Pay transparency is a new HR trend that has grabbed most HR departments’ focus over the last few years. While it used to be frowned upon to talk about pay and compensation in the workplace, this stigma is slowly dying down. Now, employees are encouraged to have knowledge about why their pay is at a certain level, and what compensation colleagues are receiving.
What Is Pay Transparency?
Pay transparency is multifaceted and oftentimes means different things to both the employee and the organization. Pay transparency is the act of an organization being open and communicative when it comes to discussing pay within the company. It is important for many reasons. It can help those who feel insecure about their compensation and feel as though they are being valued and awarded appropriately. While some are still not comfortable sharing their pay with colleagues, it is becoming more accepted to talk openly about your level of experience and how it relates to your total rewards. Fair pay and equal pay for equal job are part of civil rights.
Being transparent about wage-and-salary can come from both the organization and the employee. It is up to the organization to allow its employees to fully understand why they are being paid their current salary. This salary should be dependent on a few factors, including the level of experience, current market factors, talent, skill, and overall need within the organization. All employees have equal-rights to know why they’re being compensated the way that they are. Their role level should play an important factor in why they are receiving the compensation they are currently taking home.
What Are the Benefits of Pay Transparency?
Studies have shown that there are many different benefits to pay transparency within an organization. Some of these include more trust within the company, better psychological safety, and in some cases, better performance. Employees will have more confidence in the organization and its decision-making if they understand that they are being paid equally.
It’s no secret that pay gap exists and pay discrimination still occurs, especially in the corporate world. HR departments and employees are still fighting unequal pay such as the gender pay gap. Pay transparency helps to combate wage biases and wage discrimination. It also allows organizations to feel confident about sharing the level of pay they are offering employees. If employees are encouraged to seek further information about their compensation, there will be more trust that equitable decisions are being made in fairness and feel less of a sense of inequality.
What You Need to Know About Pay Transparency
Labor Laws in the United States
Currently, there are about 17 states within the United States that have laws around pay transparency. There are also federal laws that protect employees from pay discrimination, such as the equal pay act. The equal pay act, sometimes referred to as the fair pay act, is a labor law that requires that there should be no gender gap in any workplace, and women and men within a company should be given equal pay for equal work that they perform. There are federal pay laws and the bureau of labor as well that allows employees to always feel safe talking about compensation. No candidate should be denied the chance at a fair assessment and pay equity, because of seeking to learn more about a company’s salary information. Luckily, candidates are protected under pay laws for this reason.
Pay transparency is ethical, and managers cannot tell their employees to keep their compensation a secret. If they do, it is most certainly because pay inequality is occurring and someone is paid less for the same work. Asking employees to keep what they get paid a secret is considered employment discrimination and employees can take legal action against the company on these terms. It is always allowed for employees to talk about their paycheck, both on the job and off.
Pay transparency and demographic information go hand-in-hand. Both factors are correlated to one another, due to external and internal aspects. It can help an organization better address some of the demographic and equities that exist within the corporate world today. By promoting pay transparency, you are showing that your organization is proud of the level at which they compensate each employee and that you are taking a stance against discrimination in the workplace. You are showing that in your company, wages are not dependent on differences such as sex, race, sexual identity, or anything else. Taking a stance against the salary gap between men and women and promoting pay equality in the workplace can send a powerful message to your employees and be an asset in employer branding.
Encouraging Pay Transparency
Pay transparency can be a difficult thing to grasp, especially if you are dealing with encouraging it amongst your older demographics. It is a rather new phenomenon and age discrimination is real. Typically, it is frowned upon to talk about money and there can be a pay secrecy culture, especially within organizations. However, it is important to encourage compensation transparency within your labor-force, so that your employees feel confident when talking about how they are rewarded and where their skills lie within the organization. They should also feel confident that their colleagues are compensated as equals, and that their own payment is fair. If anyone within the organization feels like there is a difference in pay or inequities are occurring, they need to feel comfortable bringing this up.
Encourage pay transparency from the start by letting your new hires know that your company is a safe and open space to discuss compensation. Knowing that it is accepted to compare pay with another colleague can provide an extra level of economic security. This culture will take time to form, but the sooner the better!
Navigating Difficult Compensation Conversations
Talking about money can be scary. Money is funny and can be an extremely uncomfortable conversation to have, especially when it is about reimbursement or compensation within workplaces. As an HR leader or mentor, you should be coaching your managers to navigate difficult conversations about compensation. You should equip your managers to understand that all employees deserve to always understand why they are compensated at the current level they are evaluated at. No employee should feel like their compensation is unfair and that pay disparity is taking place for people of equal value that are performing the same job with the same skills. Pay should always be based on skill level, which takes factors into consideration such as education and tenure. It is also crucial that your managers are aware that it is unlawful to ask their employees after a pay negotiation to keep their compensation information private.
Mentioning Pay When Recruiting
In order to make your recruiting process more strategic, it is recommended to put the salary range in the job description of the occupation. While this might seem controversial as many companies are trying to attract candidates that have the whole package, it can be a big timesaver for both you and the candidate. If candidates know that the role will be compensated fairly, they will have more information as to whether they should apply. As a result, your recruiting and hiring team within your HR function will have more time to focus on eligible candidates. Also, this shows that your organization values communication and transparency overall and that there is equal pay for women and men at your workplace. This can be a big perk for many candidates!
There are still wage inequalities taking place in the corporate world. For example, there is still a pay gap between women and men that perform the same job. Labor laws protect employees from being discriminated by pay disparities and the gender wage gap between women and men in the workplace. Lately, a new phenomenon referred to as pay transparency has started to get promoted in the business world. Pay transparency is the act of an organization being open and communicative when it comes to discussing pay within the company. It is associated with economic security, anti-discrimination company culture, and a work environment where employees feel valued by the company.
We hope that this article helps you better understand what your HR department can do to make your employees feel economic security and appreciated at work. Make sure to subscribe to our blog for more helpful HR content!