Why and How Great Workplaces Are Embracing Pay Transparency

Ted Kitterman
2023-04-24T07:00:00-04:00
Why and How Great Workplaces Are Embracing Pay Transparency
Great Place To Work

Three ways to get started on your journey towards more equitable pay practices, and why it matters so much.

“Am I paid fairly?”

That’s a potentially expensive question for an organization’s people to ask. Most workers would demand to be paid the highest end of a salary range if they had access.

Pay transparency laws have many organizations scrambling to adjust how they talk about compensation. But even without the legal mandate, pay transparency can be a good idea for building trust with employees.

“I think we're not educating enough about the journey,” says Pat Wadors, chief people officer at UKG. Wadors addressed the topic of pay transparency on the Great Place To Work? company culture podcast, Better.

Explaining the difference between pay equity and equality is essential in these conversations.

“If you say, ‘Look, overall your earnings are equal to or greater than your peers. Even though your base pay might be lower, you’ve had these other opportunities to earn capital, to earn better for your family’ … And then people go, ‘I get it,’” Wadors says. “Transparency unlocks so much.”

Rising pressure

Even without broadly adopted pay transparency laws, many organizations are already seeing increased scrutiny over pay. Websites like Glassdoor and Salary.com are providing potential employees with salary information.

Wadors argues that employers should get in the game to help employees understand the complicated picture of compensation that isn’t captured by these free online tools. “Is it just base and bonus? Is it base, bonus, and equity? … You don't know the data that goes into these anonymous websites.”

What does it look like to educate employees about their pay?

Tech firm WP Engine is relying on tools like Pave to help explain to employees the full value of their compensation, from base pay to incentives and stock.

“We rolled out a valuation slider in Pave,” explains Priya Bhavsar, senior director of total rewards for WP Engine. The slider offers a clear visual so employees can view the potential valuation of their equity — and understand what they might leave on the table if they leave the company.

Focus on managers

Prepping managers to talk about pay is essential when rolling out pay transparency policies.

“Some managers are uncomfortable with difficult development conversations, so they're going to be uncomfortable with difficult pay conversations as well,” Bhavsar says. “But it's exactly the same thing, because your pay is representative of your performance: how qualified you are for the job, how you're growing in your role.”

WP Engine has offered managers guidance on:

How pay practices work

Overall compensation philosophy

How pay is determined

How to make pay decisions

How to navigate pay conversations

Bhavsar sees discussions about pay changing in the same way performance reviews have changed, with a one-time, annual review being replaced by frequent, periodic discussions.

“You’ve got to talk about it,” she says. “You’ve got to get comfortable with it. You’ve got to put it out there. We have educated employees that want to know more. They're asking for more.”

Wadors says managers must be engaged to create accountability and fight bias in compensation.

“If I see a bias towards high ratings for X population and Y on the other side, I'm going to go hold up a mirror,” Wadors says, as an example of how to engage leaders around pay. She asks, "Is this what you meant to do? Because one could interpret the data this way. Is this what you want me to see?"

Nine out of 10 times, the manager has no idea, Wadors says. “I don't tell them how to fix it. I ask them, how do they want to fix it — and then it gets them into problem solving. And then we co-create an amazing opportunity.”

Rewarding top performers

While pay transparency has obvious potential to increase pay equity, some worry that these policies will dampen the ability of top performers to negotiate higher salaries. That’s why HR leaders like Wadors are making it clear: Pay equity doesn’t mean you pay everyone the same.

“People bring different skills and experience to the table,” she says. “There are nuances to that. There are different compensation plans in every company.”

Bhavsar sees where the concerns about less differentiation come from.

“If you're trying to roll out pay transparency for greater pay equity, you're going to have less differentiation in pay — potentially,” she says.

However, she argues that pay transparency also opens up a different kind of conversation about pay and fairness. “The whole purpose of it is you explain how pay is determined,” she says. “You then explain that no two people have to be paid the same, because if someone is more qualified in their job-related skills; has higher competencies for the role; and has higher impact, contribution, and performance, they can be paid higher.”

Getting started

Pay transparency isn’t something you can roll out overnight. For WP Engine and Bhavsar, the journey to pay transparency has had many stages and has taken 18 months of work behind the scenes, with months of work still ahead.

Here’s what you need to get started:

1. Research pay benchmarks in your sector.

Potential employees have access to all kinds of data online. You must be ready to answer their questions.

“You have to stand behind the market data you use, how you design your pay ranges,” says Bhavsar. “And you have to be willing to say, ‘OK, we believe in our employee value proposition, we believe in our pay practices, and we are going to be transparent about it.’”

2. Consider how employees will use pay information.

Employees aren’t just interested in the pay range for their current role. They also want to know how they can move up in the organization, or how a promotion could affect their income.

Bhavsar gives the example of a software engineer who wants to become a senior engineer. If they don’t know the pay range for that new position, will they have an open dialogue with their manager about promotion readiness? Or, will they answer that recruiter call that is transparent about salary ranges?

WP Engine’s solution is to share the pay range information with employees in the relevant job family. “We plan to share any range that's in your job family, if that's part of your development,” Bhavsar says. “And we’ll also share the range for any internal opportunities that you may be qualified for.”

3. Embrace transparency as a company value.

“Don't just make it about pay,” Bhavsar recommends. Instead, think about how you can be more transparent around all aspects of the business to help employees be essential business partners.

What that looks like for WP Engine: “We're having greater transparency on where we are as a company, what our business results are, what our goals are. And we are encouraging managers to be more transparent in their career development conversations with employees.”

And for leaders afraid of telling employees too much, Bhavsar advises they get out of their comfort zone. “It's not oversharing; it's actually just sharing.”

Thinking about adopting pay transparency?
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