Communicating Your Pay Equity Analysis Transparently

Organizations are continually striving to achieve pay equity. Having fair pay amongst your employees internally while remaining competitive externally can be tough, however. Having transparency in pay equity analysis and communication can help your organization step in the right direction.

Salary.com have developed the Plunkett Pay Equity Framework which helps organizations address pay equity from start to finish. There are six stages in the framework, and they work together cumulatively rather than linearly. The stage we will focus on today is Communicate Transparently.

In this article, we will dive into the different aspects of transparent pay equity communication. As well as pay equity analysis and the role it plays in your organization. Download the Plunkett Pay Equity Framework today if you are interested in finding out more.

Every Organization Needs a Compensation Philosophy

The role of pay equity communication shouldn’t be understated. What exactly are you supposed to be communicating though? One of the main things you will want to communicate is your compensation philosophy.

A compensation philosophy is a formal statement documenting the company’s position on employee compensation. It serves to explain the ‘why’ behind employee pay and this helps build a framework for consistency. Greg Wolf, Managing Principal in Consulting at Salary.com, says a compensation philosophy helps:

“Make sure your organization meets the criteria of internally fair and equitable but externally competitive.”

A compensation philosophy will also illustrate how your compensation strategy aligns with your organization’s values, goals, and strategies. It should address what is rewarded and why. As well as provide guidance to allow for compensation decisions to be made consistently using the same principles.

The Importance of Pay Equity Communication

Once an organization has its compensation philosophy figured out, it can focus on pay equity communication. Getting employees on board with decisions relating to compensation begins by being transparent about the organization’s compensation philosophy. When communicating this, it is not only about now but also about the future and what decisions will affect it going forward.

Pay equity communication should aim to create an understanding between an employer and their employees. The point to get across is to assure employees that the goal is to provide fair and equitable pay for all. However, this goal will only be reached within the constraints of your budget, so it depends on the context of each organization.

Discussions shouldn’t be one-sided during pay equity communication. Be open with your employees and encourage them to share their opinion and have their input. When there are changes in pay, provide information on why, when, and what to expect.

Another aspect of pay equity communication is the importance of job descriptions. Job descriptions need to be accurate, fair, and comparable to other jobs both internally and externally. They help managers and employees understand why a job is at a certain level or pay range. Carol Ferrari, Vice President of Marketing at Salary.com, expresses her opinion on the matter:

“To pay fairly, you pay fairly across similar work. You wouldn’t pay a VP the same as you’d pay a manager. The core of that is accurate job descriptions. Get them right.”

As well as job descriptions, managers need to be trained to explain to their employees why they are being paid what they are paid. This means detailing the reasons used to make their decisions and what an employee can do to influence their pay. As well as this, managers need to be able to understand the organization’s process for assessing and addressing pay equity, including how their organization monitors and evaluates pay equity.

The Metrics Associated with Pay Equity Analysis

To improve your pay equity strategy, you must conduct a pay equity analysis. There are several metrics that you can measure to see if your pay equity strategy is working effectively. Some common metrics influenced by shifts in compensation strategy include:

• Voluntary turnover rates
• Retention and tenure
• Win/loss rates in hiring and how often candidates decline job offers due to pay
• Market compensation and how competitive the organization is on pay
• Comparison or the relationship between actual pay and the mid-point of a salary range for each role
• Productivity metrics for work quality and quantity
• Revenue per employee

The list above shows a good range of metrics used for pay equity analysis. Different parts of an organization will focus on different metrics which suggests how widespread pay equity analysis is in an organization. As it covers all aspects of an organization, it can prove to be a task getting all employees on board. Danielle Dos Santos, Vice President of Employee Experience at Salary.com, suggests:

“If you’re struggling getting people on board with this or having people feeling uncomfortable with the conversations, helping them to understand what the benefits are is a great technique.”

This employee engagement is imperative for successful pay equity analysis. Employees tie their personal value to their pay a lot of the time, which means that pay equity is at the forefront of their minds. Their pay is also what they view the organization’s value of them, and their work is, which is why organizations need to monitor and review pay equity regularly.

To measure employee engagement as part of your pay equity analysis, you can:

• Monitor key performance indicators
• Conduct regular polls or employee surveys
• Monitor employee NPS, Glassdoor ratings, absenteeism, and voluntary turnover rates
• Measure productivity using work quality and quantity metrics, revenue per employee, human capital ROI, etc.

Measuring all of these can be difficult depending on the size of your organization. It’s common and even recommended to call in outside experts and specialists. Allow them access to perform a pay equity audit and report results. They can offer recommendations in a variety of areas to help improve the pay equity situation at your organization.

Want to Find Out More?

Pay equity communication and pay equity analysis should be near the top of your list regarding what you need to address within your organization. Here at Salary.com, we understand the importance of this, which is why we offer the help you may need. Watch our webinar on how to transparently communicate your pay equity analysis to find out more.