Time to Start Paying Like Everybody's Watching

Pay transparency is coming. 

That is the title of a recent Compensation & Benefits Review piece by Howard Risher, the publication's Editor and an occasional contributor here at the Cafe.  This also seemed to be the consensus in a discussion among his editorial board (comprised of some of the smartest people in the field -- and also me).  No real doubt as to the whether, it is only a question of when.

I struggle with this, as any of you who've read what I've written on the topic know.  Probably many of you do as well.  Full transparency means access to all the facts. Accordingly, transparency advocates typically demand that all actual employee pay information be made public, so that everyone in the organization will have the information they need to judge the equity of their own paychecks compared to what others receive. But will they? The Department of Labor has historically held that pay is legitimately affected by a number of factors, including education, experience and performance. Do we release pay information without also releasing the other facts necessary to understand/gauge pay levels ... like details on an employee's education and experience as well as their performance appraisal documentation? Or just share half the facts, allowing "the public" to draw their own conclusions about the other half?

All that aside, however, it is difficult to argue with the fact that there is momentum building behind the pay transparency movement.  Regulatory, generational and -- perhaps most importantly -- social momentum.  As some brave organizations step up to open up their compensation practices, and I suspect we will see this happen with companies bigger than the start-ups like Buffer who have gained publicity for open salaries, the pressure on everybody else may begin to ratchet up. 

What does this mean?  It means that the window to get your act together compensation-wise may not be open indefinitely.  If you have pay clean-up that needs to be tackled, it may be time to put a plan together.  For many organizations, the plan must begin with clarity and education.  For all of them, communication will be a -- if not the -- most critical aspect of the plan.  I'm no employment lawyer, but I suspect that as the necessary pay adjustments begin to take place, employees will respond better if they understand that the adjustments are happening as part of a declared set of organization-wide forward-looking compensation goals and a plan put in place to meet them. 

And so the time has come to start paying like everybody's watching -- because they may doing just that sooner than you think!

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting to a range of client organizations.  Ann serves as President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of the Advisory Board of the Compensation & Benefits Review.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.

Creative Commons image "Binoculars V" by chase_elliott

Comments

[Tony Bergmann-Porter]

It's interesting that (in the private sector) we already have pay transparency at the bottom of an organization in the form of fixed and (typically) posted hourly rates, and at the top in the form of exhaustively-disclosed compensation information for 16-b officers.

So it's only in the middle that there's any mystery. It's my own suspicion that this comes from the fact that not too many organizations are comfortable disclosing their "merit pay" practices.

[E. James (Jim) Brennan]

Discomfort with the prospect of pay transparency is inversely related to the confidence you have in your pay system. Good programs are easy to defend. Inferior programs create anxiety. Rather than hide problems, try to correct and end them with improved, upgraded and defensible methods.

Where open publication already occurs, such as due to union rules at the bottom or government requirements at the top, satisfactory accommodations have been made. No reason the middle range can't be handled, too. View it as another professional challenge. This is an opportunity to clarify and refine deficient methods so they no longer create controversy or inspire skepticism.

[Ann Bares]

Tony:

Good point - there are already pockets of transparency in many private sector organizations, especially those that are publicly held. There are also many, particularly privately-held, employers where pay from the very top to the bottom is completely under wraps ... the Buffers of the world notwithstanding.

I share your suspicion about "merit pay" being at least one of the factors behind the need for mystery...

Jim:

You've hit the nail on squarely on the head - perhaps we should call that Brennan's Maxim? Also agree that this is a challenge we, as a profession, may need to step up and embrace. There is indeed an opportunity here...

Thanks for the comments!

[Jacque Vilet]

Great thought-provoking post. As Millenials begin to make up the majority of the workforce it will become an even more important issue.

I predict we will end up changing many ways how we compensate people. Reasons:

1)employees cannot understand it regardless of our "clean up" and communication.

2)it's a company culture issue. And cultures will have to change or explaining comp as an isolated event won't work

3)transparency will never work until executive compensation is part of it. If we're going to clean up our act --- it needs to be for all plans --- not just those of the "masses". Can't exclude it --- employees already believe there is no pay-for-performance at that level to begin with

Don't mean to be a "wet blanket" and not saying it shouldn't be done. Just saying we need to be sure we don't just deal with a piece of the pie --- when the whole pie needs to be included.

[E. James (Jim) Brennan]

Done. The phrase, "Discomfort with the prospect of pay transparency is inversely related to the confidence you have in your pay system," has been added to Brennan's Laws. It is now listed as Fair/Competitive Pay Law #12, alternatively labeled "AKA Brennan's Maxim").

[Patty Tanji]

Thank you all for leading in the area of pay transparency. And thank you Ann Bares for this post. In Minnesota we just passed a law allowing employees to share their wage information. Apparently pay secrecy is no longer working for everyone.