Tag Archive for: Pay Transparency

Six Steps to Pay Transparency

In recent years widespread social-justice movements are demanding pay equality. And in today’s war for talent, pay transparency is critical for employee acquisition and retention. While President Biden has made closing gender and racial pay gaps a priority, so far progress has been mostly limited to the federal workforce. Instead, states and municipalities are passing laws requiring disclosure of pay ranges to job applicants, a trend that is accelerating. Colorado, California, and most recently New York City have enacted pay transparency laws.

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Although regulatory action is certainly driving more pay transparency, there is growing evidence that employers adopting their own pay transparency programs have a competitive advantage. How? Job seekers gain a clearer idea that the employer values pay equity and has inclusive hiring practices. In addition, being upfront about compensation saves time during the hiring process by eliminating candidates who do not match salary expectations.

In fact, 6 out of 10 job candidates say they are more likely to apply to a job when salary information is shared, according to the 2021 Employee Expectations in Hiring survey by compensation software firm beqom. Millennial and Gen X workers have a higher expectation than do Gen Z or older Boomers.

Perception Meets Reality

Despite the apparent advantages businesses accrue from pay transparency practices, many are reluctant to act. Some fear that when salary ranges are posted all employees will expect to be paid at the high end of the scale. Others are concerned they will lose their best talent to competitors.

A recent salary.com survey of over 1,000 participants, representing companies large and small from across the U.S, finds that just over one-third (34.3%) of respondents share salary ranges with job applicants or employees. In sharp contrast, 73% of employees say it is important for them to know they are paid fairly in comparison to their colleagues in similar roles.

Putting Pay Transparency into Practice

Wherever employers land on the pay transparency issue, they may find that the goodwill generated with workers and job candidates far outweighs the potential risks. Following are six recommended steps to achieve pay transparency:

  1. Understand Pay Transparency Perceptions – An employee survey or in-depth conversations with managers and staff provides a benchmark for future planning. Make sure to address what employees know about current pay practices, whether they believe they are paid fairly, and how they view opportunities for advancement. Asking the right questions will also reveal where there are gaps in understanding. These research findings set the stage for organizational compensation plans, newly enacted pay transparency initiatives, and communications effectiveness.
  2. Define Pay Transparency Goals – In addition to improved hiring and retention success, there are other considerations impacting transparency goals. First, linking transparency objectives to the company mission and purpose helps employees understand their role in the workplace and how they contribute to the greater good. Second, a better understanding of compensation programs leads to improved productivity and performance. Employee engagement and support for DEI implementation can also be achieved. At least initially, establish only one or two goals. Then devise specific measures to determine if goals are attained.
  3. Decide What to Communicate – Once the compensation philosophy and plan are defined, outline specific information to communicate to prospects and employees. Getting the balance right between transparency and privacy is key. In that respect, give people information on how pay is determined (both salary and incentive programs); sources of competitive information and pay opportunity relative to market; the salary range for each person’s position and job level; and where and why they are paid within the range. Should a company decide to go deeper, full transparency may include publishing all company salary ranges by group (gender, national origin, etc.) relative to CEO compensation or average employee pay. Communication around DEI implementation can also be developed.
  4. Have HR Take the Lead – The company’s human resources (HR) team will be tasked with rolling out and communicating the compensation program. Most organizations thoughtfully develop communications materials that align with company policies. They also use the full scope of communications channels and tools at their disposal: the company intranet, Town Hall meetings, in-person or virtual presentations, leadership videos, tool kits, newsletters and more to ensure that every employee understands the pay philosophy and program.
  5. Support Managers with Training – Since employees rely on their managers to answer questions or address issues on a day-to-day basis, they are essential to pay transparency success. Historically, having conversations about compensation has not been easy for them. Coaching or training will help managers integrate pay discussions with guidance on each employee’s development plan. In addition, role playing can prepare managers on how to answer tough questions or deal with confrontational situations.
  6. Set Metrics to Evaluate Program Effectiveness – At least annually, a company needs to determine its employees understanding of their compensation programs using measures established in Step 2.

Final Thoughts

Legal requirements to better communicate to job candidates and employees about pay and future compensation are mounting. Still, there are many more compelling reasons to proactively address pay transparency.

First, organizations that openly communicate compensation enjoy higher trust leading to higher retention. Second, pay transparency promotes pay equity and equal opportunity. Finally, it leads to better employee engagement and job satisfaction. These are all practices that Top Workplaces have in common, and they are increasingly important to employees navigating the workplace in a post-pandemic world.

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Neil Lappley is a leading expert on pay delivery and competitiveness compensation practice issues in the Midwest. He consults with clients on compensation design matters for executives and salaried employees, assessment of pay competitiveness, incentive compensation, conduct of compensation surveys, and salesforce compensation. He authors a widely distributed monthly newsletter and presents at state and local compensation and human resource conferences. Connect with Neil at (847) 921-2812 or nlappley@lappley.com.

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Pay Transparency Approaches

Pay transparency is a hot topic for employers navigating how best to meet growing demands to close gender and race-related pay gaps, as well as satisfy loyal employees. It can be a difficult needle to thread. How much pay transparency is too much? Should an organization adopt a pay transparency standard?

A new study by compensation software provider Beqom reveals employee perceptions about pay equality have eroded further in 2020-21 as many businesses adapted to the pandemic with work-from-home strategies, reduced work hours, and even temporary furloughs. In its survey just one year earlier, Beqom reported one-third of employees believed their companies had a pay gap, a view that negatively impacts employee retention.

During the latest economic downturn, many pay equity programs had to be put on hold as companies faced growing financial constraints.

Businesses that embrace pay transparency benefit in a variety of ways, not the least of which is by establishing a higher level of trust with employers and co-workers. Trust promotes respect and improves employee retention and loyalty. Top performers know their accomplishments are being recognized.

Pay transparency also helps employers make meaningful progress toward achieving Diversity, Equity, and Inclusion (DEI) goals. And when employers are more open about pay ranges for roles and job levels within their companies, employees can shift their focus to career growth and how to support organizational success.

Arguments against pay transparency include concerns that employees may have resentments if co-workers make more than they do or that failings in the company’s compensation, hiring and development systems may be exposed. Furthermore, pay communications can make employees vulnerable to being hired away. As a result, many organizations have rules against discussing pay. It is the author’s experience, however, that even with company restrictions, many employees continue to discuss pay among themselves.

Pay Transparency in Focus

When your company decides to proceed with a pay transparency program, organizations have three key decisions to make. The first decision is Why or determining the results to be achieved when communicating compensation. The second decision is What information will be communicated. Finally, the organization must determine the How, which focuses on the ways that pay information will be disseminated to employees.

Why options that define goals of your transparency program range from describing compensation strategy to linking company purpose with employee purpose. Other goals include improving understanding of compensation programs, increasing compensation ROI, enhancing employee engagement, and reducing turnover.

Initially, establish only one or two why goals to make your transparency approach straightforward. Be sure to put specific measures in place to determine if goals are met.

Next, determine What will be communicated, which depends on the degree of pay transparency planned. Some organizations only communicate the salary range and position in range for specific roles. Others seeking complete pay transparency reveal all salaries for every employee in the organization.

Additional choices include pay opportunity relative to market, sources of competitiveness information, how pay is determined, your overall compensation budget, specific groups’ pay relative to company average pay, and employee pay communication restrictions.

Finally, the How depends on the way the organization typically communicates. Options include one-on-one meetings, group presentations, manager training to enhance ability to explain programs, leadership videos, intranet, email, employee handbooks, and the annual total rewards report.

Summary

Although there can be challenges to successfully implementing pay transparency programs, the dangers of standing pat are even greater. Organizations need to have their compensation programs in order and pay transparency is a growing priority. In fact, the Beqom survey finds 51% of employees would consider switching companies with more pay transparency than their current employer.

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If you found value in this article, please share it with anyone you think may also find it of interest. For help or information on this topic, you can email me nlappley@lappley.com or call (847) 921-2812.

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