Pay Transparency
What you need to know?
Hi, Friends!
Re-branding!
You’ve probably noticed that the colours here changed slightly, and that is because I am aligning all my assets under a single, consistent brand of Tskhay & Associates, my consulting firm focused on helping HR leaders create a fantastic people and business experience by using data.
This newsletter, of course, will remain a free resource.
As it always has been. Its goal is to share people analytics with HR leaders, helping them build great organizations.
But today, the mission is even more timely as we are going into the discussion of Pay Transparency.
Yes, that beast that we are all getting ready to *ahem* slay.
Today, we cover:
What is pay transparency
What are the levels of pay transparency
What you need to do as you step forward
Full disclosure—I am not a lawyer, so everything you read here is not legal advice, direction, or recommendation.
Shall we?
1. What is pay transparency?!
Put simply:
Pay transparency is when the company is transparent about their pay practices with their staff.
This can look different from organization to organization, and we will discuss the levels of disclosure shortly below. However, it is essential to note that the conversation about pay transparency is very timely with the advent of laws coming from states like Colorado and California, cities like New York City, and Provinces like British Columbia that require pay transparency from employers to some degree.
But, the definition of pay transparency is less important than the driving force behind it.
Or, simply stated, the question “Why?”
The answer is pay equity.
Historically, in the United States, North America, Europe, and the rest of the world, women were paid less than men for equivalent work.
We all know that this is bullshit.
The pay needs to be aligned with outcomes; if women produce the same outcomes as men, they should receive equal pay.
And though most of us agree with this logic, the reality is keeping up very slowly, with women still receiving lower compensation than men in many roles and jurisdictions.
Part of it might be selecting jobs that pay less. Part of it might be negotiating less. And part of it might be pivoting firms less frequently.
No matter what it is, the governments believe that the lack of pay transparency is what can be attributed to the effect. And, if we knew at least the pay ranges for jobs, perhaps we would not even apply for specific roles. If we had to report on pay equity, maybe companies would care more about it and alleviate inequity.
And perhaps they are right.
Hence, the laws are here.
And time will show their hopefully positive effects on pay equity.
2. What are the levels of pay transparency?
Naturally, different companies do pay transparency differently.
Most are not disclosing anything.
Very, very few disclose everything on their website.
Here is the spectrum that PayScale has come up with for pay transparency:
Looking here, we ask the question, what does each employee see?
Paycheque: They see how much they get paid per their contract.
Data: They see the overall market data and where the company sits.
Plan: They see pay ranges and how the company determines pay.
Culture: They train their managers to explain pay.
Open Salary: Everything is visible.
I don’t like this model at all. Why?
Well, the “spectrum” is sequential. And the model is not.
You can have manager training about pay without disclosing pay ranges or doing a market study. Then, why would you share a market study with employees before the strategy? #confused
All in all, this is a poorly built model.
Here is my alternative:
And I think it is better because:
It is sequential, showing you exactly what you need to progress to the next stage, including the assets you typically would have in place.
You start with no transparency, share the information with managers, and start communicating more with employees. Finally, you might start sharing communication internally and externally if you wish to do so.
Simple, eh?
Well, not really, because you need to do many things first.
3. Towards Pay Transparency
The first thing you need to do is assess where you are today.
This means looking at yourself in the mirror honestly to see how your pay structure stacks against the market, whether you are paying equivalently for similar work, and what your overall compensation stack looks like. In this step:
You will clean your compensation record
Align all roles to the market job architecture
Pull the data from the market
Run analyses to test your company against the market and internally
Review your strategy to understand where you are today
Review regulations to know where you want to move to
This stage is heavy with people analytics as you are working with data and trying to triangulate onto the holistic view of your organization.
Next comes the design of the compensation strategy:
In this step, you will work with your leadership to make decisions about compensation—what you will and will not do.
Strategy, after all, is a series of decisions that will guide you towards your goals.
You will establish your:
Pay Philosophy
Compensation strategy
Compensation timing
And documentation in support of the strategy
You will also vet your approach with legal
In this stage, you can expect some workshops and validation sessions. But most of all, decisions that create clarity about what your compensation system will look like.
Finally, you will communicate the changes to staff:
Starting with your managers and scaling to employees, you need channels to help everyone at your company understand how you approach compensation and transparency.
This means:
Manager training
Employee training
Supporting assets
Office hours
Feedback Surveys
Your goal is to create clarity and consistency here.
And this, my friends, is a huge undertaking.
Prepare to invest time, resources, and some amount of cash to make this happen. But at the end of the day, you will be in a solid position to drive compensation strategy, where pay transparency is only a part of the system you move towards.
See you next week!
K
P.S. I know this was a lot—let me know if you want to bounce ideas.
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What metrics should I use?
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Fantastic and timely read. Thanks for sharing!