The pay and performance moment

There’s a moment at the end of review season that often feels heavier than the rest. The performance conversations have already happened. Feedback has been shared. Reflections have been made. Then calibration wraps up and suddenly an indicative rating becomes final.

Now it’s time for leaders to sit back down with each team member and confirm their rating and in many cases, talk through their pay outcome.

For many leaders, this is the part they find challenging. Not because it is complicated, but because it matters. A lot.

You might recognise the feeling. You’re about to have a meeting with someone who has worked hard all year. You know what they’ve contributed. You also know the final outcome. Maybe it aligns neatly. Maybe it shifted slightly through calibration. Maybe the pay increase does not quite match the effort you saw day to day.

That tension is real and it is shared by most leaders at this stage. Some conversations will go very well and others will be more challenging.

So, what can help?

Start with clarity, not suspense

One of the simplest things you might find helpful is to remove any sense of mystery early. These conversations do not need a long lead in. In fact, stretching it out can sometimes increase anxiety. It is critical to cut out the fluff and get to the point.

It can help to be clear about what the conversation is. Something as straightforward as, “I wanted to meet to confirm your final rating and talk through what that means from a remuneration perspective this year,” sets the tone.

From there, move into the rating. Keep it focused on what has already been discussed in the performance review. This should not feel like a new conversation. Ideally, it feels like a confirmation of what has already been explored.

If the rating stayed the same, that tends to be easier. If it shifted through calibration, this is often where leaders feel less certain. You might find it useful to keep the explanation simple and anchored in fairness. Calibration exists to create consistency across teams, not to revisit or undo performance conversations. Framing it that way can help people understand that the outcome is not about changing their story, but about aligning it with a broader standard.

There is no need to go into detail about what was said in those sessions. In fact, talking about the calibration discussion is not appropriate and should be avoided. Focus instead on the outcome and the evidence that supports it.

Make the link, then move to pay

Once the rating is clear, the next step is the one most people are waiting for.

The shift into pay does not need to be dramatic. In many ways, it works best when it feels like a natural continuation. You might find yourself saying something like, “Based on that outcome, I want to talk through what this means for your pay this year.”

Clarity matters here. Saying the number, the percentage, or the outcome plainly avoids confusion. What often makes the biggest difference though is the context around it.

Pay decisions are rarely based on a single factor. They tend to reflect performance, internal consistency, budget constraints and broader business conditions. When employees do not understand that it can feel personal. When they do, it can still be disappointing, but it often makes more sense.

You do not need to over explain. Just enough to help them understand how the decision was reached.

One thing that can be tempting in these moments is to distance yourself from the outcome. This is completely normal for leaders that want to avoid blame and keep the relationship intact. Comments like “if it was up to me” can slip out, especially when the news is not what someone hoped for. It is understandable, but it rarely lands well.

It can help to remember that in that moment, you represent the decision. Owning it, even when it is difficult, tends to build more trust than trying to soften it by shifting responsibility. It is also a great leadership development opportunity.

Expect a reaction and make space for it

Once the outcome is shared, there is often a pause. What comes next can vary a lot.

Some people will be pleased and ready to move on. Others might need time to process. Some may ask questions straight away. A few may respond emotionally.

All of those reactions are normal.

It can help to resist the urge to fill the silence or jump in too quickly. Giving someone space to respond shows respect for how important the conversation is to them.

If there is disappointment, acknowledging it can go a long way. You might find yourself saying, “I understand this may not be what you were hoping for,” and then letting them talk.

Listening becomes more important than explaining at that point. Often, people are trying to make sense of the outcome as much as they are reacting to it.

If questions come up about fairness or comparison, it can help to bring the focus back to the process and their own contribution. Calibration is designed to create consistency, not competition between individuals. Keeping the conversation centred on what is known and what can be discussed helps maintain that boundary.

Keep the conversation on track

There are moments in these discussions where it can feel like things might drift off track. Emotions rise. Expectations surface. Comparisons appear.

If emotions rise, consider offering to take a break and reconvene to give the employee an opportunity to process. It is important in these moments to be empathetic and authentic. Even though the decision at this point is final, sometimes employees will start to barter. They may say things like, “But what about the project that I successfully rolled out?” or “You always tell me I am doing a great job”. Both of these things may be true, but it is important to stay focused on the outcome, the rationale and the respect for the individual.

It also helps to avoid language that can escalate things. Comments that compare people or leave an employee questioning their value tend to close the conversation down rather than move it forward.

Instead, bringing it back to facts and future focus can help keep things constructive.

Where this really lands

At the end of the day, this conversation is rarely just about a rating or a number.

For your direct report, it often shapes how they feel about their place in the team, how their effort is seen and what comes next. That is why the way it is handled tends to stay with people long after the detail of the outcome fades.

You can’t change the decision. But you do have full control over how it is communicated. Being clear, calm, honest and human is essential. It may not have worked out how the employee was hoping this year, however it does give an opportunity to make another time to have a positive and productive conversation about what success or ‘exceeding expectations’ looks like.

At the end of the day, the employee is responsible for their performance outcome, but you are responsible for ensuring that you have been a good communicator who prioritised feedback and opportunities for growth. The employee is in the driver's seat, but don’t forget your role as navigator so you both arrive at the desired destination together.

Further information

Members of Australian Industry Group can gain explore our comprehensive tools and resources on performance and communication to gain more support in handling challenging conversations.