With more states passing pay transparency laws, large numbers of talent acquisition and compensation leaders around the country are developing action plans to incorporate transparency in their companies. In the vanguard of this pay transparency juggernaut, Compa offers these recommendations on important factors to consider and steps to take.
1. Maintain and build trust with your current employees and candidates
The days of keeping secrets about compensation ranges are over. Employees today expect companies to be up front and open with them about your compensation philosophy, strategies, and plans. If you can’t communicate clearly how and why you decided on certain pay bands and benefits for different cohorts, you will likely not attract and retain talent going forward. Trust between employees and their employer about compensation is vital to productivity and satisfaction. Those who ignore this “trust” element may be seen as merely going through the motions and not sincerely committed to transparency.
2. Define your compensation values and benefits
You’ll need to stay abreast of competitors’ compensation policies because it’s inevitable employees and candidates will inquire as to the reasons for differences, especially if your compensation bands are lower for similar jobs at other companies. Optimally, you’ll maintain a “drawer statement” that explains how your compensation philosophy differs from another company. For example, be prepared to outline your entire compensation framework from guaranteed salary, quarterly bonuses, spot bonuses, health benefits, and ancillary benefits that may not be apparent in a competitor’s published salaries alone. Like in math, show your work. Explain how you arrived at your salary bands and offers.
3. Be your own best marketer! Make this an opportunity to sell your own company
Much like there’s a social contract between the government and its citizens, there’s a similar contract between an employer and its employees. The more transparent your people leaders and line directors are in speaking with employees and direct reports, the more likely you’ll be to keep talented employees fully engaged, largely satisfied, and away from job boards in search of new opportunities. Communicate early and often. Continuously reinforce the benefits of working at your company and root out reasons that may lead to employee attrition.
4. Complete pay parity and pay equity analyses
Hungry for hard to hire talent, fast growing companies often pay people with similar skills and jobs differently. Pay transparency laws will force companies to address these gaps but many companies are ill-prepared to conduct a comprehensive pay analysis to get started. Any good analysis will:
- Identify where pay gaps exist among different cohorts performing similar jobs;
- Determine why these pay gaps exist and whether they can be justified; and
- Lead to an implementation plan using objective, up to date compensation data to close gaps and communicate action steps to employees.
5. Determine how best to interpret legislation
While not legally required to do so, many companies are liberally interpreting their state’s pay transparency laws so as not to run afoul of various regulations. Many are choosing to follow California’s transparency laws since it has the most wide-reaching regulations in place. Obviously, you’ll need to stay abreast of any particular laws in your state, but many companies have made the strategic decision to be more transparent than less transparent. Work with your legal team to identify what you must do, could do, and will do. When communicating with employees make sure they understand that your transparency practices exceed what’s required by law so they appreciate the openness.
6. Plan postings that both accurately and best represent your organization
Scan your state’s largest companies to determine their pay transparency practices and factor these learnings into your plan as they likely represent the best practices across the board. People leaders should place themselves in their employees’ and candidates’ shoes to fully appreciate what information to disclose, how broad or narrow pay ranges should be, whether to publish adjustments to geo-based employees, and other similar exceptions to standard practices. It’s important also to consider publishing information on bonus practices, stock opportunities, and soft benefits like work from home, gym memberships, and transportation stipends.
7. Communicate pay philosophy internally and externally
Play the pay transparency game inside out, meaning communicate with your current employees first before engaging differently with candidates. Current employees may respond negatively if they discover that you’re being more transparent with candidates than them. Develop extensive FAQs for current and potential employees that answer questions in a similar fashion. When discussions about pay practices go from hush-hush to water cooler fodder, it’s critical that everyone be given the same information at the same time so there’s zero room for confusion.
8. Empower your people team with training
Train everyone involved in making decisions about compensation for future or current employees. This includes recruiters, hiring managers, and current managers and directors. How these individuals handle conversations with employees and candidates can mean the difference between building or destroying trust. One particular issue that often crops up is whether a company will bite the bullet and pay the so-called “loyalty tax” which is the difference between a long-time employee’s salary and a new employee’s higher salary for the same job. It’s important to understand in advance the potential ramifications of paying or ignoring that tax.
9. Understand potential organizational impacts
For all of its many benefits, pay transparency will nonetheless have a significant impact on the collection and analysis of data, hiring processes, performance reviews, workflows, communication practices, change management engagements, and training. In many ways, pay transparency will have a major cultural impact on your company so it’s vital that management be fully aligned and on board with the plethora of coming changes.
10. Get on board with Compa
We are all things pay transparency related to talent acquisition. As experts, we have developed best practices in implementing and managing a pay transparent culture which we have incorporated into a master class for people leaders, talent acquisition and rewards professionals. Schedule a chat with one of our experts, see our various software tools in action, and arm yourself with the latest and greatest information about pay transparency.