Making the Case for Pay Transparency
Is your organization increasing pay transparency? According to this article from SHRM, pay transparency is a strategic move that delivers measurable business benefits. Read this blog post to learn more.
Recommending to senior leadership that your organization increase pay transparency can be a difficult sell for HR professionals. However, pay transparency is a strategic move that delivers measurable business benefits – and it’s an issue on which HR should lead.
It is important to understand that most executives in America today rose through organizational ranks that viewed compensation as a private matter. Few within organizations had access to salary information, and even fewer talked about it. As a result, many leaders still believe it is appropriate to dissuade or prohibit employees from discussing their own compensation with other employees.
Yet we now understand these outdated cultural norms have contributed to the wage gap for women and minorities, among other negative outcomes. Pay transparency can help close those gaps and produce benefits for both employers and employees.
For example, providing employees with pay ranges for their current position and those positions in their career path sets realistic expectations. This is crucial, as many employees hold unrealistic expectations based on internet salary searches for job titles that often do not account for or accurately reflect important factors such as experience level, geography, company size, actual tasks and responsibilities, or other types of compensation. These unrealistic salary expectations create serious challenges, including employee disengagement, low morale and retention problems.
Clearly communicating your company’s pay ranges facilitates an open dialogue about how those ranges are set, when and why they change, and how employees can move up within them. These discussions in turn increase mutual trust and engagement and foster productive compensation communication — all of which help retain employees, which is especially important in today’s tight labor market.
Increasing pay transparency also helps businesses attract and retain a more diverse workforce, which numerous studies have demonstrated translates into better business results. Sharing compensation data advances this effort by ensuring women and minorities have a clearer picture of the going rate for their skill sets, education, experience and performance. While many factors contribute to pay gaps, women and minority groups may have accepted lower compensation in the past because they could not access the information necessary to determine what they should be making based on what they bring to the table.
While recommending greater pay transparency to senior leadership in your organization may seem daunting, it is an important discussion to have and a compelling case for HR professionals to make. In a highly competitive labor market, businesses that make the right strategic move of increasing pay transparency will ultimately attract and retain the best talent and come out ahead of those that do not.
SOURCE: Ponder, L. (4 April 2019) "Making the Case for Pay Transparency" (Web Blog Post). Retrieved from https://blog.shrm.org/blog/making-the-case-for-pay-transparency-0
Pay transparency: A new tool to boost employee engagement
Some companies require new hires to sign an agreement promising not to disclose their pay to co-workers. Continue reading this blog post to learn more about pay transparency.
For many companies, discussing salaries has always been taboo. Some firms even required new hires to sign an agreement swearing they wouldn’t disclose their pay to co-workers.
This “loose lips sink ships” approach is largely illegal, of course: Employees are generally free to talk about pay rates as part of their rights under the National Labor Relations Act.
Nonetheless, for years, companies held salary information very close to the vest.
But times are changing. Many firms have now gone to a policy of transparency in matters of compensation.
2 separate approaches
Stephanie Thomas, program director of the Institute for Compensation Studies at Cornell University, writes that pay transparency comes in two flavors: salary disclosure and pay process transparency.
1. Salary disclosure: In this approach, the company distributes a spreadsheet listing employees, their titles and their salaries.
This approach can be tricky. There are always going to be cases where an employee asks, “Why is Stephanie paid more than me? We have the same title and the same duties.”
Whole Foods explains the rationale for adopting its policy in a statement on its website:
“Salary information for all –including the company’s leadership – is available to all inquiring team members. Wage transparency helps promote inclusiveness and ensures our compensation system is fair.”
2. Pay process transparency: The second approach explores how compensation decisions are made, and explains to individuals why they’re making what they are and what they need to do to earn more.
This involves having detailed discussions with employees, either individually or in a group, about the overall compensation plan – salary ranges and midpoints, goals and objectives that need to be met, performance metrics, etc. Most companies prefer this approach because it focuses the conversation away from rankings of employees toward individual performance.
Both approaches signal a new trend in employee engagement – helping workers understand the inner workings of their organizations.
SOURCE: Mucha, R. (15 February 2019) "Pay transparency: A new tool to boost employee engagement" (Web Blog Post). Retrieved from https://www.hrmorning.com/pay-transparency-a-new-tool-to-boost-employee-engagement/