Making Pay Transparency Work

by Lindsay Hill on February 24, 2020

in Compensation

Salary

As laws tighten and awareness of pay equity continues, employers are faced more frequently with the pressure for pay transparency. Pay transparency is the degree to which employers are open about employee compensation in regards to what it is, how it is set and why.

A recent pay transparency study conducted by WorldatWork and Mercer states “67% of organizations view pay transparency at an increasing level of importance, while only 14% of organizations have approached pay transparency beyond a ‘moderate’ level highlighting individual pay rates, range and how pay is determined”.

There are different levels of transparency within an organization and deciding what level is appropriate for your organization is an extremely important step. Some organizations opt for complete transparency and publish the wages of every single employee for everyone to see, while others only communicate the pay rate they are paying to each individual employee and no further detail. Most organizations could benefit from pay transparency somewhere in the middle.

Below is a transparency spectrum example, adapted from WorldatWork, of what pay transparency may look like at different organizations. This spectrum may look differently for employees vs. managers and may have additional steps.

5-Step Pay Transparency Illustration

With increased access to salary data, a tight labor market, and employees discussing pay, we recommend at least having pay conversations with your employees and clearly aligning the work they perform to the compensation they receive. It is best to have a well-thought-out compensation philosophy and strategy that is widely communicated to employees so they understand how pay decisions are made and when.

Having a salary grade and range compensation structure is also very beneficial and at least being transparent with employees about what their pay range is and how they can move to the next level within their range. If you’ve gone through the work and analysis of evaluating jobs, creating a pay structure and documenting your compensation philosophy and strategy, communicate it to employees. Show them you value them and have done your due diligence.

Once you have decided which transparency level is appropriate for your organization, you typically don’t want to make a drastic change (unless it’s necessary for potential legal reasons) but rather incremental steps. Develop a well-thought-out plan and anticipate questions and concerns that will arise and forecast impact on employee morale. Train your managers how to talk to their staff about pay and the importance of it.

View pay transparency as an opportunity. It is a great chance for compensation education, providing a proactive stance on pay fairness, showing the value of pay for performance as well as career pathing and development. And, if executed appropriately, compensation education can increase employee engagement.

If you need help developing your compensation strategy and structure, let us know. We’re happy to help.

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