As inflation continues to cause problems for both cost of living, as well as cost of doing business (As of publishing, US Inflation Rate is at about 4.93%, compared to 4.98% last month and 8.26% last year. This is higher than the long term average of 3.28%) a more pressing topic has become compensation.
- Are you paying a "living wage"? Heck, what even is a living wage and can my company afford it?
- Are you up-to-date with current regulations on pay transparency? Are you providing the pay transparency your people are demanding?
- Do your people feel valued? Are they making assumptions about pay and company finances?
Here's a hot take: Your staff, your teams, and their friends are all talking about pay and how much they make whether you like it or not. Why are you not taking proactive initiative and managing the narrative and driving trust with a clearly enunciated compensation strategy?
When pay decisions are blinded from your team, they are left with only one option, to turn to assumptions
Pay Transparency has Clear Benefits but Needs Careful Management
I recently was on a panel called "You're doing HR all wrong" at the Climbing Wall Association Summit, and by far the biggest topic was pay transparency. I also just recently hosted a seminar with Climbing Business Journal about Hiring & Retaining Your All-Star Team. Similarly to the HR Panel, one of the biggest topics during Q&A was pay transparency. Clearly this is a pressing issue amongst businesses. So what can we do as leaders and managers?
Data shows clearly that pay transparency during the attraction and recruiting process will give you better more qualified candidates (and waste a lot less time). Some data from the Society for Human Resource Management (SHRM) clearly displays this:
82% of U.S. workers are more likely to consider applying to a job if the pay range was listed in the job posting.
73% of U.S. workers are more likely to trust organizations that provide pay ranges in job postings than ones that do not.
33% of applicants indicated they would not accept an interview without first knowing the pay range for the role.
But what about culture? What happens on-the-job when pay transparency is created inside of an organization? It leads to engagement, organizational trust, and improved productivity. The benefits are clear. Research conducted by Harvard Business Review concludes that:
"...studies indicate that, at least in the short term, pay transparency may have some important benefits for employees and their employers. For example, pay transparency has positive impacts on employees’ perceptions of trust, fairness and job satisfaction and has been found to boost individual task performance"
There is however some possible downsides of pay transparency. According to the Harvard Business Review:
"Our research uncovered that in firms adopting pay transparency practices, supervisors, who may not have had any say in adopting the company-wide policies, assume a self-protective approach when this happens. Because it’s often time consuming and psychologically draining for them to address employee complaints and salary adjustment requests, we found that they take steps to reduce differences in compensation within the same job level. More specifically, we found that transparency drives managers to make employees’ performance-based incentives more similar to each other — in other words, compressing them"