compensation transparency

James Haworth

5 Steps to Making Compensation Transparency Work for Your Company

What is compensation transparency? And how does it help your company thrive now, and in the future?

Systemic racial injustice, social unrest and the pandemic have left business leaders in nearly every industry scrambling. Many struggle to find ways to cultivate an equitable and inclusive workplace. At the same time, recent protests have prompted organizations to reassess their purpose. Many have taken a powerful stand for what they believe in. Others have begun cultivating a culture where everyone has equal opportunity to fulfill their dreams.

Against this backdrop, employers are under heightened scrutiny from employees, customers, investors and communities. Now more than ever, they are expected to take bold action and create radical change within their organizations.

And radical change often starts with transparency.

For instance, research from PayScale discovered that the gender wage gap closed completely with increased transparency for 73% of industries and organizations. This means companies must commit to doing what’s right over what’s easy. It also means taking a hard look at their compensation structures to make salary transparency a top priority.

Yet equal pay is far from a set-it-and-forget-it policy. It requires diligent, intentional and consistent analysis. Also required: Iteration and measurement to ensure compliance with late-breaking employee expectations and legal regulations.

As an HR leader, consider these five steps to ensure that transparency remains at the center of your compensation strategy.

Identify Existing Pay Gaps and Disparities

Your company can relatively quickly eliminate pay inequities. Start by performing an audit to include analyzing salary structures and reviewing job descriptions to ensure they accurately reflect the requirements and demands of the position. Then examine and document various circumstances that may justify pay differentials.

For example, you may be able to support pay differences when employees meet the preferred qualifications for a position. Or when they’ve assumed additional responsibility or when their performance is superior.  Ultimately, the cost of identifying and correcting pay inequities will likely be outweighed by the benefits. Those benefits include increased employee morale, retention of a dynamic and diverse workforce, and much more.

Determine an Appropriate Level of Transparency

The next step is to assess your company’s level of comfort with pay transparency. For instance, publishing pay ranges for each position may be a great first start. If your company already has some transparency in place, you might be ready to make the leap to complete transparency. This involves publishing the compensation of individual employees (instead of ranges) externally, internally or both.

Whole Foods and Buffer, for example, have fully embraced the power of pay transparency by disclosing exactly how much everyone in the company makes – from the intern to the CEO. Yes, this strategy can be fraught with fear and overwhelming for many. When implemented correctly, though, the pros far outweigh the cons.

Transparency typically results in greater trust among the team, increased accountability for pay equity, and a rise in job applications from diverse applicants. Complete transparency, however, isn’t for every company. So, it’s critical to evaluate what level is appropriate for your employees, brand and business objectives.

Clarify Compensation Potential by Embracing New Technologies

Equal opportunity is timeless, but equal pay technologies are not.

To address the need for greater transparency, many companies, including Codacy, Buffer and Gitlab, have created salary calculators prospective candidates can use to determine what they’d make if they were brought onboard the organization. These calculations typically include the base salary for a specific role coupled with the minimum job requirements (as they relate to career advancement and market realities).

Other companies have invested in innovative technologies and cloud-based software to automate, simplify and streamline the equal pay process. By clearly explaining pay and pay practices—such as the relationship between pay and experience, performance, qualifications, and other data—you can build trust between employees and thereby bolster loyalty and engagement.

Encourage Feedback from Employees

In today’s unpredictable economic climate, employees may fear they’re expendable. Their focus and performance may deteriorate as a result. You can set your employees’ minds at ease by encouraging feedback regarding business objectives. Implementing pulse surveys and organizing town halls to gather input on pay equity and transparency best practices is also beneficial.

The key: Open communication that helps business leaders better understand what employees feel and experience while encouraging a diverse flow of ideas.

Coach How to Successfully Navigate Compensation Conversations

Perhaps most importantly, it’s imperative to coach managers on the art of compassionate communication as it relates to compensation – from new hires to the most senior team members.

For example, if the initial compensation is misaligned for a new hire, that inequity will perpetuate over time and tenure with a company. Additionally, if salaries are broadcasted publicly, employees may ask why they’re not making as much as someone else in a similar position. So, as part of these conversations, managers should set clear expectations and articulate the criteria for performance and pay progressions. That way, every employee understands the steps necessary to earn an increase in pay.

Ultimately, employers that change the framework for compensation conversations—and empower their teams with the direction needed to advance—are most likely to succeed.

At the end of the day, companies that create equitable workplaces retain employees who feel respected, valued, inspired, and encouraged to reach their full potential. When executed successfully, compensation transparency increases organizational diversity, productivity and profitability.

At the same time, open and equitable pay helps turn employees into brand ambassadors who deliver unparalleled performance.

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