Should Organizations Adopt Transparent Pay Structures?
Organizations looking to improve retention, employee engagement, and culture may benefit from a transparent pay structure. But is it necessary for organizational success?
Read on to learn more about pay transparency strategies and how your organization can effectively implement them.
What Is Pay Transparency?
Pay transparency refers to open communication from an employer regarding compensation. This can include transparency around base salaries, pay levels or ranges, bonus compensation, and even policies around discussing wages internally.
Many employees and job seekers are pushing for more pay transparency to close pay gaps in the workplace. Nearly 2 in 3 workers (63%) prefer to work at a company that discloses pay over one that does not. These findings demand that organizations assess their current pay policies and procedures.
Are Organizations Required to Be Transparent Around Pay?
Not only are employers feeling pressure to ignite change around pay transparency, but many states are taking legal action in favor of pay transparency. In recent news, New York City and the state of California have started taking steps toward enforcing laws that will protect employees regarding compensation.
New York City’s Pay Transparency Law went into effect on November 1, 2022. This new law made it an unlawful discriminatory practice not to include minimum and maximum pay ranges when publishing an open job position. In doing so, they hope the law will encourage pay equity among those who historically have received lower pay—including women and people of color.
Following in their footsteps, California lawmakers recently passed a law, SB 1162, that would strengthen previous pay transparency laws by requiring California employers to provide pay ranges when publishing or making known an available job. In addition, the law would require employers of 100+ employees to submit a pay data report supplementing existing annual EEO-1 reporting requirements.
Even if your state does not require pay transparency, it is still a good idea to evaluate the benefits that it can provide your organization. Johnny C. Taylor, President & CEO of SHRM, comments on a recent SHRM article stating:
“A recent SHRM survey indicated that 94% of HR professionals surveyed believe it is important for organizations to be transparent about pay decisions. I encourage all organizations to be more transparent about their pay structures. Not only does it hold everyone accountable, but it is also critical for employee retention and pay equity.”
The Benefits of Pay Transparency
If employers want to maintain strong retention, hire top talent, and boast strong culture, they need to build trust among their employees. One way to build trust is by creating a transparent pay structure. Decide what system will work best for your industry and provide employees with clear paths toward increasing their pay. This means you must include actual numbers, so employees know what they need to do to make a certain amount of money. Include this in your model if you work in a sales environment where commissions are a factor. Outline the base salary and the expectations for commission earnings. This may include a detailed look at how a set number of sales will lead to a specific commission threshold.
For non-commission teams, consider creating a levels document that clearly outlines the expectations of each pay level and how to move into a new pay range. Clearly define the amount associated with each level and allow employees an opportunity to achieve the requirements for moving up in pay.
Creating transparency is part one, but part two is providing employees the resources and time needed to improve that pay. If an employee knows what is needed to make more money yet has no feasible way of doing so, it can defeat the entire purpose of pay transparency and deter employees from trusting in your organization.
Increased transparency can also improve employee engagement and retention. When employees have laid out before them an opportunity to make more money, they will be more inclined to engage with projects and other employees.
It is encouraging to be told that you can make whatever income you want at any point in time, so long as you reach the qualifications of that level. When many employees may opt to leave an organization in favor of a pay raise elsewhere, those working with transparent pay will be more motivated to continue within their current organization.
Strategies for Successfully Implementing Pay Transparency
Develop clear and consistent pay philosophies. This should be created at the highest level and used across all teams within the organization. There should never be confusion around the pay structure. And while each team may have different requirements or levels of pay, the theory behind the strategy should be constant across teams.
To clarify this further, employers should set a meeting with all executive members and HR to discuss the pay scale and structure. Analysis should determine what pay scales make the most sense based on what is competitive, realistic, and attainable. Pay should be attractive to employees but not above what the company can afford, and the requirements should not be out of reach.
One strategy employers can use to implement pay transparency effectively is using an HRIS system, like BerniePortal. Employers and HR leaders are increasingly turning to applicant tracking systems (ATS) to optimize the recruitment process. It also makes it easy for organizations to be transparent about pay in job listings. BerniePortal job listings are entirely customizable, allowing you to add salary ranges in the description, and they can be updated at any time—even after posting.
Pay transparency can feel overwhelming with many moving pieces, especially when an organization is just starting its efforts to be more transparent. BerniePortal’s customizable all-in-one HRIS platform streamlines everyday processes to make HR more manageable while the organization remains compliant. See a demo of our award-winning software today.
You can also stay informed, educated, and up-to-date with pay transparency and other important topics by using BerniePortal’s comprehensive resources:
BernieU—free online HR courses, approved for SHRM and HRCI recertification credit
BerniePortal Blog—a one-stop-shop for HR industry news
HR Glossary—featuring the most common HR terms, acronyms, and compliance
HR Guides—essential pillars covering an extensive list of comprehensive HR topics
- HR Party of One—our popular YouTube series and podcast, covering emerging HR trends and enduring HR topics
What Is a Probationary Period? A probationary period is a set time frame dedicated to...