'Organizations that are seen as early adopters are seen to be cutting edge'
For some jurisdictions — such as federally regulated workers and those in Ontario and P.E.I. — organizations will have to implement pay transparency programs because of legislation.
But what about for those places in which businesses do not have to comply, is implementing this practice a good idea?
Absolutely, says one compensation expert.
“It can be a really good way to get out there with messages around your whole talent management strategy because once you start pay transparency, it is all about things like: ‘What are our salary ranges? What are the different levels of jobs that we have? What’s the minimum and the maximum of a salary range for each of these levels?’” says Cynthia MacFarlane, principal of career consulting at Mercer in Ottawa.
“There are some real benefits for employers to get some information out there for employees because they’re definitely looking for it. Educate yourself as to what you’re required to do but then also start looking at how you might use pay transparency to engage with your workforce.”
Retention benefits
It’s obvious that transparency is the right thing to do for employees, says says Anand Parsan, national practice leader in compensation consulting at Eckler in Toronto.
“One of the important things of salary transparency is that fewer workers will be exploited. If salaries are not revealed, it’s easy for companies to pay some people more than others and this can obviously lead to disparity within the workforce of that organization. It’s important that people do have similar pay for similar work,” he says.
Pay transparency can be employed as an attraction and retention tool, according to Parsan.
“Organizations that are seen as early adopters are seen to be cutting edge, and they have their administration set and they’re very comfortable in disclosing this information. Maybe candidates see this as, ‘Hey, these are really organizations that have everything put together, and they and they have a really good environment and culture.’”
“It can have that positive effect versus others that are on the other end of the spectrum, where they’re not sharing any information and everything is really a black box,” he says.
Communications strategies
It’s key to work on communication strategies early, says Parsan.
“Salary tends to be a very emotional topic for most people which can obviously cause chaos if it’s suddenly thrown into light without any clear policies around it, so that’s something that organizations need to be prepared around, more of the administration and the communication prior to divulging all of this information.”
It comes down to ensuring the proper “foundational pieces” are in place so the effort is successful, he says.
“When we’re working with organizations, sometimes they don’t even have proper job descriptions or evaluations of jobs, so [you need] to discern the differences between certain roles within an organization — you can be at the same level but there’s different job families within the organization, whether it’s HR, IT, and different functions.”
“[It’s about] having the proper infrastructure in terms of job descriptions; properly evaluating the roles; and having those up-to-date salary ranges so that you can really communicate,” he says.
“It’s just important that organizations understand both the pros and cons of when they do move into such a policy.”
When it comes to deciding what to include in a transparency disclosure, there are a number of questions that need to be answered, says Parsan.
“Do you just want to disclose salaries? Or do you want to disclose incentive compensation? Do you want to disclose any other types of rewards that might be offered at your organization? There’s that matrix of what they want to disclose and how far along you are in terms of disclosing some of that information.”
Read next: How to use the RASCI matrix for HR projects
There’s no going back
One of the pitfalls employers need to be aware of is that once the information is out there, “you will start getting into more debates, discussions or arguments with people [because] now they’ve been armed with some information,” says MacFarlane.
“They’re going to want to try and take that information that you are giving and start arguing why they should be paid more; people can’t help it, that’s what we do,” she says.
Don’t abandon the effort if this does happen, because not every employee will feel the same way, says MacFarlane.
“You’re not going to change some people’s mind but at least for other people, you help them understand that ‘Actually, when you talk about your friend off in another job doing the same thing as you making more money, it's possible they’re actually not doing exactly the same.’”
“You actually want to let employees understand which jobs fall in which levels and therefore, which jobs have access to which minimum, maximum salary ranges but you want them to have the message around how the salary structure was created in the first place.”
Once the pay transparency scheme is in place, it should become permanent, so it must be done correctly from the beginning, she says.
“Once that genie’s out of the bottle, you can’t take it back. You can’t decide two years later that this is more hassle than it’s worth: that would be a real disengager for employees. We had heard that from employers in the past, saying, ‘What if we ever decide to take this step? We need to be 100 per cent sure because once we’re in, there’s no going back.’”
