Pay Transparency Tips to Attract and Retain Talent
Companies today face a growing need to reimagine traditional workplace practices amid labor shortages and evolving employment regulations. As the workforce landscape evolves and expectations shift, organizations are discovering that maintaining a competitive edge goes beyond the usual perks and benefits.
Pay transparency has emerged as a powerful tool for fostering employee trust, engagement and long-term commitment. By removing any secrecy around compensation, organizations can cultivate a work environment that attracts top-tier talent and nurtures a sense of fairness and equality. In turn, this can increase employee loyalty and satisfaction. However, implementing pay transparency can be a significant change, creating unintended consequences if employers are not careful.
This article highlights pay transparency tips to attract and retain employees.
Understanding Pay Transparency
Pay transparency is the practice of openly sharing pay-related information with current and potential employees. This information generally includes the pay scales or salary ranges for specific positions. Pay transparency aims to help ensure fairness and equity in the workplace by giving employees and applicants a better understanding of how they’re compensated compared to other positions and individuals. Employees value pay transparency because it can help them to avoid applying for positions they wouldn’t accept due to low pay, negotiate for better salaries and build trust with their current employers.
This practice is not just a passing trend; more states and localities are enacting pay transparency laws. Since new pay transparency laws emerge regularly, and legislation differs by jurisdiction, employers must stay on top of the local laws and regulations where the company operates, has employees or may consider recruiting new ones.
Attracting and Retaining Employees
Several aspects of pay transparency can benefit employee attraction and retention. First, pay transparency can help attract more talent since candidates want to know their pay expectations are realistic with a role’s pay ranges early in the interview process. In fact, most job seekers (85%) are more likely to apply for a job that lists a salary range, according to a ResumeBuilder.com survey. Such transparency can also provide a better candidate experience, which keeps them engaged in the recruitment process and fares well for an employer brand. A potential drawback of pay transparency for attraction is that the candidate pool can actually be reduced if pay ranges are not competitive enough.
From a retention standpoint, pay transparency also has its benefits. Workers who don’t believe an employer’s rationale for denying a raise or aren’t told a reason for the denial are likelier to quit. According to a survey by compensation software company Payscale, 72% of workers who don’t believe in the rationale and 71% who were given no reasoning plan on seeking new jobs outside their company in the next six months. There’s a growing recognition that salary transparency is a sensible and ethical practice for organizations. As such, many employees want to work for an organization that is transparent about pay decisions and treats workers equally regardless of gender, race or ethnicity. When workers perceive their pay as equitable, they are more likely to be satisfied with their employer and engaged in their work. Employers should also consider any downsides of pay transparency for their current employees, such as workforce envy or poaching. Employees may become jealous or resentful of their colleagues’ salaries when that information is out in the open. Other companies may also try to price competitive job offers to poach employees once they know an organization’s pay range.
Along with weighing the pros of cons of pay transparency for their specific workforce, employers can also consider the following tips for winning and keeping talent with this practice:
Update pay ranges. Updating pay ranges may help ensure an organization can continue to attract and retain talent while making consistent pay decisions. It’s also a good idea to run a pay analysis against updated pay ranges to ensure internal pay equity for each existing employee.
Include pay ranges for all employees. Some employers may exclude remote workers or workers who reside in states with pay transparency laws. However, this is likely not a sustainable strategy, as it can limit an organization’s recruiting pool.
Consider a proactive approach to pay transparency compliance. To address potential issues of recruiting remote workers or employees from states with pay transparency obligations, some employers ensure their job postings comply with the strictest pay transparency requirements. This can include revamping hiring and recruitment practices to comply with pay transparency requirements, standardizing job postings to include salary ranges and benefits information, or tailoring job postings for states and localities with pay transparency laws.
Communicate the organization’s compensation philosophy and structure. Organizational transparency is enhanced when company leadership can share their thoughts on pay equity and openly explain how compensation decisions are made and how various factors are involved.
Train management for uncomfortable conversations. It’s important to help prepare managers and supervisors with education and resources to handle pay-related discussions with employees. Talking points or FAQs may be helpful to have on hand.
Regularly update employees on compensation. Managers can conduct transparent performance reviews and have candid discussions with their direct reports. They can also openly share information about salary adjustments and bonuses to make this topic less taboo.
Embrace a culture of pay transparency. Pay transparency is more than revealing pay ranges to become the norm in the workplace. To support a cultural shift, employers should encourage open dialogue and feedback about pay transparency and offer channels for employees to discuss compensation openly. Employers could also conduct regular pay equity audits and promptly address any disparities to further demonstrate a commitment to equal pay and fairness in the workplace. It comes down to transparency in all actions.
Avoid unintended consequences. Employers should prepare for the impact of increasing transparency but be aware of potential consequences. While pay transparency offers advantages and is likely unavoidable for most employers, organizations face real risks. Thus, uncovering all this could cause some business disruptions if employers aren’t careful.
Even if employers are currently unaffected by pay transparency mandates, they must begin developing strategies to address this issue since pay transparency likely already impacts them directly or indirectly as they compete for talent.
Summary
Pay transparency benefits employers and workers alike, and organizations may see those reflected in their employee attraction and retention efforts. There are pros and cons to any workplace strategy or policy, so it’s important for employers to keep tabs on the candidate and employee sentiment about pay transparency. Employers should also be cautious before making any significant organizational changes and be thoughtful about how they roll them out.
Pay transparency is a complex workplace topic, so contact us for more information and resources.
This HR Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice. © 2023 Zywave, Inc. All rights reserved.