Are We Allowed to Talk About That?
Originally Published in HR Professionals Magazine
When I was an HR newbie, I was standing in line at the credit union waiting to deposit my paycheck. (Yep, it was a long time ago!) I became incensed when I overheard two fellow employees discussing their recent raises. They shouldn’t be sharing that information with each other, and certainly not in a public place!
In those days, the two words “pay”, and “transparency” had not yet been linked together, at least not in the private sector. Today the concept of pay transparency is well known and a subject of debate.
Why has pay transparency become common in business parlance? Do a bit of reading on the topic, and you quickly discover certain words popping up often enough to become themes. Words like trust, pay gap, and diversity seem to point to underlying issues, which have pushed the concept of pay transparency to the surface.
If you have any experience administering or managing pay, you’ve likely discovered employee skepticism about most things pay related. In my experience, this skepticism is often the result of employees not understanding how they are paid. In the place of facts, conjecture and assumptions take root, fostering a lack of trust. Although employee mistrust is not a new phenomenon, it must be recognized when discussing pay transparency.
PayScale’s Gender Pay Gap Report for 2020 shows women in 2020 earn 81 cents for every dollar earned by men when measuring median salary for all men and all women. When measuring the “controlled” gender pay gap, which measures median salary for men and women with the same job and qualifications, women are paid 98 cents for every male dollar. Close, but not quite there.
Then there is the racial pay gap. On average, black men in the U.S. earn 87 cents for every dollar earned by white men according to a separate report by PayScale, Racial Wage Gap for Men, May 2019. Black women who work full time year-round earn 63 cents for every dollar paid to white non-Hispanic men, according to the nonprofit National Women’s Law Center.
The gender gap has created enough of a ruckus that some states have passed legislation giving candidates and employees the right to pay information for the jobs they are applying for or being promoted into. Other states have passed “ban the box” legislation making it illegal to ask candidates about their earnings history so as not to perpetuate patterns of pay inequality.
Diversity & Inclusion
Society’s awareness of the need for diverse and inclusive workplaces, where everyone is welcome and encouraged to contribute, has risen to a new level in 2020. Given what we know about wage inequities affecting people in marginalized groups, the push for real change makes it essential that companies take a serious look at their compensation practices.
The Data is Out There!
During the time I’ve worked in compensation management, one of the most profound changes impacting pay discussions between employees and employers, is the amount of real time pay data available online. Often this data is not as reliable as traditional employer-provided survey data but try convincing an employee of this fact. If it’s on the Internet, it must be true, right?
Despite the inaccuracy of some of the information, employees really are more informed about competitive pay practices than ever before. Some are more knowledgeable than the senior leaders in their organizations responsible for recruitment and retention.
A lot of anecdotal data exists linking pay equity to pay transparency, although not enough research has been done to definitively link the two. The literature available on the subject does a good job presenting the pros and cons of a more transparent pay culture.
Often, when presented with a new way of looking at things, we seem to take an all-or-nothing approach. But what about thinking about pay transparency on a continuum.
Mercer, on their website, shares a model of “The Pay Transparency Journey”. What this model demonstrates so well is the level transparency must be considered in light of the company’s existing culture and its aspirational culture, that is, where the organization wants to be. I would encourage anyone to go to their site and review the whole model.
The Mercer model includes six potential points along the transparency journey, beginning with “We don’t have pay ranges for all of our jobs, but we’re working on it”. I like that: We’re working on it! Something as basic as designing a few salary ranges shows the company has a plan and is doing something to be more intentional in its pay practices.
Pay transparency doesn’t have to mean posting your employees’ salaries on the company website. Some companies do that, and it seems to have worked well for them. That doesn’t mean it will work for everyone. Find the level of transparency that fits your organization and start there.
Belle Beth Cooper, in a Culture Amp blog, summed up her experience with full pay transparency at her former employer, Buffer.
“I found that knowing how and why my salary was determined, was even more powerful than knowing what my colleagues made. There was never any question about whether my pay was fair.”
From my perspective as a compensation professional, when employees understand how and why their salaries are determined, that’s a win for transparency!