Pay Transparency in 6 Steps

According to The New York Times, “Transparency is important because keeping compensation secret reinforces discrimination.” Companies that are invested in ensuring that all employees are rewarded equitably for their work and experience are making their compensation structure transparent.

Consider the Pros and Cons of Pay Transparency

Step One: Layout strategy and timeline

• Strategize what changes you want to make, the impact you want to have, why you’re doing it, what problems you are trying to solve and why this is important to your company culture and values.

• Make openness a part of your organization’s culture. Articulate how pay transparency ties directly into your company values. This is a critical step to instilling confidence and assuring impartiality.

• When you are ready, communicate what you are implementing to your employees and be as clear and as detailed as possible about your new system

• Consider having leadership present your new transparency model and emphasize the company’s commitment to fairness.

Step Two: Define a compensation grading system to determine everyone’s salary.

• Start by defining your grading system and metrics. Define ladders by department and pick your ladders by role.

• Establish the number of levels you need to have for each band and attach the skillset necessary for each.

• Create a Pay Grade Chart. Establish the range per grade. Evaluate/rank the positions by level of responsibility and place them into a compensation structure, clustering positions with relatively equal weight into one classification or tier of positions.

• Build a compensation system with salary ranges and objective metrics around compensation, performance, advancement and recruitment, to help ensure consistency.

• Companies can use a variety of sources blended together: market data surveys, information they learn about competitors, specific factors they value (post-grad education, certifications, licenses, etc.). Make sure you are using a consistent data source.

Step Three: Review your current roles and see how they match with the new system.

• Identify any patterns. Dig in and study your current compensation with an eye towards gender, race, job type, location, seniority, and other variables to identify systemic factors that may be contributing to inequality.

• Where are the greater gaps? Who is on the “wrong” pay band and why? Are there any groups or teams currently underpaid? Do this exercise regularly to identify if there are standouts who may be suffering from the greatest inequities and adjust accordingly. Don’t be afraid of what you find, you’re not safe if you’re not looking.

• Implement corrections. If someone is underpaid, make the adjustment as soon as possible.You can add the modification as part of your Raise Cycle; But, you can also have proactive conversations with your employees, explain that you have done an extended pay analysis and they are getting a salary adjustment. It is a very good practice that can instill trust from your team.

• Pay equity is not just about salary. Review all methods of compensation: Stock options, periodic stock grants, vacation time and other perks or benefits, are another form of compensation. Make sure these are fairly aligned to bands and levels.

Step Four: Train your Managers

• Train all decision-makers about the new compensation system and teach them how to properly document decisions.

• You need consistency in the implementation of your new pay transparency practice. Making sure managers have all the knowledge and training to have these conversations is important to your success.

Step Five: Consider posting the salary range with your job descriptions

• Evaluate each new role in the company using your new compensation grading system. Pre-define the pay range of the role before you interview.

• Also, include a salary range with your job description when recruiting new employees. Potential employees will experience your value for transparency from the very first interaction with your organization.

• Consider communicating a Mobility Analysis for your employees based on your new system. What are the skills and achievements necessary for promotions and to move up the scale of grades and bands.

Step Six: Hold your company accountable

• Conduct regular, comprehensive pay analyses across all job positions.

• Review hiring and promotion processes to reduce unconscious bias and insert equal pay efforts into broader company equity initiatives.

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