Often when we think about pay transparency, we’re only thinking about pay disclosure. In other words, revealing the salaries of our employees. In fact, pay transparency refers to being clear and open about how and why compensation decisions are made. Pay is by no means a one-dimensional process; there are many factors that determine how we pay our employees.
But these variables aren’t easy to measure, whether it’s the skills and capabilities required, the complexity of the tasks, the performance of our employees, or benchmarking our roles against the external market. Decisions can often be subjective. Which begs the question: how do we ensure consistency and fairness?
Should we be publishing salaries?
With regard to pay disclosure, research from the Fawcett Society revealed that 50% of people would feel uncomfortable disclosing their salary to their colleagues. But with coronavirus and remote working, pay transparency is more important than ever. Is it right to put comfort first?
A recent study in the US revealed that men working full-time were 191% more likely to earn a salary over $100k than women who work remotely full-time. Do we have a responsibility to publish the salaries of all our employees if doing so will eliminate the gender pay gap?
Many countries in Scandinavia are open about the salaries of their citizens. In fact, every year in Finland, the government publishes the salaries of all of its citizens, which means you can go online and look up the salary of anyone else in the country. The New York Times calls this ‘National Jealousy Day’.
Yet in spite of this, 2018 Eurostat data revealed that the gender pay gap in Finland was 16.2%, compared to the EU average of 14.8%. So if disclosing salaries isn’t helping to eliminate the gender pay gap, then what is the solution?
The pay transparency scale
Our approach to pay transparency can be split up into three categories:
What do we pay our employees?
How do we make pay decisions?
Why do we manage pay the way we do?
This can be further divided into five steps:
Step 1 means thinking about what we pay our employees. What is their monthly salary? What benefits should we offer? What is their total reward package?
Step 2 means thinking about how we make pay decisions. Some organisations already have an approach to job evaluation in place, but often this is used only within HR or finance.
Step 3 means communicating more widely across the organisation, so employees know how pay decisions are made.
Step 4 means thinking about why we manage pay a certain way. What are our reward principles? What is our pay policy? Do we want to link pay to performance or skills?
Step 5 means further communication across the organisation so that employees understand the overall reward principles that underpin everything that we do.
How to introduce more pay transparency
The first step is to start with why. Think about your objectives and be clear about them. Why are you looking to introduce pay transparency in your organisation? The next step is to look at the pay transparency scale and think about where you are right now. Where do you want to be in five years?
Once you know where you want to be, the next step is to think about how to get there. So if you want to move from 1 to 2, you might look at your approach to job evaluation. If you’re moving from 2 to 3, then you need to start thinking about how you communicate this to your employees. For example, are your leaders equipped to have pay discussions with their team or do you need to provide them with training?
The final step is to put together a detailed project plan and timeline. These may change, but it’s always useful to consider key milestones that will help you to implement a more fair, equal and transparent pay structure.
When it comes to pay transparency, there is no definitive right or wrong answer, only what’s right for your organisation. If you’re thinking about disclosing salaries, we recommend following the five steps outlined above. We look forward to hearing your feedback.
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