Who, How, and When in Compensation Transparency

3 min read
Oct 4, 2018 11:24:33 AM

We often think about compensation transparency as a question of how much data to share and with how many people within a company:

  • Should we publish all the job grade descriptions internally?
  • Should we publish what job grade each person is in?
  • Should we tell each person what their salary band target is?
  • Should we publish the salary band targets for all grades?
  • Should we share how underrepresented minorities are paid compared to their peers?

But as I learned from this great article in First Round Review, the way people experience transparency is complicated. There’s more to consider  than information sharing practices. It also relates to their ability to participate in and understand decision making. People want transparency around information creation, updates, decisions, approvals and release. Process is important, and so is knowing who decides, who has a voice, and when these processes happen.

RACI stands for Responsible, Accountable, Consulted, and Informed. It’s a framework to help figure out who is involved in decision making, and in what way. Employees care about who makes the decisions in their companies. They care about the raw data used to create grade rubrics and salary bands. And they care about how and when decisions get made, and how and when changes roll out.

Inputs and Influences

Transparency about inputs and influences can help employees understand what data is used in decision-making.

  • Do you use industry benchmarks as the major input to determine salary band targets?
  • Do you use recruiting data (success rate with offer letters) to influence salary bands?
  • What are the inputs to determining an individual’s salary?
    • If managers have little influence over this, it’s worthwhile to share that as well!
  • What are the inputs to determining bonus and equity grants?

Responsible and Consulted Parties

Who’s responsible for determining job grades in your company, and who do they consult?

Not only should you be clear who has this responsibility, it might be nice to be transparent about it. You may you publish a job grade rubric, for example. In that document, there’s probably a spot with each job function where you could share who developed the descriptions for all grades in that function. It’s also handy to share when the rubric/description was last revised.

Who’s responsible for deciding what numbers to put on salary bands?

It’s probably HR, especially the compensation expert, in consultation with leadership. Even if you don’t publish exact salary band targets throughout the company, you still may choose to be transparent about who is responsible for salary band targets. A company can describe its salary band philosophy without revealing what the exact numbers are.

Who’s responsible for deciding what raise an employee will receive?

It may be their manager or director. In many companies, the line manager determines performance ratings, while raises are solely the domain of VPs or HR.

Process and Timing

In addition to who and what, people care about when. When do salary band changes translate to raises? How often does the company review or change salary bands? How long does it take for changes to salary bands to show in employee paychecks?

When did the company last change salary bands/targets? When the the company last review job grades?

When job grades change, how long before they get published internally? How long will these job grades remain stable?

When people get a promotion, how long before they get a raise relative to the promotion? Should they look for it in the next pay stub? Will they have to wait until the next focal cycle?

Knowing when something is coming is a great relief to people. It saves them from having to worry and look for something that they expect to happen.

A Window

Imagine what a window of insight this kind of transparency can give to employees of the typical company, who aren’t in HR:

At OurCorp, we review salary band targets on a yearly basis during Q1. Our HR Team starts with competitive market benchmark data. We also consult with Recruiting to learn how our market requirements may differ from benchmarks. We consult with VPs to see what leading indicators they might also have of changes. When we propose changes to salary band targets, the CEO, CFO, and VPs review them. After approval by company leadership, we use the new ranges in the Q2 focal review cycle. During that cycle, we surface any employee who may have fallen below band due to market changes. We then work to bring everyone in-band.

At Compaas, we help companies think about compensation from various points of view, including transparency. Employees get a better picture of how compensation works when you think about all the angles, like Who, How, and When decisions get made. When you take this approach, transparency reduces employee anxiety, especially around hard-to-discuss topics like compensation.

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