Here at PayScale, we talk a lot about the concept of pay transparency and fairness. We do on-going research to understand how organizations pay their workers, who’s involved in pay decisions, how workers vs. employers perceive these pay decisions, and how workers’ perceptions impact their level of engagement and satisfaction with their employer.
Through this research, we’ve seen that there is still a perception gap on matters related to pay between employees and employers. In fact, we’ve found that only one in five employees feel that they’re paid fairly, and less than half of employees feel valued at work. Communication around pay decisions to employees is either not happening as frequently as it should, or the message isn’t landing with employees.
Yet, there are real benefits to making sure that employees understand why they are paid the way they are. PayScale’s research has found that when an employer pays under market rate, but clearly communicates the reason behind that lower compensation, 82 percent of employees still report job satisfaction.
Only one in five employees feel that they’re paid fairly, and less than half of employees feel valued at work.
So the question HR and business leaders need to answer is “what steps can we take to promote a culture of pay transparency?”
To get the answer, I decided to look into how PayScale is practicing what we preach. I wanted to understand:
- What does pay transparency actually mean to our People Team and Executive team?
- How does our People team use our own products to enable frequent, fact-based conversations around pay?
- What do we expect from our managers?
- How, and how often do we communicate pay decisions to employees?
- By approaching compensation the way we do, what sort of cultural impact have we seen?
I reached out to Brian Webber, a Senior HR Business Partners (HRBP) on our People team and our in-house compensation expert, to get some answers. Like many HR professionals, he wears many hats. He is responsible for managing PayScale’s own compensation program. He also supports performance management for the Sales organization and the Engineering org, handles employee relations issues, and supports projects related to our benefits, such as administering the 401k plan. The rest of his time is spent on strategic projects with the executive team, many of which are related to PayScale’s compensation strategy.
Q: Where is PayScale as a company on the pay transparency spectrum?
Over the past couple of years, we’ve taken steps to move PayScale to a Level 4 out of the five levels.
To us, being at Level 4 is about making sure that our core values are reflected consistently in our decisions, including how we pay people. At a Level Four, it means that every employee at PayScale understands how their job is priced, what the range is for their position, which skills or the compensable factors went into determining the price of that job, and where an individual falls within the range (range penetration).
Q: Why did our senior leadership team decide that we should be at this level?
We want to be at a Level 4 because we want every manager to be able to have on-going, open conversations with employees about their pay and their career paths. We want employees to feel like they can have a well informed conversation about pay and/or career development with their manager whenever they think it’s merited.
Q: How are managers at PayScale involved in pay decisions?
A: Managers are involved through the entire process. We think managers’ involvement in pay decisions is crucial, because they know the employees’ skills and proficiencies best. When managers are involved in making pay decisions, they’re able to effectively explain the pay rationale to employees.
When we’re trying to fill a position, managers are involved in creating the job description, and reviewing the benchmark for the job. As someone is recruited into the position, managers know the salary range we’re recommending for the position was based on market data and the desirable skills they identified in creating the job description.
We work with managers to figure out what’s possible.The manager can recommend where someone should be in the range. At times, a manager may discuss how to find budget to raise someone’s offer. Sometimes, the manager would choose to move existing dollars around. Other times, they may decide to make an offer for more than what was budgeted for various reasons and then opt not to spend in other areas.
Q: When should people managers be talking to employees about their pay?
As I said before, on an ongoing basis. Though, I think that the onboarding period is particularly important. I encourage managers to have pay conversations with employees within the first two months of someone joining the company, because you want to harness that excitement the new employee has towards the organization. We also want to make sure that from the very beginning, the employee feel like they’re getting a fair deal, that they know that we as an organization values the skills, experiences and talents they are bringing to us.
We also want to make sure that from the very beginning, the employee feels like they’re getting a fair deal, that they know that we as an organization values the skills, experiences and talents they are bringing to us.
In this initial conversation, you want to reiterate to the employee the compensation decision you just made, why you’re choosing to pay them the way you do, and answer questions they may have. You want the employee to know all of the value that your organization is providing, and the opportunities they have to grow into their new job, as well as affect their own earning potential. You want the manager and the employee to be aligned and both say “yes, this is a fair deal”.
Q: From an operational standpoint, how do you make sure that managers and employees are having these conversations?
All the information about employees’ compensation and benefits is our PayScale Insight account. In Insight, I can generate Employee Compensation Reports. I send these reports to people managers so that they can communicate with employees about their total compensation. This report, or compensation statement, is a crucial tool for employee communication and pay transparency.
Right now, I am generating these reports and sending them to managers. Something I’ll be working on soon, a best practice I’d like to get to, is to automate the process of generating the employee compensation reports so that these reports can be sent to managers automatically, as soon as a new hire is added into our HRIS system and we hit their start date.
We also train managers on how to have pay conversations with employees. What we want managers to know is that every conversation about pay is also a conversation about values. If someone asks for a raise, the manager should dig into the motivations of the employee and understand what’s the underlying need that’s driving this request. What are all the things that the employee values, and how can we as an organization meet their goals? This way, the manager (along with HR) can provide a total package that’s deemed valuable by the employee. This could include a pay increase, but it could also include other things like more flexibility or career development opportunities.
Q: How often do you re-evaluate employees’ compensation?
A: We have two review cycles to evaluate base pay. One in June (mid-year review), one in December (annual). We have a separate bonus review process that happens in January. On a quarterly basis, we are reviewing hot jobs in different labor markets and are updating the benchmarks to see which jobs are moving fast, so we can make pay decisions on current market data.
We use job-based salary ranges (vs. grade-based ranges) here. We consider updating the salary ranges annually. This is built into the budgeting process, which usually happens over the course of September and October. At this point, we update the benchmark jobs, and adjust ranges for certain jobs.
Q: You’re currently using Insight to manage PayScale’s compensation plan, and you’re about to migrate to Insight Lab. What benefits do you anticipate to experience by moving to Insight Lab?
After we move to Insight Lab (this is the compensation management platform we recently released to the market), I expect that it’ll be easier and faster to collaborate with managers to make and communicate pay decisions. When we move to Insight Lab, I’ll be able to take advantage of the new Job Collaboration feature which allows me to gather feedback from managers on how each job should be priced. When managers are actively involved in how a job is priced and what skills are being evaluated, they will feel more confident in having pay conversations with employees.
With Job Collaboration, I’d be able to have instant dialogue back and forth with managers, regardless of where the manager is located. This will translate into managers having better and more frequent pay conversations with employees. As I said earlier, managers are already involved in these processes, however, we can do better at this and the Job Collaboration feature aims to take that involvement up a notch or two.
Q: What sort of impact has USING PayScale ProDUCTS had on your job as an HR professional? What About On our culture?
Without PayScale, I’d be at the whims of the manager or executive who is asking me to change the pricing of a job based on anecdotes or what they think is right. Having PayScale in my tool belt, I am able to point to the compensation philosophy we’ve established, the data sources I used and be able to justify my decision.
Because managers are familiar with our compensation philosophy, strategy and the data sources I am using (because they’ve already provided their input), this removes objections that could come up. As a result, we are not spending time debating on whether we think the pay for a position should be higher or lower, we’re able to have a more robust conversation about their people strategy.
Q: What is most exciting to you about being an HR professional at PayScale?
Being at PayScale, I have the potential to impact the future of compensation, and shape how employers relate to employees. Compensation, because it’s traditionally not something we talk about at work, has been something of a barrier in the relationship between employees and employers. It’s been something that kept employees from being able to fully engage in their work. As an employee, if I don’t understand what “fairly paid” means in the eyes of my company, then I am not going to feel emotionally safe or valued in my position. Without this foundation of safety, the employee isn’t going to be invested in the organization and consequently has a higher likelihood of leaving.
As an HR professional at a compensation company, I have the opportunity to turn compensation from a barrier into something that can actually strengthen the employee-employer relationship.
By bringing compensation out into the open, employees and their supervisors can have honest conversations about money with less anxiety. Whether it’s about compensation directly, or performance, or career trajectory, when employees know how the organization makes pay decisions and is clear about how they can affect their own earning potential, they can make an informed decisions for themselves.