Benefits and Compensation

Anxious About Pay Transparency? Don’t Be

Many of us have worked in a workplace that didn’t talk openly about pay. Employees didn’t want to disclose their salaries for fear their peers would think they were over- or underpaid, and employers were more than happy to keep quiet. (Some even issued gag orders.)

All that is changing—fast.

New laws from bellwether states like New York and California are forcing the issue. A sweeping law in Colorado requires businesses to publish salary ranges for every job posting, essentially making their payrolls public. Even if your business isn’t compelled by law (yet), chances are your competitors are sharing salary info. And most workers are eager to know.

pay transparency

According to LinkedIn’s Workforce Confidence Index, 81% of Gen Z and 75% of millennials say pay transparency will lead to improved pay equity (versus 47% of Gen X and 28% of baby boomers).

Don’t Worry About Transparency—Instead, Worry About This

If you’re feeling anxious about a new world where everyone knows who gets paid what, that’s understandable. It’s quite a vibe shift. But I’m here to say that talking pay is not so hard. In fact, it’s one of the easier conversations to have.

The more urgent and vastly more complex conversation is: Why do talented people want to work for your company in the first place? There’s been a lot of speculation recently about why people quit jobs, but to me, the better question is: Why do they stay?

People stay when work is purpose-driven, when they’ve bought into the mission of an organization, and when they see that their contributions are meaningful and valuable. In a recent survey of nearly 6,000 professionals, my company, Paycor, found that company culture is the #1 driver of retention. Company culture means a lot of things, but a key component of a healthy culture is the simple, powerful feeling people have when they show up for work: I’m here because I want to be here, I believe in what we do, and my team needs me here.

So, don’t be concerned about having transparent conversations about pay. Instead, be concerned about your company’s ability to answer bigger questions about its purpose and mission and (this is critical) its ability to objectively evaluate individual performance. If your company doesn’t have good answers to the big questions (why it exists and how talented people succeed and grow there), worry about that. (And then, when you’re done worrying, here are six ways HR leaders can build a healthy company culture.)

Now, for the Easy Part: How to Talk Pay

1. Start at the top: Educate your executive committee.

Many executives grew up in the “don’t ask, don’t tell” world of yesteryear, so it might not be safe to assume that they know everything that goes into compensation decisions. To avoid confusion down the ranks, ensure that execs know the results of timely market research you or (ideally) an unbiased third party conducted, which competitors you benchmark against, the current supply and demand for key roles, etc.

Don’t roll out a companywide plan until leaders can convincingly explain and defend your company’s pay philosophy in their own words.

2. Be prepared to explain your company’s strategic approach to compensation.

Some employees think they can find all they need to know about fair pay on the World Wide Web (they can’t). Internet research will give them a general sense of what a particular job pays, but it won’t tell them why your company at this moment is paying X for Y. This is where HR pros beat Google. For example, faced with a situation like this, you might say, “At certain times, we’re going to invest in different parts of the business.

In years past, we invested more in product roles, and now we’re investing more in customer service roles.” By explaining your company’s pay philosophy, you reassure folks that you’re being intentional about compensation.

In the imaginary case above, you’re not saying product people are less important; you’re just saying that for your company to succeed in the long run, you must focus your limited resources.

3. Avoid apples-to-oranges comparisons.

Team members will come to you with what they feel is a slam dunk: A competitor—some company you compete with every day—is offering higher salaries. That may be the case, but just because you compete with this company doesn’t mean it’s in your peer group when it comes to compensation.

For example, competitor A might generate three times the revenue of your company. You may still compete with it, but that’s not an apples-to-apples comparison when it comes to pay. (Here’s where company culture and personal growth opportunities come in; your company may offer both tangible and intangible benefits that the bigger one doesn’t.)

4. Educate team members on how to interpret a salary band.

There’s a common misconception that the midpoint of a salary band is the starting point. It’s not. It’s the midpoint. And it’s not unusual for someone to reach the midpoint after years of doing the job. Midpoint doesn’t mean mediocre, but people often believe it does because (I think) we all tend to overpraise a job well done.

We’re all guilty of telling people they did an “awesome” job when what we really mean is that they did a good job. The problem is, tell people they’re awesome enough, and eventually, they’re going to wonder why they’re not making awesome money. We could spend a long time talking about how important clear, objective standards of performance are (here’s a good article on that), but suffice to say, in a world of transparent pay, we need to be equally transparent about what exactly doing a “good job” looks like.

5. Zoom out to talk total rewards.

Finally, put “pay” in perspective. Employees’ salaries are just one component of their total compensation. When HR leaders talk narrowly about salary, most people think of the paycheck they get every 2 weeks with all the deductions taken out. They forget how much their company invests in them, from health and wellness benefits to training, learning, paid time off, and more.

Talk to your HR software provider about easy ways to create a total comp statement. It’s one of the best ways to demonstrate how much your company values people.

I hope this was helpful. And I wish you the best as you lead your company into a new world of pay transparency. I’ve said that talking pay is easy, but that doesn’t mean you won’t run into tough conversations along the way.

When you do, keep this in mind: Education makes all the difference. The facts are on your side. I’ve been in HR for a long time, and I’ve never been in a situation in which the intention was to do wrong, pay workers unfairly, or cheat them out of a fair wage. It’s always the opposite: We’re constantly trying to do right and enable talented people to stay and grow with us so we can succeed together.

Paaras Parker is Chief Human Resources Officer at Paycor.

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