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Pay Transparency is Replacing Pay Secrecy by Randy Stollar

Pay Transparency is Replacing Pay Secrecy by Randy Stollar

Seeking higher pay is typically the top reason employees give for leaving their current company, yet most employees have no idea how their pay is determined or if it’s fair and competitive internally or relative to the market. Pay transparency—when employees have a full understanding of their company’s pay philosophy and practices—is a current trend that is quickly picking up steam.

According to a recent Payscale survey of 71,000 workers, 80% of people who are actually paid above market believe they are paid at market or below market. Similarly, 64% of people who are actually paid at market believe they’re paid below market. These are alarming statistics; employees are guessing or assuming they’re underpaid when in fact they’re not, putting companies at risk of losing top talent due to inadequate communication or secrecy around compensation.

Pay transparency typically takes two forms: full pay transparency or partial pay transparency.

· Full pay transparency means specific salaries and wages are revealed for every employee in the organization, as well as salary ranges, the company’s compensation data sources, and how pay is determined. Most companies following this practice disclose pay information internally only, but some actually make all employees’ compensation publicly available.

· Partial pay transparency means specific salaries and wages are not disclosed but the organization does openly communicate its compensation philosophy, policies and practices, and oftentimes salary ranges, to its workforce.

The right approach to pay transparency will differ for each company, and both have their advantages and disadvantages, but it’s critical that every organization always be fair with its compensation practices. A transparent pay philosophy, one where the value and mechanics of pay are clearly and regularly communicated to the workforce, results in more motivated, productive, and collaborative employees.

Transparency isn’t just about the company’s bottom line, though; it’s important because keeping compensation secret can reinforce discrimination and gender or racial biases. Many states have already passed laws to outlaw pay secrecy, and the National Labor Relations Act (NLRA) prohibits employers from retaliating against employees who discuss or disclose their own pay, including supervisors and managers who aren’t protected by the NLRA.

The key to successful implementation of pay transparency is having a sound compensation management strategy, which includes a stated pay philosophy, the organization’s position in the market, salary range structures, regular competitive benchmarking, and fair and consistent pay practices. But perhaps most important, strong communication and education around all of these components is vital to retaining a diverse and talented workforce.

Consult HR Partners is prepared to help you streamline your compensation management practices, keep you in compliance with ever changing laws, and ensure your approach to employee pay aligns with your organization’s culture and goals. Contact us today!