Years ago, employees did not have many tools to compare their salaries in the marketplace, but now we have such sites as Glassdoor.com and Salary.com. Still, many factors go into setting compensation, and it may be beneficial for companies to have some pay transparency to help workers better understand how they’re compensated.
In fact, this year 58 percent of organizations aim to be transparent, compared to 54 percent in 2017, according to a report by Seattle-based PayScale.
“Companies are finally waking up to the idea that pay isn’t something you should only talk about once a year,” says Tim Low, senior vice president of marketing at PayScale, a technology company that provides solutions for compensation management. “It’s something that affects people all the time.”
Sharing your pay practices helps foster trust, he says, so you need to inform employees not only about what they’re being paid but also why you pay the way you do and how their pay aligns with the company’s strategic mission.
Pay transparency, however, is not just disclosing everyone’s salary for all to see. That’s not the norm, says Low.
There are different levels of transparency, which PayScale outlines in its report. (Check out www.payscale.com.)
But in general, pay transparency “leans more toward being open and clear about your policies, compensation philosophy and how pay decisions are made,” says Sharon Podstupka, an expert and principal of Pearl Meyer & Partners executive compensation consultants in Manhattan.
With all the data out there and pay equity in the spotlight, companies need to start doing a better job of explaining to people how pay is set and determined, she says.
Employees may see people in similar positions making more but not really understand the factors that contribute to that, say experts.
“Compensation can be fairly complex, and the reasons for different compensation levels isn’t always apparent,” says Ted Turnasella, principal of Comp-unications, a compensation consultant in West Islip.
In a recent survey by Pearl Meyer, about 80 percent of company respondents felt employees didn’t understand how to appropriately compare their own level of pay to either those in similar positions to themselves at other companies or to their internal colleagues.
Most companies rely on managers to have conversations about pay, but often they’re not effective in explaining compensation, says Podstupka.
“While they may have been coached by the company to have those conversations, they may not be comfortable or confident in having the actual discussions,” she says.
That needs to be addressed.
Beyond that, employers should avoid prohibiting or discouraging employees from discussing pay.
The National Labor Relations Act protects employees’ rights to discuss conditions and terms of employment such as salary and benefits information, says Andrew Kimler, a law partner at Vishnick McGovern Milizio in Lake Success.
There are certain exceptions such as government employees and most supervisors, but the majority of private-sector employees are covered by the NLRA, he says.
“You can’t stop or discourage employees from having the discussion about their pay with their co-workers,” he says.
Still, many employers are reluctant to have their employees discuss their respective salaries or pay rates, says Kimler, noting that smaller employers sometimes aren’t aware of the law.
He’s had a few inquiries from employers asking whether they can prohibit salary discussions among employees.
While companies don’t need to reveal everyone’s salary, being open about your compensation philosophy can be beneficial, Turnasella says. He says he finds in general employers like to keep salaries close to the vest, but “people don’t like to be taken advantage of. They need to feel that the pay they’re receiving is equitable to the pay other people are receiving for similar work.”
Percentage of employees who feel they are paid fairly.
Source: PayScale 2018 Compensation Best Practices Report