Compensation transparency is a goal of many companies, yet it can be a distant objective if it is not given priority within a company or among the C-Suite executives. How can you accomplish compensation transparency if the culture of the business includes minimal compensation communication?
So frequently, pay transparency is misinterpreted. We hear in the news of companies that openly communicate all employees’ compensation. Yet, this is an exception and not a common practice. Organizations with best practices communicate openly, legally, and transparently, but they do manage confidentiality carefully and are cautious in the dissemination of critical compensation information.
It is important to support your organization in developing a culture of trust and open communication in how it distributes pertinent information to employees. A great place to start is developing a compensation planning strategy that communicates key goals and the objectives of the compensation program, including pay equity and transparency.
Here are some important questions to consider in the process:
Are your new hire letters accurate and complete, displaying a warm welcome to the organization? Do the new hire letters include the job title, pay, incentive opportunity at 100% target, job tier, salary range, compa ratio (equivalent to pay divided by the midpoint), exemption status, and next review date?
Are your job descriptions up to date and posted on the company’s intranet site? They should be available to all employees and are excellent for employee transparency. Even better, posting career ladders, as well, provides valuable information on developmental career opportunities within the organization.
Does your organization have job tiers (aka salary grades) and pay ranges to support in establishing the hierarchy of the organization? A fair, equitable, and market-competitive salary structure is important to establishing pay equity within an organization. Employees should be knowledgeable of their job tier, pay range, and compa ratio.
A company-wide, annual, short-term incentive plan target percent eligibility should be consistently managed based on job-tier level. This supports competitive market practices while creating trust and fairness within an organization.
Does your Human Resources Information System (HRIS) offer employee access to update and review their personal information? Do managers have access to the HRIS for decision-making purposes?
When employees receive a pay change, does Human Resources develop communications for each employee confirming the change, including former and new pay, salary range, and compa ratio, with a special thank you from the applicable executive? Ideally, the communication will be forwarded to the responsible manager to send to the employee. When Human Resources provides this documentation to managers, it provides consistent and thorough messaging to employees.
When employees receive annual incentive plan payouts, is a communication sent with a message from the president and CEO confirming the earned payout, the company objectives attained, and a sincere thank you? Again, Human Resources prepares this message, the CEO approves it, and then Human Resources distributes the message to each eligible employee through their applicable managers.
Do your discretionary bonuses include a written message from the deciding manager?
Are your compensation programs supported by plan documents that are simple to understand for eligible employees?
Are responsible steps being taken to establish pay equity within the organization? Fairness and equity go a long way towards establishing employee trust—even without broad-based communication. A simple compensation report can be part of the annual compensation plan for top-management approval and can support in identifying and resolving issues in pay equity.
Employees do not expect complete pay transparency, but they should be given the necessary information to be effective in their jobs and trustful of their organizations. Employees understand and respect confidentiality. Pay transparency and pay equity take time to accomplish. Taking a few steps each year will go a long way towards achieving important pay transparency and equity goals.
