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Benefits, careers and employee wellbeing programs wisely jump on the pay transparency bandwagon

October 31, 2023

Transparency is making employees better consumers of employment. Employers that embrace transparency have an advantage.
Future of Work|Health and Benefits|Inclusion-and-Diversity|Employee Experience|Ukupne nagrade |Benessere integrato
the-future-of-work-and-risk

WTW’s Catherine Hartmann, Monica Martin and Amol Mhatre shared their perspectives on workplace transparency and why this trend is gaining momentum in a LinkedIn Live conversation. Here are the key takeaways.

3 drivers of increased transparency

Today’s employees demand greater transparency in decisions regarding their pay, benefits programs, career growth, and performance measurement, and employers are seeing greater value in building awareness on the “why” behind program design. Three factors driving employers towards greater transparency include:

  1. Legislation. In North America and Europe employers are required by law to be increasingly transparent, based on the evolving regulatory environment, which empowers current and prospective employees to make better decisions and call for more equity and transparency.
  2. Social media. Employees have more of a public voice than ever before. Water cooler whispers are being replaced by a more open social dialogue, quickly spreading and amplifying how employees view their workplaces.
  3. Data democratization. More data out in the public (albeit sometimes inaccurate), propelled by generative AI, gives employees access to new, immediate and more relevant information about workplaces, their own and others.

Transparency: An organic outgrowth of better communication

For years, the focus was on fostering better communication with employees. Transparency is the natural evolution in program design. Today, as companies move towards greater pay transparency, other total rewards elements are being pulled into the conversation, including career frameworks, health benefits, diversity and inclusion, retirement benefits, and perquisites – and how decisions about these total rewards are chosen and applied are part of the dialogue.

Transparency is no longer a 'nice to have' but a 'must-have'

The idea of transparency will become less intimidating for employers as we see more well-known companies becoming increasingly transparent. We’re already seeing this play out in this year’s Pay Transparency Survey. It’s not that companies are going to have to adapt. They’re going to want to adapt as employees become better consumers of employment and to differentiate their employment deal from talent competitors.

Transparency doesn’t mean equal

Transparency doesn’t mean that everything must be equal for everyone… neither does having an equitable pay program. Rather, there needs to be a good and demonstrated reason why employee A, for example, does not earn the same amount as employee B. And understanding that reason may inspire employee A to set new goals to improve their performance, increase their contributions and learn new skills to progress in their contribution level and value.

On the benefits side, there are also ways to convey the reasons behind perceived disparity. For example, employer decisions to close pension plans and create different retirement offerings for newly hired employees may result in benefit differences.

When you frame the conversation within the context of the whole suite of total rewards, the rationale behind differences becomes much more apparent. Employees are also more likely to be receptive to these differences if they believe their employers are embracing transparency. Bottom line: employers must be able to show what, how, why, and where there are differences. They can’t hide anymore. And there doesn’t have to be fear of employee backlash as companies become more transparent — if organizations are smart and intentional about how they embrace transparency, they will build trust and loyalty with employees.

Get your total rewards house in order

There are numerous, and valid, reasons why segments of the employee population have different total rewards than other employees in the same company, even the same division. Now is the time for employers to step back and get their “house in order” by revisiting their career structure, job architecture (job families and functions), job leveling (skills and competencies), and performance measurement fundamentals. By defining the nature of work, explaining how jobs differ, and ensuring this is well-documented and clearly communicated, employers provide themselves with a foundation to speak openly and confidently about total rewards differences. Employers also need to have a strategy on how they will communicate with employees on this topic. What will they say? How will it be communicated and when? How do organizations ensure they get proper credit and goodwill from adopting a transparent mindset?

How companies differentiate when everything is 'out there'

Companies will differentiate their approach to transparency through delivery, tying transparency to the organization’s mission, and doubling down on company culture. When salary data is more open, the question we pose is, will salaries become a commoditized variable in the total rewards value proposition? If prospective and current employees have a solid sense of the salary range for their job, what levers will employers utilize to differentiate the value they are delivering to employees? Reason stands that,all things being equal in pay, will they focus on other aspects that deliver value? Will employee’s more readily ask themselves: “Do I believe in the company’s mission?,” “Do I work for a purposefully driven organization?”, “Is there flexibility in how, where and when I work?”, “Are the benefits inclusive and adaptable to my needs?”, “Is the company aware of my unique needs?” With transparency, employees will analyze and evaluate these total rewards components in dramatically different ways than just five years ago.

Delivering on transparency

While transparency may increase costs to the organization, consider the cost of not being transparent. If you’re not transparent about your total rewards programs, you run the risk of eroding trust with your employees. When you’re transparent, you have a stronger ability to control the narrative, refine the message and create awareness of these programs to strengthen the value derived from your program design. Here are some guidelines to help you be more transparent effectively.

  1. Get your jobs and pay structures ready for prime time. Understand your compensation ranges and how you align actual pay within these ranges. This means truly knowing the job levels, the job requirements and keeping up with competitive market data.
  2. Avoid false advertising. Comply with good faith requirements and be vigilant about being consistent. For example, the hiring range disclosed might be a subset of the actual range used internally, so reflect the true range for actual rates.
  3. Address areas of risk as quickly as possible. Once you shed light on total rewards practices and policies, many questions beyond pay will arise, including broader questions of inequity. Have a plan in place to address them head-on.
  4. Upskill your managers to speak to total rewards. Make sure your managers are trained, ready, and have access to the data they need to address all the questions their teams will ask. There’s more to transparency than adhering to legislation and good intentions. Change management, readiness and communication are critical.
Contacts

Maurits de Graaf
Associate Director, Rewards

Head of Integrated Global Solutions Benelux
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