important to workers than actual compensation.

Some employers are starting to boost wages as the economic outlook improves, but most are opting for bonuses and improved benefits instead, preferring a more cautions approach. A recent Randstand report, however, suggests that these offerings might not be enough to attract top talent in this tight labor market. Employers may have to consider paying above market if they want to compete, according to Randstad.