How to Make Salary Transparency Work at Your Company

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Jul 9, 2020

Editor’s Note: This is part of a duo of simultaneously published articles about our collective discomfort addressing salary issues more openly. Check out this story’s companion article on “The Most Taboo Topic in the Hiring Process.”

As we all deal with the inevitable downturn resulting from the coronavirus pandemic, HR leaders are grappling with how to put employees’ concerns at ease. Many organizations are implementing salary and hiring freezes, while workers who haven’t already lost their jobs are likely nervous and experiencing the stress of adapting to new environments, making productivity and morale big challenges.

Transparency can do much to quell anxiety throughout the entire organization. A company that’s transparent with its employees can generate a greater sense of ownership, connection, and loyalty — all of which help weave together individual and business success. 

Transparency is also especially powerful when it comes to salary. Sure, salary transparency risks generating feelings of resentment if employees see the salaries of others and feel as though they are paid unfairly. But that risk is outweighed by benefits associated with minimizing the impact of unconscious bias by forcing a company to place everyone on a single pay scale and bringing subjectivity into the light.

So why aren’t more employers transparent about salaries? Why do so many consider it taboo to discuss salary? Maybe because some people think it’s harder to achieve than it actually is. Or maybe people want to protect their privacy. 

However, done right, you can make salary transparency work at your organization. Here’s how we did it at mine:

1. Start With Communication

It’s important to take a proactive approach to salary transparency by communicating it clearly. Consequently, we:

  • Provided an overview of the approach we were taking
  • Built a rubric using external data to support our compensation decisions
  • Reassured employees that we would not decrease salary if they were over their pay scale
  • Informed people of any changes to their compensation

We shared the detailed rubric with the entire company in an all-hands meeting, circulating a document explaining the reasons for the change, how salary is set, and what every employee can do to increase their overall compensation.

The document also describes how discretion may be exercised to offer additional incentives or rewards. By having an easily accessible, documented policy that clearly communicates our formulaic approach, employees are assured they’ll have the same information and can ask questions if they see anything that appears out of line with the stated approach. 

2. Be Smart About the Rollout

It often helps to use a third party to give you information about compensation at comparable companies. When doing so, make sure to research providers by looking up customer reviews and checking for potential red flags.

Likewise, you should understand whether you’re required to share your own business’ compensation information, which often serves as a principal source of information for providers. You may also want to ask where the provider obtains their information, so you know whether there is independent research behind the data or if it only represents the information the company receives from other customers like you. To that end, it’s worth asking how many other companies provide information. A smaller number of customers will mean a smaller sample size for salary comparison.

3. Build in Flexibility

When we built out our rubric for calculating salaries, we did it in ways to programmatically add flexibility to compensation based on established variables. 

For example, if your company calculates the price of living disparities in different geographies, show how this is accounted for in a way that is easily understood and uniformly applied. A role in California, for instance, might have higher compensation than the same one in Minnesota.

Experience may also play a part — though you should continually audit salaries to ensure that you’re addressing potential. For example, be mindful that women may have gaps in their job history for taking time out to raise a family. Similarly, when setting a starting salary, remember that some employees have been taught or socialized to negotiate harder for higher pay; others shouldn’t be disadvantaged just because they weren’t taught to push for more. 

4. Gather Employee Feedback

To ensure buy-in, it’s critical to engage employees by soliciting and using their input, communicating changes clearly, and assessing how they experience the movement toward salary transparency. Without buy-in, employees may resist or resent the change. 

After our change in approach to compensation, we included questions in our employee engagement survey to assess how people feel about compensation, including whether the structure is fair and transparent and if people perceived gender or other pay gaps. We’ll continue to collect this feedback in our biannual engagement surveys to ensure we’re validating our approach.

5. Recognize That Transparency and Privacy Are Not Mutually Exclusive

Use a rubric to show how your business compensates roles so employees can see how their compensation compares to others in the industry. Transparency doesn’t require that employees know the take-home pay of the person next to them. At Storj, we assign levels to roles and share those levels with the individual employee as well as their manager. Whatever individuals want to disclose to others is in their hands. In other words, transparency doesn’t mean sacrificing privacy. 

In sum, salary transparency is a pivotal way to be an ally to your employees and help them feel valued and empowered. Clear and early communication, as well as involving your people in the transition to salary transparency, is key to creating a successful salary transparency program.

Just remember to stay vigilant to ensure that the goal of minimizing bias is not undermined in the execution of the program. It’s also critical to audit and monitor the program regularly to assess employees’ experience and whether the program is meeting its objectives. Ensuring privacy and anonymity in the process will enable your team members to feel comfortable with the new approach.