Pay Transparency Spectrum – the way forward
The trend towards Pay Transparency does seem to be gaining traction, partly because of landmark legislative events and partly due to a new generation of workers demanding greater openness and fairness. Changes are happening. In the USA many states are now pushing for greater transparency in how roles and pay ranges are advertised, while this year’s EU Pay Transparency Directive will certainly apply different kinds of pressure as it comes into effect over the next three years.
Legacy: the case against Transparency
There is no question that people worry about Pay Transparency. Taking things to the extreme, if every worker can see everyone else's salary, it might create resentment and affect morale. Inevitably, some workers may not understand why others are being paid more, either inside or outside their company. There may be several reasons for the difference - a particular expertise or skill set, for example - or on the flip side it may be totally unjustifiable.
There is also a concern that more transparency means needing to pay everyone the same, which might inflate salaries or mean that companies lose a competitive edge. There's a fine line to tread here in terms of transparency inside and outside an organisation and, as we will see, a lot of it comes down to context.
What we've started to think about at Innecto is the transparency-readiness of organisations. We are boiling this down into a framework of questions for business leaders, HR, managers and employees with a view to gauging a company’s readiness to broach the topic of transparency. Questions might include what transparency really looks like for an organisation, or how they might know whether they are ready for it. When organisations say, ‘we want to be transparent’, the questions we're asking are: What does that mean? How far do you want to go on that journey? How quickly do you want to go on that journey?
Before it is even viable, there are important foundations to put in place around pay structures, benchmarking, training, line management and consistent decision-making. And, of course, not every organisation will want to be fully transparent, which is fine.
Transparency Framework Tool
In terms of strategy, we often work with senior leadership teams to help them articulate what they want and need. Often, they will say they want to be transparent, fair and equitable but the question we then ask is: What does that mean? Not many organisations are able to fully answer that yet, so we are helping them measure how culturally-ready they are to broach policy, strategy and comfort levels around pay transparency.
Understandably, as with Equal Pay Audits, many are quite risk-averse and nervous because they're not sure what they're going to find, and whether they can have confidence that their existing structures could enable pay transparency fairly and freely.
Some of this is about comfort levels but it is also about having governance and structures in place. If you have an aspiration but you don't have the robust structures in place to make pay decisions, it's very hard to be transparent. For example, some companies may share parts of a pay range on a job advert (for example £40-45k) without also sharing enough context. Existing staff on £35k may well see the advert, judge that their job is similar and see unfairness in the discrepancy. Within this information and context vacuum people can infer a great deal, much of which will be incorrect.
Following the EU directive to the letter of the law would mean providing ranges for every job. Rather than solving a problem, this potentially creates more issues. Again, it comes back to comfort levels and how far people want to go. In the public sector actual salaries may often be shared, while in the private sector, we are seeing indicative pay range levels shared or pay levels for specific roles, but that falls short of true transparency. Unless companies share how pay decisions are made, what the average increases are, what they mean for the individual versus the majority of the organisation, that same vacuum is created.
The other conversation we’re often having with clients is geared lower down organisations, towards the under-40s. Facing an uphill battle in the housing market, they are hungry to forward their careers and grow their pay and will jump ship very quickly if they're not able to see an upward trajectory within their company. Typically, this generation uses online tools like Transparency Street and Glassdoor and will infer meaning from the data they access, much of which falls in the same information vacuum. Does this make Pay Transparency more pressing when dealing with this younger demographic? We cannot generalise, but there is certainly a lot to consider. You can certainly mitigate some of your risk with them by ‘opening up’ and talking about comfort levels and aspirations around transparency? This is where Innecto’s Transparency Tool is designed to help.
By walking companies through a process and asking the framework of questions I mentioned before, we can map out the stepping-stones that companies need to investigate their comfort levels, aspirations and readiness to move forward toward a desired degree of transparency, both internally and externally. Then, by setting your stall out, educating line managers and telling employees how you are operating, you can manage your own fears and start to fill the vacuum of uncertainty.