How to Determine Your Company’s Pay Transparency

Across the business landscape, pressure is mounting for pay transparency.

With Pay Equity legislation sweeping the U.S., as well as company cultures transforming to embrace transparency, pay openness is a critical question in every organization.

But how far is your organization willing to go?

The degree to which you share your compensation formula with your employees (and the world) falls on a 4-part spectrum:

1. Administrative Transparency

This level of transparency relies on employees understanding how their pay is derived and the factors involved with measuring internal equity and external competitiveness.

With this approach, employees would know their grade level, the salary range associated with their current grade, and the other grades and salary ranges in their career path. Currently, this is the most common form of pay transparency.

2. Complete Salary Transparency

Complete salary transparency makes salaries available to all employees and may even disclose salaries to the public. Many government agencies follow this approach, but private organizations have been slow to embrace this level of openness.

3. Comprehensive Transparency

This allows for complete sharing of salaries, incentives, equity, and the methods of arriving at each of these compensation components. This is considered true transparency and very few organizations are following this model.

4. Hybrid Transparency

Hybrid transparency uses a mixture of approaches, such as publishing salary ranges for all grades, all jobs, and all employees with the exception of disclosing employee’s actual salaries. Using a combination of tools to provide more information to employees will assist in removing the uncertainty around compensation management.

Once you decide which of the four approaches is best for your organization, you’ll want to do 4 things:

  1. Communicate it often—explaining the compensation process helps to clarify your organization’s pay philosophy.
  2. Provide training—training your organization’s employees and managers on your transparency approach will create openness about your compensation system and how it drives your business strategy.
  3. Pay competitively—this means performing an annual market analysis on every job in your organization to make sure you’re compensating employees according to your organization’s pay philosophy.
  4. Consistently monitor your compensation program—this ensures fairness and equity in all aspects of your pay system.

As compensation and HR professionals, our challenge is to make sure managers and employees understand the fundamentals of our pay programs. That requires a certain level of transparency about your salary information.

How transparent you are will depend on your pay philosophy, your compensation system, and your company culture. If you calibrate everything correctly, you’ll earn the most valuable return on your investment:

The trust of the people in your organization.

Note: If you enjoyed this article, check out my new bestselling HR book Pay Matters: The Art and Science of Employee Compensation available now on Amazon.

© 2020 David Weaver. All rights reserved.