With societal and stakeholder spotlight on transparency in the workplace, companies can no longer hide business issues such as pay gaps. Additionally, employees have easier access to salary data to figure out the appropriate pay range for their position. The reality is, if companies aren’t maintaining competitive - and equitable - salaries, top talent will leave.
According to JobVite, 43% of employees say they would leave their current position if they discovered they were paid less than a colleague of a different race or a different gender doing the same job. Also taking into consideration the cost of turnover (between 90 and 200% of the employee’s base pay), that’s a pricey problem to have - on top of closing pay gaps.
Now more than ever, pay equity needs to be built into team culture and compensation policies. We’ve covered this topic in a couple of our pay equity webinars. And with pay data being a couple clicks away, organizations need to take a closer look at how their leadership and HR teams are communicating pay. Pay transparency and a compensation communication strategy will help companies retain top talent, and increase employee productivity and engagement with a strong inclusive culture. PayScale found that employee satisfaction rises when they feel their company’s approach to pay is fair and transparent, a factor rated as more important even than how much people are actually paid.
So, once you’ve performed your pay equity analysis or audit and have checked off the objectives you wanted to accomplish, how can you begin communicating your pay findings? We’ll give you a starting point.
We’ll answer the pay communication questions:
- What’s the best way to approach pay communication in terms of strategy?
- Is it common to tell employees that you've completed a pay audit, and do or don't have a pay equity problem?
- What are the benefits of pay communication?
What’s the best way to approach pay communication in terms of strategy?
Firstly, decide who to communicate with. This is likely to be determined by the goals of the pay equity analysis or pay equity audit. If the objective was simply to quantify legal risk, then an organization may choose not to communicate to anyone outside of the working group. This is accepted as the best way to maintain legal privilege. If the company was aiming to tackle pay equity to enhance employer brand and to demonstrate commitment to fairness and transparency, then communicating more broadly is a must. But this will require a tiered approach. Starting with the executive team, who are hopefully going to be part of the solution, paint the whole picture, the level of risk, the cost to fix and where underlying root causes or systemic issues might lie and provide the team with informed solutions.
Next, when communicating pay with managers and employees, those sharing must be prepared to discuss outcomes and proposed solutions simultaneously. This can begin by expressing commitment to fair, competitive pay that reflects the company’s compensation philosophies. Then, focus on the headline outcomes of the analysis followed by the plan to address them. It’s critical that managers are equipped with appropriate guidelines to tackle any questions from employees - and that they are always prepared for misinterpretation.
As pay equity has emerged as a multi-stakeholder issue, some companies also decide to make a public statement on their pay equity position. In the last two years, a number of larger companies have chosen to do so. It’s worth noting that communicating externally can have a greater impact on employees internally and is a wider demonstration of commitment. Public statements tend to be short and well drafted, having decided what the company is comfortable disclosing. It’s advisable to emphasize fairness rather than equality, and pledge an ongoing commitment to fair pay rather than specific steps.
We are often asked that if the results of the initial pay equity analysis show disparity, how much of it should be communicated. This comes back to an organization’s commitment to real transparency. Pay equity analysis should not be a “one and done”. Organizations rarely fix pay equity in their first round of analysis, particularly because employees are continuously transitioning in and out, and impacting analytics. It’s more authentic to explain that the route to pay equity and equality is a journey, and that there’s intent to share the progress continuously and over time.
Is it common to tell employees that you've completed a pay audit, and do or don't have a pay equity problem?
Many companies complete their pay equity analysis and understand what their compensation issues are before deciding what to communicate to employees. It is rare that there are no problems, as most are impacted by unadjusted pay gaps that are driven by historical systemic issues. It is also important to frame this as part of a wider communication strategy on your commitment to fair, competitive pay that reflects your compensation philosophies. When focusing on the headline outcomes, it is important to follow this up with your plans to actually address them. A few leading tech companies have demonstrated this in 2020 and beyond:
Apple stated ”Equal work deserves equal pay. We looked at the total compensation for U.S. employees and closed the gaps we found. We’re now analyzing the salaries, bonuses, and annual stock grants of all our employees worldwide. If a gap exists, we’ll address it. And we’ll continue our work to make sure we maintain pay equity.”
Microsoft stated “For every $1 earned by men, our female employees in the U.S. earn 99.9 cents at the same job title and level. Racial and ethnic minorities in the U.S. combined earn $1.005 for every $1 earned by their White counterparts. Breaking it down even further, Black employees are at $1.002; Hispanic/Latinx employees are at $1.000; and Asian employees are at $1.007 for every $1 earned by White employees at the same job title and level, respectively.”
Sage Software UK is a leader for equality. The Northern tech firm has a 0% pay difference between men and women. Plus in contrast to the majority of tech companies, Sage actually pays 17% higher bonuses to women employees.
Adobe announced that it had achieved gender pay parity in all of its global offices. The company also ensures pay parity between white and non-white employees. Glassdoor broke down more companies committed to pay equity here.
What are the benefits of pay communication?
- Boosts employee engagement
- Increases employee motivation and productivity
- Improves retention rates
- Strengthens team culture
Boosts employee engagement
PayScale’s 2019 Compensation Best Practices Report reveals that there’s a gap between how employees and executives view whether or not employees are fairly paid. When asked if they believe they are being paid fairly, only 22 percent of employees agreed with the statement, whereas 42 percent of employers believe they are compensating employees fairly. This division of opinion is one of the main causes of decreased employee engagement.
There is a risk that a lack of communication around compensation practices can lead employees to believe they are underpaid, causing them to be less engaged with their work. In contrast, employees that are communicated to about pay feel valued and aren’t spending time thinking about whether they might be underpaid, meaning they are more likely to be more fully engaged in their work. In the end, a more engaged workforce amounts to improved business outcomes.
Increases employee motivation and productivity
Not only does clear communication around pay practices lead to a more engaged workforce, but it also increases employee motivation and productivity when there are communicated pay increases or the opportunity to earn more. According to Harvard Business Review, wage hikes increase productivity for two reasons. First, paying wages above the market rate can be a motivating force due to current employees having more to lose - so they would want to do strong work and remain at their job. The second reason is due to reciprocity. HBR research shows that when an organization gives an unexpected pay raise, workers tend to work harder than is required. When there isn’t compensation increases in the budget, communicating and showing appreciation for employees as well as a compensation plan is key to maintaining and strengthening your workforce’s motivation and deliverables.
Improves retention rates
For many organizations, employee retention is the main motivating factor for making adjustments to compensation practices. PayScale’s 2019 Compensation Best Practices Report also stated that 66 percent of organizations agree or strongly agree that keeping their top employees is a concern. PayScale also found that 82 percent of employees are satisfied with lower pay as long as the rationale is explained, emphasizing the importance of adopting effective pay communication within your organization.
Strengthens team culture
Communicating details of your organization’s commitment to fair pay and reflecting them in your compensation philosophies helps foster trust among employees, which allows your company’s stated values to resonate more among your employees. Sharing pay transparency and compensation practices will help employees feel like an important piece of a larger whole.
Reactive approaches to compensation often leave employees feeling that they are being left out of information that is of great importance to them, which will negatively impact their perception of their own organization. This approach leaves room for speculation and assumptions, often allowing incorrect information to be circulated. Taking a proactive approach to pay communication will help control the overall message and nurture a strong and inclusive company culture.
Pay transparency is key before, during and after your pay equity analysis. Being transparent and using a compensation communication strategy in your company will help you and your team retain top talent, and increase your workforce’s productivity and engagement with a strong company culture. When employees feel their organization’s approach to pay is fair and transparent, they will be motivated to deliver results, stay productive, and create a positive impact for the business. Miss part one of our Debunking Pay Equity blog series? Click here to read about the top pay equity myths and misconceptions in the workplace.
Want to see how you can use CURO Pay Equity analysis software?
Book a 1:1 demo with us.
Want to see how you can use CURO Pay Equity analysis software?
Book a 1:1 demo with us.