As we continue to share our series of tips for pursuing pay transparency, here’s tip number three.
It can be overwhelming to think about the steps needed to achieve greater pay transparency. Most companies want to do the right thing but feel paralyzed because their data is a mess or the company is growing so fast that the right structure and controls are not in place.
So where do you begin if you aim to achieve greater pay transparency? Here are five places to start:
1. Understand legislative requirements
There are differing legislative requirements for pay transparency in different states (such as publishing pay ranges or providing them to employees when asked). A critical first step is to understand the requirements for the states in which you operate. It is best to be as consistent as possible across your Company, so focus on the state with the most aggressive legislation and see if you can set that as your baseline.
2. Define where on the continuum of pay transparency you want to be
It is important that you are legally compliant, as well as that your approach to pay transparency aligns with your Company philosophy and values. Where on the continuum of transparency do you aim to be? Define your target, clearly articulate the business case, and ensure leadership is aligned. The main components to consider include:
a. Transparent Job Levels
To be transparent with job levels, you need to have clear definitions of each level within your job architecture that outline the scope, accountability, impact, complexity, etc. required at each level. You also need to accurately align the roles to that structure. Being transparent about levels is a great first step to help employees and leaders not only to understand the requirements of a role but also what it takes to grow their career. Salary surveys can provide a great starting point for defining these levels to create a common and equitable framework for comparison.
b. Transparent Pay Ranges
Many companies publish their pay ranges on job postings or share job pay ranges with an employee when asked, but what would it take to publish pay ranges internally for all employees to see?
Besides having the right structure in place, you need to be confident that the every day pay decisions are defensible – they are aligned to your philosophy, effectively and accurately leverage your job architecture, and consistently and equitably apply your pay guidelines. This may require a new level of rigor and guidance for your managers, which is why it is so important they are aligned upfront with what you are trying to achieve. Some organizations have even progressed so far in this effort that they publish their full pay ranges externally.
c. Transparent Total Rewards
Salary is just one component of an employee's total rewards package. You may also consider providing greater transparency around other important elements of rewards, such as incentives and equity targets. In some jurisdictions, particularly in the European Union, there are additional requirements to disclose reward elements other than just base pay. If you operate outside the U.S., make sure you are aware of these requirements.
d. Transparency Audience
Once you have set your sites on the information with which you are ready to be transparent (i.e. job levels and pay ranges), next is to determine the audience to whom you are transparent. This can also be an evolution as you work to gain confidence in the application of your pay policies and guidelines.
A typical evolution would be HR > Business Leaders > Front line managers > Employees (individually) > All internal employees > External to the organization (more rare). Deciding your target scope for transparency upfront can help provide some milestones for your evolution.
3. Assess your Policies & Procedures
Because pay decisions are frequently made by managers and can occur every day, it is important to have clearly defined guidelines and guardrails in place to ensure consistent use and integrity of your job levels and pay ranges. Beyond the typical merit guidelines, consider guidelines around new hire pay, promotional increases (including “growth” or “in-seat” promotions), lateral moves, and how to manage incumbents who may fall above or below a salary range.
4. Develop robust manager training and support
Frequently we see training developed for managers at the time of the compensation cycle, but often there is a gap in training and support materials for all the other “moments that matter” when a manager is faced with making a pay decision. Take the time to develop training and communications around your compensation philosophy, programs, policies, and processes not just for the merit cycle, but as part of new manager orientation (both for newly hired and newly promoted managers). Also, make sure training and decision support materials are accessible by your managers on demand, or consider pushing refresher training throughout the year.
5. Build in guardrails and quality control
Lastly, the right systemic, sustainable, and scalable controls must be put in place around pay decisions. Organizations are constantly changing, and so are your leaders, so it is important to have safeguards in place to maintain the integrity of your pay policies and programs.
Consider where it makes sense to build in systemic hard stops or red flags (ie if over or under guidelines). Define an exception approval process (if needed). Be clear about who is responsible for looking at internal equity analysis at the time of pay decisions and determine a regular cadence of audits and reviews to monitor adherence.
The Bottom Line
Achieving pay transparency doesn’t need to be overwhelming or paralyzing, but it does require a methodical approach to ensure you meet legislative requirements, have clearly defined goals, thoroughly assess the state of your policies & procedures, develop the necessary training and support for your leaders and managers, and build in the guardrails and controls for sustainability.
Want to learn more about how Nua can help you chart your course and build the structure, policies, and practices to achieve greater pay transparency? Drop us an email at hello@nuahr.com!