November 21, 2023
It has never been more important to communicate compensation with employees than it is today. In order to attract, retain, and motivate employees, it is important to have conversations about compensation as well as to conduct compensation training and education with employees. Several states have enacted legislation requiring some level of pay transparency and banning salary history questions on job applications. These steps forward, coupled with newer generations in the workforce demanding more pay transparency as well as open communication about pay, are driving long-overdue changes for employers.
Doing the right thing regarding pay transparency and compensation communication sounds simple. However, there are several moving parts to be considered for making changes in any organization. Let’s take a deeper dive into New Hire Compensation, Preparing for Pay Transparency, Training Leaders, and Training employees.
New Hire Compensation
There has been noteworthy progress recently with many cities and states banning salary history questions on job applications. Simply put, if an employer benchmarks positions to market and has pay ranges for each job, there is no reason to need to know an applicant’s current or recent salary history.
By evaluating the applicant’s previous experience relative to the job requirements and also looking at where other similarly situated employees are in their range, an employer should be equipped to make a fair offer relative to the position’s market value. In fact, many employers have found that advertising some or all of their pay ranges with their job postings can result in better job candidates applying; this reduces time and effort that might be wasted by taking a candidate through the majority of the interview process only to find out that the applicant’s salary expectations are way out of line from what the employer is willing to pay.
So, what’s the best practice? Do market benchmarking to determine pay ranges for similar positions in your industry and geographic location. Then, establish clear-cut and market-competitive salary ranges for positions in your organization. Completing these critical processes will enable you to share essential information with job applicants, enhance the hiring process, and reduce wasted time. Making compensation and pay grade information available to new hires will also provide them clarity as to where their compensation stands coming into the organization; and can indicate how their compensation might progress over time whenever they get promoted or change jobs.
Preparing for Pay Transparency
Whether by virtue of new legislation or because it’s simply the right thing to do, many employers are taking critical steps toward pay transparency. These include:
- Conducting a market benchmarking study
- Developing pay ranges with a minimum, midpoint, and maximum
- Ensuring every employee is appropriately placed in the pay range relative to their experience and other similar employees.
- Conducting a discrimination analysis
With these processes completed, the employer can inform employees where they are positioned within the pay ranges. The employer can also share how the organization, unit, or various levels of employee salaries compare on average as a percent of their mid-points. And eventually, employers may even share what all employees make in an organization. If that sounds scary, remember that many industries, government agencies, and those who work with or for these agencies, have been required to post all employee salaries on an internal site for many years.
Training Leaders
Most employees will approach department or organization leaders with compensation questions. It is vital to employers, therefore, for leaders to understand how to manage these compensation questions. Here are some tips:
- Listen, truly listen to the employees’ concern about their compensation
- Ask questions to ensure you thoroughly understand the employee’s concerns
- Commit to take action. Do not agree with anything an employee has said. Instead, simply commit to look into the situation.
- Work with your Human Resources department to look into the employee’s concern
- Be timely! Do not take a month to get back to an employee. If there are delays, be sure to explain them to the employee.
- Communicate with the employee. Be sure to communicate the ongoing status and all final findings with the employee. Do not blame upper management or Human Resources if you were unable to get what they wanted. Instead, explain why they are paid where they are. Take accountability for the conversation with the employee.
Training Employees on Compensation
Most employees see compensation as a “black box.” It is a sense of the unknown that makes it feel that away. If you can train your employees about your market benchmarking process, it goes a long way toward helping them understand how compensation works in your organization. Let them know what sources you use to benchmark your roles and what scopes you use for comparison. Let them know (on a large scale) how your organization compares to market. Once you are comfortable with your pay ranges and where employees sit in their pay range, communicate the employee’s pay range to them and explain why they are paid at their level. Be sure to also let them know how processes work for promotions, pay increases, bonuses, etc. The more you can communicate, the better!
The Bottom Line:
Keep in mind that the purpose of pay communication is to help employees feel more satisfied with their pay and less compelled to pursue outside opportunities. It also builds a lot of trust with employees when they understand compensation. Enhanced communication typically leads to more satisfied employees, and satisfied employees are engaged employees! TO learn more about this and other employee compensation topics, contact us at 317.589.8529.
Cassandra Faurote
About Total Reward Solutions:
Total Reward Solutions is your trusted partner for compensation services. Led by Cassandra Faurote, professionally certified Compensation and Human Resources expert and author of the book Compensation Sense 101, Total Reward Solutions offers a broad range of compensation and total rewards consulting services to help your organization attract top talent, motivate employees, and retain top performers. We can partner with you on a project basis, on retainer, or as your total outsourced solutions provider for compensation services.