- Ongoing transformation. Pay transparency will force changes in compensation management. Discretionary actions will become urgent.
- Improved structure. Periodic updates to the compensation framework will become more continuous, and pay ranges stored in files and shared manually will become connected assets.
- More connectivity. Organizations will migrate toward having a salary range system of record.
In recent times, compensation professionals have been inundated with news of pay transparency legislation, with Massachusetts being one of the latest states contemplating new laws. Beyond the legislative landscape, a societal shift is underway, potentially exerting additional pressure on organizations to disclose internal pay ranges.
A recent study revealed that a substantial 80% of job seekers would reconsider applying to job postings lacking salary information. While many business leaders may not have fully embraced this paradigm shift, most compensation professionals acknowledge the inevitability of salary range transparency. However, the crucial question receiving inadequate attention is how this transformation will redefine the role of compensation professionals within their organizations.
Pay transparency is poised to instigate three profound transformations in compensation:
- From Discretionary to Urgent. Many organizations grapple with common issues related to their internal pay ranges, such as pay compression, challenges with employees positioned above or below the range for their roles, or individual job ranges deviating from market values. Previously visible only to the compensation team, these anomalies could be addressed over multiple compensation cycles or through targeted market adjustments. With increased transparency and more detailed conversations among employees about specific pay levels, these issues will now demand urgent attention.
- From Periodic to Continuous. Traditional compensation management follows a rigid annual calendar based on compensation review cycles and updated market survey information. However, in the era of pay transparency, this traditional calendar is insufficient. Real-time data from platforms like Compa and Levels.fyi, along with millions of real-time job posting ranges provided by companies like Wagescape are becoming increasingly important. Matching job ranges to market data will evolve into a continuous process, often triggered by the necessity to communicate a competitive range in a new job posting. Organizations must adapt their processes and tools toward real-time data and analysis.
- From Isolated to Connected. Many organizations with over 100 employees have job architectures and corresponding pay policies, including pay ranges. However, these policies and ranges are often stored in files and manually shared as needed. The compensation team may utilize a tool accessible only to them to benchmark internal ranges. A payroll or HCM/HRIS platform may include pay ranges, but they are probably static or updated sporadically. The absence of consistent pay ranges for job postings in recruiting or ATS systems and the manual nature of assessing internal equity for new job offers pose significant risks as pay transparency becomes an expectation. Internal pay ranges need to transition from isolated, manual practices to real-time connected assets for talent management, recruiting, and business planning.
The challenges facing compensation professionals are not new. Creating a job architecture and salary ranges has always required great data, deep organizational understanding, and expertise. The ongoing need to adjust each employee's compensation for a fair and rational application of the compensation strategy is a perennial challenge. Balancing the creation of offers that attract the right talent without creating disparities among existing employees is a classic conflict between compensation and talent acquisition. The trend toward pay transparency simply raises the stakes.
To meet evolving workforce demands, organizations may want to reassess compensation management. One concept gaining traction is a connected system of records for salary ranges. An enterprise system used to create, maintain and connect the salary structure with recruiting tools and employee engagement tools can become a competitive advantage. New AI technologies such as generative AI and natural language processing have the potential to enhance the productivity of compensation teams. Pay transparency is inevitable and not without challenges, but the opportunity to make compensation management more timely, continuous and connected will advance compensation professionals’ primary objective — to attract and retain the best talent.
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