A push and pull has long existed between employers and employees when it comes to pay. Employers have historically exhorted employees not to share their pay with other employees—sometimes even sanctioning those who did. On the flip side, employees have long lamented that “when you keep your pay secret, you keep it low.”
A Move Toward Pay Transparency
Then in 2021 things began to change as Colorado became the first state to mandate transparency in pay as a means of improving pay equity. Since then other states have followed; although today only one in four employees work in a state with these mandates.
In addition, the issue of pay transparency is really broader than simply sharing pay ranges or rates. Employees also need to know how these pay ranges are established, how companies decide what individual employees are paid, who gets pay increases, and why. Ultimately, of course, what they’re concerned about is whether pay is consistent and equitable and how the payroll system shows it.
Employees Want to Know: “What About Me?”
Pay is personal. Employees naturally wonder: “Am I paid fairly compared to my peers?” “Am I paid fairly for the work that I do and the value I bring to the organization?” “What do I have to do to get a pay increase?”
Answer those questions honestly, openly, and effectively and you’ll go a long way toward building a climate of transparency and trust that can boost engagement—and retention. Fail to answer them, or demonstrate through your actions that what you do isn’t aligned with what you say, and you’re likely to lose that trust, lose engagement, and fall prey to the great tsunami of turnover that many companies have been experiencing.
Steps Toward an Open Climate Related to Pay
Unfortunately, despite legislation demanding pay transparency (today one in four U.S. workers is covered by a law that mandates that salaries be posted in log listings), Gartner reports that fewer than one-third of employees believe they’re paid fairly and only 34% think their pay is equitable. If that’s the case in your organization, a quick calculation can tell you what percentage of your employees may be at risk for seeking jobs elsewhere. Worse, the employees who could most successfully do so likely represent your best and brightest.
So, what should you be doing to turn this around and boost those percentages?
- First, evaluate where you’re at. Conduct a pay equity audit to determine, objectively, how your pay practices stack up across positions and employees in those positions. Augment that pay equity audit with an employee poll or survey to determine how employees perceive pay equity.
- Next, communicate and take steps to close any gaps so that equity can be achieved.
- Finally, make your pay practices clear and transparent—not just through a one-time announcement, but through ongoing communication about what you do, why you do it, and how it affects individual employees. Make sure managers and supervisors are knowledgeable and prepared to address these questions when they hire, evaluate, coach, and counsel their employees.
Pay equity and pay transparency have always mattered to employees. Historically, though, for employers they’ve been optional. That’s rapidly changing. Now is the time to take steps to ensure that your pay practices are open, fair, and widely and continuously communicated.
Authored by Robert Sheen, CEO, Trusaic