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Lessons on the path to pay transparency

Total Rewards|Talent|Executive Compensation
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By Casey Hauch and Stacey Rapacki | March 26, 2019

Employees today are looking for the why, what and how when it comes to their pay. Now is the time to talk about pay differently. This article provides lessons for employers on a path to pay transparency.

A new reality

We are designing pay programs in a new reality. With instant access to information all around us, crowd-sourced websites like Salary.com, Glassdoor.com and Indeed.com make it easy to access – and compare – compensation. We’ve moved from a traditional environment where talking about pay is taboo, to a new reality where employees are sharing information about pay and benefits freely with each other. Organizations need to get ahead of these conversations.

New pay fairness legislation and requirements for disclosure continue to shine a light on the topic. Social demands to reward employees based not only on market competitiveness but also on internal equity and gender pay equality are in the news. The result – everyone is talking about pay – from social media users, to shareholders and activists, to government regulators. There can be risks associated with this constant conversation if you aren’t proactively talking about pay inside your organization. Managers can feel in the dark and employees may form their own perceptions about why they make what they do and how your organization designs pay programs. Layered on top of this is the concept of relativity, where employees’ perceptions may be influenced by what’s around them, resulting in a limited and subjective view of pay.

This new reality of free-flowing, personalized information has created a shift where employees expect to be treated like consumers by their employers. After all, they are consumers of the organization’s Talent Value Proposition, including pay, benefits and other programs. As such, demands on transparency are increasing and employees are looking for the why, what and how when it comes to their pay.

Now is the time to talk about pay differently. Or talk about it, period.

Go beyond design

Compensation and rewards program design is critical to effectively attract, engage and retain talent, but it’s only one piece of the puzzle. How leaders position pay messages and prepare human resources and managers to talk about pay to unique segments of their employee population is key to ensuring clarity, engagement and connection to purpose.

Willis Towers Watson fielded a global survey called Getting Compensation Right to capture employer perspectives on emerging trends and issues for compensation and rewards. One of the key themes that emerged was building a culture of pay transparency.

When it comes to pay transparency, organizations fall somewhere along a spectrum from staying totally silent to openly disclosing salaries. When considering which transparency strategy makes sense for your organization, it’s important to keep in mind that there is no best practice, it’s about the right fit. Start by understanding where you are today, what your employees expect and what makes sense for your business and talent strategy. Once you have a clear picture of where you want to be, you can then begin to build a roadmap to get you there, through sound design and comprehensive communication and change management. Therein lies your transparency strategy.

Your pay transparency strategy should take into account your Talent Value Proposition, which represents the overall deal you offer your employees in exchange for their contributions, as well as your total rewards philosophy. It needs to be aligned and integrated with your organization’s purpose, vision and values to ensure your employees understand their impact and how they are rewarded. These are the makings of your pay transparency narrative, or “pay story” and will help the messages you create take root.

Talking about pay means much more than a once-a-year discussion. Once organizations have developed their pay story, they need to consider all stakeholder and audience groups and what roles they play in communicating and embedding the right messages in the employee experience – from talent acquisition to performance management. For example, leaders set the tone for a culture of transparency and must connect messages to business strategy and organizational purpose, while managers need to be equipped to have pay conversations with new hires, high-potential candidates and their direct reports.

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