As we partner with organizations to create base and variable pay programs, benchmark external compensation, and evaluate internal pay equity, the level of pay transparency is tested. Organizations make significant investments in time and resources in building of pay programs and yet the level of communication strategy and actions to deliver the program to managers and employees often misses the mark. We are not talking about publicizing each employee’s compensation but instead creating understanding about how compensation decisions are made and the organization’s compensation philosophy, methodology and policies. And when there are changes, why and how are employees impacted.
Pay Transparency Policies
The impact of pay knowledge and pay transparency prevalence have been addressed in studies. In 2002, Knowledge of Pay (WorldatWork and LeBlanc Group) study revealed that there is a direct correlation between pay knowledge and pay satisfaction. Simply increasing employee knowledge of their pay program has shown to improve employee satisfaction with their pay, job, and the company overall. In 2020, the results of the Pay Transparency Study (WorldatWork and Mercer) indicated that only 14% of participants had gone beyond providing employee access to their own salary range, pay determination, reward opportunities, etc. Seventy percent of responding organizations do not share salary ranges for all positions. The hesitation to provide this information can be attributed to the need to apply discretion in certain situations that are not always easily explained to employees, nor should be shared when it involves another employee’s privacy related to performance or other factors.
Six Ways to Move Towards A Better Employee Pay Experience
- Involve your managers in the development or modification of pay programs through focus groups, project teams, surveys, etc.
- Develop and document the organization’s compensation philosophy, pay policies and processes
- Brand your compensation programs with meaningful names and taglines
- Create and deliver manager tools and training so that they understand the principles behind the programs and how they support and align with the business strategy
- Meet at least annually with your managers to review the compensation decisions they made with bonuses and base pay to provide insights and learnings about the impact of those decisions, with the goal of more consistent and harmonious pay decisions
- Proactively and regularly communicate to employees about the compensation programs, providing the big picture regarding bonus and base pay opportunity
The level of openness for your organization is normally similar to how open and communicative leadership is in other areas of the business. Increased transparency may support the organization in achieving compliance with state pay equity laws or a desired culture/strategy of pay equity. If pay knowledge creates employee pay satisfaction, more transparency could help improve employee perceptions of pay equity. Whether implementing a new program or maintaining the current program, the goal is continuous improvement of the employee pay experience.