Insights

Pay transparency: How to do it and how far to take it!

Overview
Published on: September 13, 2022
Subjects:  Surveys and forecasts, Total compensation

Ah, transparency! A word that evokes integrity, inspires trust and, these days, probably features at the top of most company’s lists of values. Transparency is the opposite of opacity, defined by some wikis as “[o]penness; accessibility to scrutiny.” But does that mean that an organization has to disclose everything under the sun, including all the details of employee salaries, to avoid being accused of non-transparency?

Judging by the number of articles1 that have recently been published on the matter, pay transparency is a hot topic. But the fact that there’s so much talk about it doesn’t mean that organizations are any more transparent nowadays—or that they’re ready or even able to be. Here are our thoughts on the subject.

What’s pay transparency?

Pay transparency involves disclosing the processes and net outcomes of pay-related management to employees. However, pay transparency exists on a spectrum. It’s important to determine what level of opacity and transparency is best suited to a given organization’s situation and goals.

Some companies do take it as far as sharing individual employees’ salaries, but that doesn’t mean that’s the best approach for the market as a whole. It’s important to be aware that that approach has far-reaching implications, particularly for SMEs, where positions tend to be less set in stone and where certain jobs are done by more than one person.

Is it a measurable trend?

In the salary forecast we conducted in 2021, we reported that 61% of surveyed organizations had not changed the level of compensation information shared with employees in the past few years. We also found that 35% of these organizations had improved their level of transparency around compensation. The survey showed that pay transparency remains limited, as 24% of organizations do not disclose any direct compensation information other than salary and 80% share job-specific salary ranges. It should be noted that this information is disclosed to individual employees rather than to the organization as a whole.

What’s interesting is that, while pay transparency seems to be on everyone’s lips, most organizations are still proceeding with caution. That’s not to say that they shouldn’t be sharing more information, if only to help employees better understand their total compensation and their development and growth opportunities.

It’s an important nuance because transparency and effective communication don’t necessarily go hand and hand. One thing’s for sure: adding more transparency without thoughtful communication that reflects the organization’s values and culture can lead to problems. Similarly, disclosing information about a total compensation package is probably doomed to failure without a certain willingness to be transparent.

Are you ready for transparency?

Building a culture of transparency obviously doesn’t happen overnight. To enjoy the benefits of increased disclosure without any of the downsides, organizations first have to determine what level of transparency best fits their values. Then, they should adopt a step-by-step approach tailored to their stage of development:

  1. Define a vision for pay transparency
  2. Establish disclosure limits, making sure to account for any advantages and potential disadvantages that might affect the entire organization
  3. Review the organization’s compensation philosophy and structure and correct any gaps or oversights that might lead to communication issues
  4. Determine key messaging, choose who will be in charge of communicating with employees (HR team or managers) and train them appropriately

Key takeaways

Transparency has become a groundswell in our society, and that’s a good thing. But when it comes to compensation, the real question isn’t “Should we have more transparency?” but “How far should we go and how should we go about it?”

Once you start sharing more compensation information, make sure you communicate effectively. And be forewarned that it may be hard to reverse gears afterward, since increased communication (and transparency) comes with increased expectations from employees. Take the time to think things through and prepare an action plan.

Let’s keep the conversation going...

Are you thinking of adopting a more transparent approach to compensation in your organization? Our experts can help you make informed decisions tailored to your circumstances. Contact us to discuss your specific needs. 

Authors

  • Marc Chartrand, M.Sc., CPHR Distinction Fellow, ASC, Senior Consultant
  • Mélissa Allard, CPHR, CMS, Consultant

Sources

1Accepteriez-vous que votre salaire soit public?, Journal de Montréal, June 4, 2022, Ce qu’il faut savoir sur la « transparence salariale,  La Presse, May 7, 2022 et Plus de transparence dans les salaires, bonne ou mauvaise idée?, Les Affaires, January 6, 2022
 

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