Jun 13, 2024

The Onion Approach to Pay Transparency

Understanding the many layers of compensation transparency

The Onion Approach to Pay Transparency

The Onion Approach to Pay Transparency 

Understanding the many layers of compensation transparency

Pay transparency is the talk of the (HR) town these days—and I personally believe for good reason. But like many big, complex issues, it’s all too often generalized. It’s talked about as a black and white issue: either your company is transparent, or it’s not. Either you do the right thing and value having informed employees, or you’re LexCorp and just want to save a dollar anywhere you can. My unnecessarily hot take is it’s not black and white at all—it’s so much more complex than any of that. Sometimes I use the term “pay translucency” to describe my views on the subject. Today, however, I want to break down the many layers that make pay transparency so complex, so I’ll use my other favorite term for the topic: The Onion Approach (Still working for my trademarks on both of those terms. 😉)

Pay transparency is complex and multifaceted. While some frameworks (often within legislation and other legal works) set clear guidelines for employee and candidate transparency within their job listings etc, I think it’s important for organizations to aim to enhance pay understanding and transparency over time. Making it an ingrained and authentic best practice that makes sense for the unique needs of each company. This gradual process can be likened to peeling an onion, each layer representing a different level of understanding and communication.

Starting with HR: The Core Layer

The foundation of any pay transparency begins with HR. It is crucial that your org’s HR team have a deep understanding of the org’s pay strategy: levels, bands, ranges, and the rationale behind equity and salary distributions. This should seem like a no-brainer, but when you’re juggling as much as the average HR leader does, it can seem easier to just adopt whatever practices were handed to you and get on with it. This foundational understanding is key to effectively communicating the pay strategy within the organization and getting buy-in.

Empowering Executives and Managers

Once HR has a solid grasp of the pay strategy, the next step is to empower executives and managers with this information. They should be well-versed in the pay structure—and the “why” behind that structure—so they can confidently discuss compensation with their teams. This step plays a huge role in reducing comp-related back-and-forth during reviews and merit cycles, in building trust between managers and employees, and in improving retention with your top talent.

Engaging Employees

The ultimate goal of any pay transparency efforts should be to equip employees with the information they need to understand their pay. Yes there are legal boxes to check, but you will truly get so much more out of your efforts if you create your policies with employee education and engagement as your top priority. This doesn’t mean yu need to provide everyone with all the raw market data. In fact, I strongly discourage that as it’s wildly confusing and complicated (hence why we created a software to help manage it…). Pay transparency is about understanding and communicating the nuances that influence compensation decisions. Employees need to recognize that their pay is determined by a complex interplay of internal and external factors. This understanding helps manage expectations and fosters a more informed and constructive dialogue about compensation. Access to this information will encourage employees to consider how your organization can help them reach their career potential while also moving the company closer to its goals.

When done right, an informed employee is an engaged employee. An engaged employee is a happy employee. And a happy employee is a top contributor who sticks around. Win. Win. Win.

Encouraging Discussion and Alignment

A layered approach to pay transparency encourages discussion and alignment throughout the organization. By gradually increasing transparency, you can ensure that each level (layer) of the company is equipped to understand and communicate compensation effectively. This approach helps set the right expectations and promotes a culture of trust.

How CandorIQ Can Help

CandorIQ offers a range of tools to support you on your journey towards a more transparent workplace:

  • Analytics and Reporting CandorIQ provides comprehensive analytics and reporting capabilities that allow HR and leadership teams to monitor pay trends throughout the year. This ongoing visibility helps identify instances of overpay or underpay and ensures that compensation practices remain fair and equitable.
  • Total Rewards Experience Our employee and candidate total rewards experience enables individuals to see their complete compensation package and run various scenarios. This tool not only benefits employees and candidates but also supports managers and HR in their efforts to communicate and justify pay decisions.

I want to highlight that pay transparency is not a fixed goal. It should be a moving, or evolving goal. Similar to your pay strategy itself, it should continue to develop as your company hits different milestones, the economy changes, etc.

That’s why I like The Onion Approach. It’s all about a layered system, focused on educating your workforce aout your organization’s pay strategy. When done right, it can help strengthen employee/manager relationships, build trust with HR and leadership, and improve employee retention.

Let us know if you want to learn more about how CandorIQ can help get you on the right track!

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