- A call to action. Presenters at Total Rewards’23 cautioned that organizations that aren’t fully transparent about how and why they pay employees will quickly fall behind in the war for talent.
- Defining ideal pay transparency. Pay transparency laws require organizations to provide salary ranges on job postings. Organizations that go beyond compliance provide the total compensation information and communicate to employees where they sit in a pay range and why they sit there.
- Getting leadership buy-in. Leadership might be reluctant to do more than the minimum due to cost and potential negative consequences. However, pay transparency is expected by younger generations of employees and organizations that fail to meet these expectations will struggle to win the war for talent.
- Nailing down communication. To reach an ideal level of transparency, you must educate managers and leadership about why certain compensation decisions are made and how to communicate those decisions to employees, so they better understand how and why they are paid what they are paid.
Compensation and total rewards leaders from around the globe came together June 12-14 for WorldatWork’s Total Rewards’23 Event in San Diego looking to gain and share valuable insights about a variety of relevant topics to the profession.
However, top of mind for everyone in attendance was pay transparency, and the sessions that focused on the trend overflowed with highly engaged and inquisitive attendees.
The overarching message from presenters: Make sure your proverbial house is in order, because the organizations that aren’t fully transparent about how and why they pay employees will quickly fall behind in the war for talent.
Level Setting
Presenters in two sessions began by asking attendees where their organization currently resides on their pay transparency journey. While a small percentage of the audience said they were on the low end (working toward compliance) or the high end (beyond compliance), the majority said their organization was in compliance with the existing laws on the books.
As such, the theme throughout the sessions became how to move from what’s “required” to what’s “desired” and how to get leadership on board with advancing beyond compliance.
Compliance, at this stage, means organizations are providing base pay salary ranges on job postings and providing job candidates and/or employees salary ranges for jobs when asked. Going beyond compliance entails a fully transparent compensation system available to the global workforce that includes total compensation elements like bonus eligibility and stock options.
Lulu Seikaly, senior corporate employment counsel at Payscale, Inc., said organizations run the risk of limiting their talent pool for many jobs if they only provide the base pay information. However, she said, bonus information, equity and any other total rewards elements should be listed as separate line items and not included in the salary range itself.
“It’s important to note that the law requires a base compensation range, not the total compensation,” Seikaly said.
Generational Expectations
To get leadership on board with moving beyond compliance, presenters emphasized the generational shift that is underway in the workforce.
Seikaly said compensation professionals should compare it to the advent of caller ID. Prior to the invention, people would answer their phones without knowledge of who was on the other end. Now, of course, many younger people have grown up in a world where you always know who is calling you and if you don’t recognize the number, you won’t answer the phone.
The same is beginning to be true in regard to pay transparency, and it will only continue to be the case as younger generations enter the workforce.
“Pay transparency is how Millennials and Gen Z’ers see the world now,” Seikaly said. “They are no longer willing to apply for a job not knowing what that range is going to look like. They don’t want to waste their time. They don’t want to waste your time.”
Nancy Romanyshyn, senior director of total rewards strategy and solutions at Syndio, said there’s a clear business case by moving into the desired range of pay transparency. Once you begin providing pay ranges on job postings, existing employees will become aware of those and will no doubt have questions concerning their own pay. Thus, it behooves your organization to nail down the communication angle after doing the hard work of having defined job architecture, job titles and salary ranges.
“It’s something you have to anticipate because perception is reality, so embrace it and lean into it,” Romanyshyn said. “Employees want to know they can grow with your company and that’s less likely to happen if they don’t think they’re paid fairly. When they are educated, they trust more, and they are more likely to stay.”
The Communication Aspect
Once an organization moves beyond compliance — assuming the requisite groundwork is laid — the focus must shift to working with key stakeholders, particularly management and leadership, about how to have constructive and educational conversations with employees about where they sit in a salary range and why they sit in that range.
Swati Bakshi, senior manager, compensation programs at Roblox, described how her organization had to work quickly to comply with California’s pay transparency law, which went into effect Jan. 1, 2023, just four months after it was passed in the state’s legislature.
Bakshi said open lines of communication with management has been key to Roblox’s successful implementation and execution thus far.
“We conduct ongoing training for our managers and our employees to help them understand all the different elements within their compensation,” she said. “I think that’s helped them understand all the different components that we as a company offer.”
Ryan Fowler, director of compensation at Symetra Life Insurance Co., said the company was already highly transparent about pay, so ensuring compliance has not been an issue. However, Fowler said his goal is to move the organization to a place where employees are experts about their own compensation, which only happens with effective communication practices throughout the company.
“The days of employees not understanding why they are paid what they are paid should be gone,” Fowler said. “We need to create a world of comp analysts, so they understand the ins and outs of where this data came from and why the range is what it is and why they are where they are in that range.”
Organizational Value
Fowler encapsulated the view of many panelists with his simple assertion that pay transparency is not a fad.
“There is a generation that’s not just going to demand this but expect it from all of us,” he said. “As time goes on, you’re going to have a hard time competing if you aren’t being transparent with your pay. It’s going to be difficult to attract people to your company if step zero — the first impression they have of your company — is something that’s secretive.”
Research from Payscale supports this notion as well, as it found that pay transparency increases employee retention by 30%. Moreover, 80% of employees won’t apply to jobs where the pay range is not disclosed. Additionally, employees who think they’re paid below market are overall 50% more likely than those who think they’re paid at or above market to seek a new job in the next six months.
“Ultimately, this is a branding opportunity for your company,” Payscale’s Seikaly said. “This data should demonstrate to leadership the value of becoming a more transparent organization.”
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