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Q&A: What ‘Audits’ Should We Conduct as We Move Toward Greater Transparency in Pay?

I received a great question today from an attendee of last week’s webinar on pay transparency, and I realized after sending my response that other folks might be curious about the same thing. As such, I’m sharing my recommendations here for all. Enjoy!

Q: As an organization seeks to move along the [pay transparency] spectrum, there are likely points where they need to validate current practices before moving forward. For example, if an employer knows where it wants to be [relative] to market but has not measured where employee pay is [currently], they probably need to get that figured out before going too far along the transparency spectrum. What audits/checkpoints can you recommend as employers move along the path?

A: Yes, increasing transparency means you need to have your house in order before pulling back the curtains. Here’s a recommended path through the transparency spectrum:

  • Tell employees WHAT they are paid
    • Ensure your internal payroll system or portal is up-to-date and accurate, and share directions with your employees for accessing that info as well as a cheat sheet for understanding pay, and taxes deductions. (An optional lunch and learn is great for this!)
    • Go one step further with an employee compensation report or total rewards statement that breaks down base pay, benefits, total cash compensation, etc. that says, “This is our financial investment in your contribution to the organization.”
  • Explain HOW pay is determined
    • Prep your org with a notice that you’re undertaking a market study, and include info on when it will take place, when to expect results and how those results will be delivered. (“Tell them what you are going to tell them, tell them, and tell them what you told them.”)
    • Share high-level information first, such as “This pay decision was based on a market study through PayScale,” followed by more details, like “Here is the market-based pay range for your role based on comparable positions in our location and industry.”
Planning a move toward pay transparency? Get your house in order before you pull back the curtains. Click To Tweet
  • Share WHERE an employee’s pay falls in their range
    • Explain that pay structures are being evaluated, and may be adjusted to align with market (and potentially other internal equity and company strategy factors). Indicate when that will occur and what folks should expect to hear about the results.
    • Prepare to have some pushback about ranges, and answer questions about position in range (or range penetration). I highly recommend prepping the org to listen before responding to any employee concerns or perceptions about pay range relevance and accuracy. (These conversations should be one-on-one, not in a broad meeting or email.)
  • Give context around WHY the org pays the way it does
    • It is crucial to get aligned with execs and leaders on the comp philosophy and strategy prior to sharing with employees.
    • The next must-do is training and prepping managers to talk about it — the worst thing that can happen is for a manager to slide a total comp report across the table to an employee and say, “HR told me to give you this.” Trust, empower and hold managers accountable for these conversations. I’ll paraphrase a quote from The West Wing here: “Tell them what you want them to do and then expect it.”
  • WHOA!
    • A MUST-DO if planning to share some of the more “radically” transparent information is to let your org know this is coming, and WHY. A statement from a top exec, echoed by business leaders, about the purpose and intent behind this exponential transparency, is crucial.
    • The most common version of this is to publish salary ranges or grades per department or across the org.
    • Prep would include getting all necessary buy-in and sign-off on market data, pay grades, job ranges and communication plan. (Check out Buffer for an example.)

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Image: Daniel Páscoa/Unsplash

Rita Patterson
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Sheena MarosyCriston MenzLiz D'AloiaJason MagillEdwin Carlson Recent comment authors
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Chris Thorpe
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Chris Thorpe

Good stuff, Rita. We’re starting to make some progress in these areas, but we have a ways to go before “pulling back the curtains”. 🙂

Dana
Guest
Dana

Great information! We are currently working with managers and supervisors – they have to understand pay and be able to have those challenging conversations with employees. If they don’t understand the why, the message will not get to the employees.

Christina
Guest
Christina

Great article! We are beginning our journey on pay transparency with discussions in regards to our annual merit increases. We are moving slowly with our managers since this is the first time we have asked them to have these conversations and so far they seem to be going well :).

Kris Kildahl
Guest
Kris Kildahl

This is a great list!

A few other things to consider:
– Evaluate gaps in pay against market, internal equity and gender equity, and determine how you will address any gaps you find, both from a communication standpoint as well as action.
– Determine what you want your total rewards statement to show. Is it potential (i.e. bonus and commission targets and maximum 401k match), or a look back at actual? What are you trying to achieve with the communication?

These are a few things that we’ve been working through, and thought they might be helpful reminders for others.

Edwin Carlson
Guest
Edwin Carlson

Our company let’s all employees know the salary ranges and their position in the range. We also do Total Rewards Statements every year.

Jason Magill
Guest
Jason Magill

We’re currently in the middle of improving transparency, but it’s a slow process. Also, I personally feel it’s a struggle to train managers to adequately speak the language of compensation. It’s all about a conversation, and if the manager is just reciting “what HR said to do” it’s going to fall flat as corporate-speak.

Liz D\'Aloia
Guest
Liz D\'Aloia

Great tips!

Criston Menz
Guest
Criston Menz

Pay transparency is great for the non-exempt crowd, but we are not yet sold on the benefits of exposing our exempt workers. It is a complete process of education.

Sheena Marosy
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Sheena Marosy

Great information. There are discussions around pay transparency, but we are not ready to move there yet.

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