Last post, I talked some about a side-effect of California AB-168. While new employees know the salary range for their job, existing employees may not. This can lead to problems in your company if you don’t have a plan for pay transparency.
So what exactly is pay transparency?
First, pay transparency doesn’t mean companies must openly share every employee’s salary! Sure, companies that publish this information are transparent. But that approach isn’t right for everyone. Great companies have a clear strategy to be more transparent about pay. The core of a successful pay transparency strategy is communication around total compensation.
Have a clear compensation strategy.
This means first being clear and consistent from leadership through recruiting and HR. How does the company determine its salary ranges? What are the qualifications expected for an employee within each role/level? When hiring, how is the salary range/role/level determined for a candidate?
Communicate down the line.
Train recruiters, HR, and managers about the company’s compensation strategy. For the roles they support, where is the company generally targeting the market? Make sure that everyone involved in hiring or supporting employees understands the strategy. It’s not enough to know the ranges and numbers — they need to understand how these came to be.
Keep the communications up to date.
Things change. When the company shifts its market targets for salaries, share that change. Also, as companies grow it’s very common to see changes on how the company offers stock to new hires. How does the company think about stock/options/RSUs as comp — and how does that change as the company grows? Explain right up front that while these are the targets now, they are subject to review and change.
Talk to your employees about their total compensation.
Remember to keep employees up to date about how compensation works at the company. Managers must learn how to talk about compensation with their employees, including cash and stock value. A clear, up-to-date total rewards/compensation report helps a lot with these conversations.
It’s all about building trust.
A good pay transparency strategy with clear communication enhances employee trust. Employee trust has a direct connection to retention and engagement. Employees won’t give their all to (or stick with) a company they don’t trust. Pay transparency is one important way companies should invest in growing employee trust.