Pay Transparency is More Complex than Most Companies Realize

3 min read
Apr 19, 2023 10:25:22 AM
Rushing to Patch Pay Transparency Issues Can Cause Unintended Employee Retention and Satisfaction Issues

Many organizations are facing an unintended consequence of pay transparency: Disgruntled employees.

As new pay equity legislation is passed, your employees have more access to pay range data — both within and outside your organization. Employees who are dissatisfied with their pay may leave, and some may decide to take legal action for unfair pay practices. This can harm your company's ability to deliver results, while negatively impacting your reputation, revenue, and profits.

Where pay transparency can go wrong

HR teams are under immense pressure to quickly and continuously adapt to changing market conditions. 

You’ve navigated the change from remote to hybrid work. You’ve shifted from attracting star talent in an overheated market to retaining top talent in an increasingly dynamic and uncertain environment. You’re trying to keep up with new legislation to ensure compliance. And you may be doing all of this without the resources you need to implement people-centric HR programs.

Changes to your HR programs may need to be rolled out before you’re ready and the fallout from a rushed implementation can be both immediate and severe.

In the case of pay transparency, your team members may be unsatisfied with their pay range penetration or they may be enticed by higher pay ranges elsewhere. You can make pay adjustments if discrepancies are discovered — but it’s often too little, too late. Employees lose trust in your organization and seek out new opportunities where they’ll feel valued for their contributions.

Compensation is already a top cause of turnover and poorly implemented pay transparency practices is fueling this further. 

Best practices for successfully increasing pay transparency

True pay transparency is so much more than sharing pay ranges for your roles — it’s helping your team members understand why they earn what they do and how they can earn more. Open communication builds trust, improves morale, and increases retention.

Here are some best practices to implement pay transparency more effectively:

Build a clear compensation strategy. Your compensation strategy should be in order before you begin increasing pay transparency. Build job levels and salary ranges to align with your strategy and update them at least once or twice a year. This is a crucial first step to make fair pay decisions that can be openly communicated with your team.

Address pay disparities. Pay transparency can bring unfair compensation practices to light. Analyze internal pay equity before implementing changes to your pay transparency policy so you can address any pay disparities before it’s too late. 

Establish a formal pay transparency policy. Consider your current state of pay transparency and the level of transparency you’d like to reach, and lay out the steps you’ll take to get there. Then create a formal pay transparency policy that can be applied consistently throughout your organization.

Train managers. Your team members may have more compensation questions for their managers when you increase transparency. Train your managers on compensation basics, like job levels, salary ranges, and pay range penetration so they can effectively support your organization’s commitment to pay transparency. 

Encourage two-way communication. Pay transparency requires clear, consistent communication between company leaders and team members. Make sure your team members know about changes to your pay transparency policy before they roll out. Review pay decisions according to your policy at the point of hire, during each review cycle, and whenever questions arise. And encourage your team members to flag potential compensation issues so they can be addressed.

Discuss total rewards. Wages aren't the only consideration when it comes to a competitive compensation package. Job candidates and employees also care about things like bonuses, stock grants, and benefits. Offer competitive benefits and use total rewards statements to quantify the value of your compensation package.

Encourage career development. Build employee development plans so your team members know how they can reach higher levels of pay within your organization. This helps employees see a future with your organization, making them less likely to leave due to pay concerns.

Monitor employee satisfaction. Regularly survey employees to gauge their satisfaction with compensation and overall workplace conditions. Analyze the feedback and use it to inform your compensation and rewards strategies.


Final thoughts: The right technology can improve retention in a more transparent work environment

Your HRIS may already have a compensation module, but it likely falls short of what your team needs to be more strategic about pay. Your stakeholders need a user-friendly platform to analyze, optimize, and communicate about compensation with your team members. 

The right compensation management platform can better support your strategy, while helping you comply with new legislation and improve employee retention. Get a demo of Compaas Rewards to learn how.

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