Implementing pay transparency: Three steps your organization should take today

Conduct a salary audit

Pay transparency, or making employee salaries visible within (and sometimes outside) your organization, is becoming increasingly important to employees. According to Beqom’s 2021 Compensation and Culture Report, 58% of respondents said they would consider switching jobs if it meant more pay transparency. Of those respondents, 70% were Gen Z, which shows it is even more important to the younger labor force. In addition, some states—such as California, Connecticut, Nevada, Maryland, and Washington—are starting to implement pay transparency laws, while other states—like Colorado and New York (to take effect in April)—require a salary to be stated in a job description.

For employers, incorporating transparency into their compensation strategy has become imperative for both retention and recruitment—and in some cases, to stay in compliance.

Three steps to increase pay transparency

 Implementing pay transparency in any organization takes forethought and planning to ensure it is done correctly and positively impacts both employees and the organization. Here are three steps you should take to ensure your compensation strategy is ready:


Step 1: Be proactive [about your approach]

Don’t wait until it is too late to incorporate pay transparency into your compensation strategy. If the Great Resignation has taught us anything, it’s that employees aren’t going to wait around for, well, much of anything. Adopting a strategy now will help your organization’s retention and recruitment today and in the future. In addition, a proactive approach shows your employees that you have their best interests in mind, which includes fair compensation.

Getting buy-in from executive teams may produce some challenges, so keep in mind that your organization can determine the level of transparency they are comfortable with. It could be something as simple as discussing a salary with that specific employee and the data used to determine their pay, or taking the more open approach that companies like Buffer and Whole Foods have adopted, in which salaries are shared across the entire organization.

Step 2: Ensure pay is fair and market-based  

A pay equity audit is needed to ensure your organization is offering fair compensation across all levels and positions. During this audit, you will be able to identify gaps and areas that need to be addressed proactively. Additionally, you should benchmark jobs using third-party compensation data, such as salary surveys, to compare your pay with similar organizations in the same market. These two steps will help you make informed employee pay decisions.

This step often involves outside specialists who have easy access to salary surveys, know how to review and interpret the data, and can help you to ensure your compensation is fair and equitable across the board. At Compensation Works, for example, we use best practices and a fully licensed salary survey llibrary to market price jobs and a six-step process to conduct a thorough pay equity analysis.

Step 3: Implement a training and communication plan [for managers and employees]

Adoption of pay transparency includes training managers on the subject itself. They need to have a firm understanding of your organization’s compensation philosophy,  strategy, policies, processes and how to discuss pay with their team. Depending on the level of transparency your company adopts, this could lead to some pretty challenging questions from employees. A pay equity survey of employees across numerous industries found that 67% of respondents felt their managers could not fully answer questions about how pay was determined.

Provide managers with helpful background information and data they can turn to when needed. In addition, make sure they know when to bring HR into a tricky or heated compensation conversation.

In addition to training managers, create a communication plan around employee pay transparency. This will include explaining why the organization is moving in this direction, the level of transparency available, and whom employees should talk to when they have salary questions.

Pay transparency can feel scary and overwhelming, especially for organizations that have kept salary discussions under wraps. However, when done correctly, it can create a positive impact across your organization. When it comes to creating a pay transparency strategy, whether you are unsure where to start or know you need a little help developing a plan, Compensation Works can help. Reach out today for a consultation.