05/14/2024
Employee compensation has traditionally been shrouded in secrecy. Salaries were rarely discussed in polite company, and employers did not disclose their compensation for job openings until making an offer. Inquiry about co-workers pay was taboo ...
But a series of rapidly expanding laws requiring employers to post salary ranges and prohibiting questions about salary history are offering more pay transparency than ever before, creating a foundational challenge—and opportunity—for organizational leaders.
Companies around the world have been increasingly adopting pay transparency policies and practices as a means of fostering an engaged and positive working environment that builds trust. Pay transparency has positive impacts on employees’ perceptions of trust, fairness, and job satisfaction and has been found to boost individual task performance.
According to a recent Salary.com survey, 77% of organizations say they pay employees fairly, yet studies show only 1/3 of workers agree. Why do 2/3 of workers doubt they are paid fairly?
According to PayScale, if the process is not transparent, employees — particularly younger ones — may be more likely to leave a company within six months. However, when employees know what everyone in the organization is paid, managers must justify visible pay differentials and respond to employee requests for raises in order to address differences and generate a sense of fairness.
“Pay equity does not mean that all individuals will receive exactly the same pay, even for workers who occupy similar roles,” the Payscale report reads. “Pay equity is about fairness, and fairness takes into account differences between people that are nondiscriminatory, such as years of experience, education, special skills and location.” Building and communicating the framework for that fairness takes work.
Your organization won’t reap the benefits of a transparent pay process if it lacks an objective performance measurement or reward system. Additionally, all employees must learn and understand the compensation policy and methods of calculating pay. Without proper manager training and learning resources for employees, a transparent compensation system will only lead to further confusion.
In order to prevent pay transparency from becoming a catalyst for contention, organizations need to move beyond simply providing access to pay information and take a more holistic approach to reward-related human resource practices, ensuring that managers and employees understand the logic underlying pay and performance management processes, and that these processes operate in sync to achieve the organization’s strategic objectives.
