Organizations are racing to put in place measures that will not only satisfy the anticipated or already there legislative requirements but also their people who have growing and stronger views of their actions on not just pay transparency but pay equity. In a recent report conducted by Beqom, employees’ perception of employers’ progress in this regard was harsh and bore testament to the truth that perception is often more negative than reality. Despite initiatives implemented by employers and governments in recent years, US and UK employees believe that more can be done by both parties to ensure equal pay. Roughly half (51%) of US respondents said they think their employer has a gender pay gap problem, an increase of 121% since 2019. But some remain skeptical of any improvement, with more than a third (35%) of US employees who said they believe the gap has increased in the past two years. In the UK, the number was slightly lower, with just less than a third (31%) believing the gender pay gap had increased during the past two years.
Issues/Challenges to Address:
Three key Issues/Challenges need to be looked into while addressing the Pay Transparency Issues:
- Job Titles
- Employee Perspective
- Managers’ Capability
The Compromising Art of Job Titles:
Pay transparency was a relatively simple thing to construct 10-15 years ago, where job titles were aligned and everyone was clear about what we meant by a myriad of titles. However, now the world has changed and take, for example, the simple title of ‘VP’. The job title ranges from budget holders in the CEOs range right through, to employees that were difficult to retain, where a job title overcompensated for salary review. You see a variety of roles sitting with titles that are too senior for their level. As such, we have inconsistencies in how we evaluate roles and compare like with like.
With roles evolving daily, HR often has challenges in keeping up with new skills required and it can be hard to upfront evaluate the range and skills required for those new roles. It gives limited scope to ‘test the market’ and navigate you to the right candidate, which leaves the risk of not being able to find the right talent as the role has been priced incorrectly.
The Employee Perspective
For employees, pay transparency should be good news. However, it leaves little room for negotiation on entering a new role where the pay ranges could be already established with little room for movement.
Let’s not forget the biggest challenge: our salary ranges often don’t neatly fit into our existing salaries for the employees who occupy those roles. Legacy reasons or internal movement can mean that you often have employees that sit outside the desired range, leaving you with difficult conversations should their role be advertised with a completely different set of salary ranges than those that reflect reality internally.
Managers’ Capability to Communicate Effectively
Finally, one of the most challenging considerations is how you get managers fluent in being able to communicate pay philosophies and positions on salary ranges, without a continuous deflection to HR for answers. Our Managers have spent many years dispensing salary reviews without greater knowledge of the wider context of where those salaries sit within market ranges, as to why they sit in a particular position on that range or indeed how they can improve their position on their range. There is far greater onus now on managers to explain this rationale to their people throughout the year, as opposed to just salary review time.
Practical Ways Forward
Leaning on the title, what got us here won’t get you there; we need to embrace a new way of managing this terrain to prepare ourselves for the legislation and our employee’s expectations. So here are some key ingredients to preparing us for the new era of pay transparency.
It will be challenging to continue living in a world without a clear structure on your job architecture. A key to ensuring your pay transparency is well articulated and well-defined job architecture that can be easily articulated and explained. For those who don’t have a clear job architecture in place, the next year needs to be about ensuring that you have one that is well thought through, easily explained and communicated to all.
Ranges to Cohorts
In having precise salary ranges, it’s key that they don’t aim to encompass too many cohorts, making them too broad and uninterpretable for internal use or market advertisement. Watch the cohort size to ensure that you have well-defined cohorts that can easily fit into the same salary bands and ranges.
Essential to success will be a clearly articulated compensation philosophy that strongly features clarity and purpose for those who use it. When you believe you have communicated it effectively, communicate again! This is new territory for Managers to become fluent in compensation philosophies. Being able to explain to employees who’ve seen their jobs advertised at a higher range than they enjoy is going to be a difficult transition for most Managers and we need to give them all the helping tools we can. Compensation professionals will have to turn their attention to communication professionals and sometimes become one!
Tools for the Job
With pay transparency at the top of the agenda, as Managers make salary decisions, ensure they are equipped with the right tools so that they realize the impact that these decisions will have on their ranges and, indeed, their gender pay gap. Often, our challenge with pay transparency is that our salary ranges are made up of thousands of individual decisions made by managers across the organization. We cannot believe that they are all carried out without subjectivity or bias.
Ensuring that Managers have the right tools to proactively advise them on the guidelines and cross-check the impact on those salary ranges will ensure that Managers are choosing wisely, allowing your pay structures to remain intact and without compromise.
Be Clear about what You are Paying For
As the debate rages on, HR finds itself in a world where skills and performance are at a premium, and often, how we pay for those is at variance to transparency. If we are to pay for skills, as some notable thought leaders currently argue for, how do we ensure that those skills are easily measured? Should we pay for performance? How can we ensure it isn’t subject to bias and favouritism? A clear performance management structure is essential in a world of pay transparency. Without it, you will find yourself in no man’s land explaining to disgruntled employees why they are sitting at a particular position on the range with no clear signposting of how they can move their position upwards. Clarity on what and how you measure performance will be paramount to success.
The march of pay transparency is unstoppable, and as it gets rolled out to countries, most organizations will face the need to have a global strategy on same. Employee expectations will outweigh the exclusivity of compliance in one country and the neglect of pay transparency in others. In facing this new reality, we need a new approach, one that puts simplicity at the core and can be easily articulated, both internally and externally, to whatever stakeholder holds an interest. This need for clear articulation will drive out complexity and force us to look at our pay philosophies, salary ranges and job architecture in new ways. Ways that will sit easily in a one-pager explainer document. Arguably, the greatest skill compensation professionals can develop over the coming years is not only the ability to build and roll out great compensation philosophy and structure but one that can communicate it effectively. It’s time for the compensation world to embrace the art of communication at its core and bring a new reality and inclusivity to the world of compensation.