Written by
Ruth Thomas
Senior Consultant and Co-Founder, CURO
LinkedIn

30 November 2020

Here’s what we know about pay transparency to date. The working world is more driven and motivated when compensation is transparent. Pay transparency isn’t just about bottom line - it’s about the fairness and trust employees have towards their executive and leadership teams. Without transparency, employees are left in the dark with questions and uncertainty around how they’re being compensated - with silence around salaries reinforcing potential discrimination, inequalities, and bias in the workplace.

In the initial phases of the Coronavirus crisis, we saw an uptick in overall transparency with increased open and direct communication in teams across industries. We’ve all spent important hours explaining why we had to make key changes that impacted our workforces including: pay, benefits, and wellbeing. This strengthened a bond of trust during what has been a tough time.

It’s crucial to continue building on this trust by being transparent on pay – a journey that relies on where your company is starting from and culture.

We virtually sat down with two HR and compensation experts to talk pay transparency, get some of your questions answered, and find out what actions they’re putting in place for their own clients. We’ve summarized their insights here:

Meet the experts

Samantha Gee, is a founding director of Verditer consulting, a CURO partner of ours. She is based in the UK with expertise in reward strategy and implementation. Samantha provides advice to a range of clients from large corporate and professional partnerships to charities and mutual organizations. 

Jennifer Peacock, is Principal of Innovative Consulting Services based in the DC area of the US. ICS are a boutique HR consulting firm specializing in utilizing automation to develop processes and create efficiencies for organizations of all sizes.

 

Live Audience Poll 1: Where do you sit on the pay transparency continuum today?

When it comes to pay transparency, there is a big difference between broadcasting everyone’s salaries and being transparent about how pay is determined in your organization. In fact, there is a continuum. We asked our live audience where they currently sit.

Pay-Transparency-Continuum

  • 36% - No information shared except their own pay
  • 28% - Share information on how pay is determined
  • 16% - Share salary range data for current role with employee
  • 16% - Salary range data shared internally
  • 3% - Individual employee salaries shared internally
  • 2% - Salaries shared publicly

This highlights that most organizations are still in an “aspirational state” when it comes to implementing pay transparency, with the largest group not sharing any information on pay. This is in line with a study done by WAW and Mercer earlier this year:

  • 67% of organizations say pay transparency is increasing in importance at their organizations
  • 14% of organizations have approached pay transparency beyond a “moderate” level
  • 4% say pay transparency is of highest importance

Source: WAW & Mercer, Pay Transparency Study, January 2020

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Understanding Pay Transparency:

What is pay transparency?

Brian Westfall, Senior Analyst of Capterra defines pay transparency as “revealing a little - or a lot - about how much you pay your workers. Pay transparency is the practice of allowing your company’s employee compensation figures to be visible to other people. Partial pay transparency is when you allow pay ranges to be disclosed for roles in your organization without going so far as revealing individual figures.

Why are expectations different now? Isn't someone's salary their own business? How does building trust link with having a strong social responsibility or purpose?

Today, there are greater expectations of being treated fairly and transparency is embedded in our way of life. Transparency doesn’t necessarily mean sharing individual salaries and can be more about sharing the principles and frameworks to explain pay decisions in context. One way organizations can re-build trust is through pay. On joining a company there is often a negotiation around pay and once employed, pay progression is ‘done’ to you and you have to trust the business to do this well. This also ties in with social responsibility as it is about doing the right thing and being proud of your approach.

Why are expectations different now? Isn't someone's salary their own business? How does building trust link with having a strong social responsibility or purpose?

Today, there are greater expectations of being treated fairly and transparency is embedded in our way of life. Transparency doesn’t necessarily mean sharing individual salaries and can be more about sharing the principles and frameworks to explain pay decisions in context. One way organizations can re-build trust is through pay. On joining a company there is often a negotiation around pay and once employed, pay progression is ‘done’ to you and you have to trust the business to do this well. This also ties in with social responsibility as it is about doing the right thing and being proud of your approach.

What are the first steps to creating pay transparency?

The first steps to creating transparency are to establish a business case and convince your leaders. From there, you can work with them to define a clear pay strategy to guide the work needed to develop your pay framework. Tidy up your pay before moving towards transparency.

I work in an organization that has several different divisions that are run very independently. This causes issues with internal counteroffers between divisions when competing for talent. How do you approach the start of the journey on pay transparency in this situation, as it may be seen as potentially taking away a competitive edge?

I would recommend having a shared reward strategy and in that, being very clear about the balance between internal consistency of pay and paying the market rate. If internal consistency is more important, then this should reduce the internal competition on the basis of pay. If market rate is of high importance, and this is different across the divisions, then internal movement is a reality. It is better that the talent moves internally and is kept within the group rather than leaving for higher market rate elsewhere.  

Our organization is rolling out the job architecture to employees as step one to pay transparency, and then working on communicating career paths and pay afterwards. Is it possible to phase the communications on this or will the architecture let it out of the bag?

We find that when job architecture is discussed, the question ‘will this affect my pay’ always arises. We would suggest being as open as possible with employees about what you are planning to do and having a clear answer to the pay question - even if it is just a future timeline of when things will occur.


Live Audience Poll 2: What’s stopping greater pay transparency?

Our second poll focused on the typical barriers that may hinder the journey towards pay transparency.

  • 30% - Need to create/update pay frameworks
  • 28% - No buy-in from leaders
  • 15% - Manager capability
  • 9% - Fear of litigation
  • 17% - Need to address pay anomalies

According to our findings, the two biggest hurdles are the need to create/update pay frameworks that will support transparency and management buy-in.

 

Making the Case for Pay Transparency:

What is the most compelling statement to make the case for transparency among reluctant leaders?

Transparency = trust = engagement = productivity.

Our biggest hurdle to pay transparency is hesitation from leadership - despite our careful and thoughtful pay equity practices. What strategies have worked for you to move the ball forward with leaders?

We would ensure that pay is in a place that you are proud and confident of all your decisions and happy to share them. We would then try to understand why they are reluctant and address that, as well as share the business case (e.g. transparency improves trust - it is expected and valued by employees, and it enables you to provide the context for the decisions).

How can you be transparent with no money available for internal equity increases?

If you have internal equity issues, these are a risk that need to be addressed whether or not you decide to be transparent. It is not unusual when we work with clients to develop a pay structure that they don’t share internally until they have had the opportunity to tidy up their ranges first.

 

Do organizations need to plan for large increased budgets when they implement pay transparency?

No. If you are implementing a reward strategy, the cost to implement it would be the same whether you are planning on being transparent or not. If you establish a pay and reward strategy that is right for your future business and there is a cost involved in implementing, then this cost is about getting pay right - regardless of transparency.

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Implementing Pay Transparency:

We are a medium-sized company and, at a senior level, don’t typically match people with the same job titles or same roles that don't require parity in pay or a defined pay scale. It is the belief of leadership that we shouldn't have pay bands or anything so rigid in place - even at levels where this would be possible (people working in roles that have the same duties, titles, and responsibilities). How should I tackle this?

The important thing is to be clear about, in the absence of pay ranges, what basis these decisions will be made on. We often work with Remuneration Committees to provide appropriate market data for the senior roles, and then guide them on all the others factors they might take into account to make a pay decision (e.g. size & performance of business, individual competence, individual performance, pay of peers internally and approach taken to pay for the employee population).


How can a business with a very flat structure be transparent about pay? Does this demand more delineation of grades/bands, or is there a positive way to shift perception around pay when bands may be very wide?

Regardless of the number of grades or bands, alignment with the market is what is most important. Employees want to know that their pay is market driven and equitable. We’ve seen a shift in recent years for smaller organizations to move away from grades and bands and map each job directly to survey data.

What are your recommendations for sharing salary structure outside of HR? I'm with a new company and have been shocked that some managers expect it. I worry about it leaking outside company walls, employees using it against the company, and managers misreading it. Telling an employee their range is one thing, but releasing the whole structure is another. Thoughts?

First off, if there are issues to resolve about managers misusing and misreading the ranges, then I would say this is an issue to address as soon as possible. As for sharing the scales, if they have been developed well and are being used properly, they should be a tool to help managers motivate their people - not something to hide. Sharing the whole range enables managers to understand the pay of people more junior to them, as well as view the pay opportunities for them should they wish to progress.

 

How would you approach a conversation about compensation with an applicant?

I would be as open with an applicant as you are internally. Ideally, this will mean sharing the pay ranges and the principles you apply in order to set the salary in the right place within range. This gives them a clear idea of current and future pay opportunities within your organization.

 

Key Takeaways on Pay Transparency

We closed our virtual session with some key takeaways including the compelling truths around pay transparency as they relate to organizational values:

  • You core values should match the organization’s compensation philosophy
  • The right pay framework should be easy to explain because it obviously aligns to how you attract, retain and reward talent
  • If you say employees are your most valuable asset, pay them fairly
  • If you value open communication, prove it by communicating salary ranges and your pay rationale to your employees

And, if you’re inspired to kickstart your own pay transparency journey, our initial recommendations to help you on your way are to:

  • Start the conversation on pay transparency at a senior level
  • Establish what you want to be transparent about (relative to your culture and values)
  • Create a business case (remembering transparency = trust = engagement = productivity)
  • Understand the risks and how to mitigate
  • Identify what frameworks you need to put in place to support a more transparent approach
  • Build a communication and feedback strategy

 

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