Employers Less Transparent About Pay, Aspire to Be More Open

Employers have pulled back on providing employees with broad-based information about pay within their organizations, new research shows, even as compensation specialists advise that transparency is needed to convince employees that they're fairly paid.

Employers haven't given up entirely on being more forthright about compensation, however, as they try to find an appropriate balance when discussing how they determine pay and what salary an employee could earn by advancing within the organization.

Almost half of all organizations provide employees with only minimal pay-related information, and in several key areas they're giving workers less information than in the past, according to just-released findings from the 2019 Compensation Programs & Practices Survey, conducted by WorldatWork, an association of total rewards professionals, with underwriting from consultancy Willis Towers Watson.

The association's latest survey, with responses from HR compensation and benefits professionals at 348 public- and private-sector employers, was conducted in October and November 2018. The findings, compared with earlier surveys going back to 2010, showed minimal pay-related information was shared by 47 percent of employers last year, up from 32 percent in employers in 2010. However, employers are more reluctant to give employees the following information:

• Pay program design, shared by 42 percent of employers in 2018, down from 49 percent in 2010.
  

• Base salary range for employees' pay grade, shared by 38 percent of employers, down from 43 percent.
  

• Base salary ranges for all pay grades or jobs, shared by 13 percent of employees, down from 19 percent.

Only 2 percent of respondents shared actual pay levels for all employees, up from 1 percent in 2010.

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"The results point to the need for much more transparency about how compensation programs work, especially when we see continued concerns about miscommunication, wage gaps and pay inequities," said Scott Cawood, president and CEO of WorldatWork. "This isn't the time to retreat into sharing less information with your employees, which, in fact, could backfire. People want to know how to succeed in organizations and that starts with understanding how compensation programs are designed and administered."

"At a time when employers are engaged in a hyper-competitive environment for talent and open platforms are increasing the level of pay information available to current employees and recruits, the need to build a solid pay communication strategy has never been greater," said Catherine Hartmann, North America Rewards practice leader at Willis Towers Watson.

She added, "We believe employers who have yet to expand and become more transparent in their pay communication with employees will need to do so as top talent will demand it."

"Transparency in salary data eliminates confusion and wrong assumptions" among workers and fosters a culture of trust between an organization and its workforce, said Tanya Jansen, chief marketing officer at beqom, which provides compensation management services and software. By being more transparent around what employees are paid and explaining how compensation is determined in the first place, companies can show they are committed to their employees' financial wellbeing and "will do what is right to close any pay gaps that exist within their organization."

[SHRM members-only how-to guide: How to Establish Salary Ranges]

More Transparency Ahead?

Employers seem to recognize there's a need to share more information about how pay is determined at the organization, according to compensation software firm PayScale's 2019 Compensation Best Practices report, based on responses from executives and nonexecutives at more than 7,000 organizations.

A substantial gap remained between employer and employee perceptions of fair pay and pay transparency, according to the survey, which was conducted during November and December 2018:

• 22 percent of employees agreed with the statement that employees are being fairly paid versus 42 percent of employers.
  

• 24 percent of employees and 27 percent of employers agreed with the statement, "How pay is determined at my organization is a transparent process."

Despite a lack of progress increasing broad-based pay transparency, employers indicated that they would like to be more transparent:

• 28 percent of organizations said they aspire to adopt a formal compensation plan that would include sharing with employees the pay range for their position, up from 18 percent that have done so.
  

• 8 percent aspire to full transparency around pay, making ranges throughout the organization and information on what everyone earns available to all employees, up from 5 percent that do so now.

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Building Trust

"When you're open about these matters, you send employees the message, 'We care about getting pay right, and this is competitive pay for your role,' " the researchers wrote. "You effectively tell employees that you want them to have a future within your organization."

"When employees understand how pay decisions are made, they're more likely to feel confident they are fairly paid, which matters because we've learned the way people feel about their pay is closely linked to their level of engagement and satisfaction at work," said Jingcong Zhao, a senior content marketing manager at PayScale.

Transparency also can hep to address pay inequities within organizations. "When people don't know the range for their own position within an organization, how would they have a sense whether they're being paid equitably compared to peers?," noted Lydia Frank, vice president of content strategy at PayScale.

Frank doesn't advocate absolute transparency for every organization because "knowing the exact amount that your co-worker makes can lead to more drama and distraction than is helpful. But employees have every right to know the value of their position to the organization and their earning potential."

Greater transparency also can lead to meaningful discussions around career path and performance, she added. "If employees know their range, they can have better conversations with their manager about how they can move forward in that range."

Some organizations have made the argument that compensation ranges are proprietary information that they don't want competitors to learn about, "but I'd argue that it does more damage to withhold that information from your own employees in terms of building trust," Frank said. "Secrecy around pay indicates to employees that there's something to hide, and with four out of five employees feeling unfairly paid, you can't afford to further erode trust around compensation."

Related SHRM Articles:

3 Trends that Will Shape Recruiting in 2019 [soft-skills hiring, flex work and pay transparency], SHRM Online, February 2019

Get Ahead of the Curve and Be Transparent About Salary Information, SHRM Online, April 2018