Tips for achieving pay transparency and fairness in the workplace
Regulations that require employers to put a price on a job during the recruitment process are quickly evolving.
In recent years, regulation has been introduced across several US states and many companies are now required to publish a pay range with every job advertisement.
Similar regulations will come into force across Europe when the EU Pay Transparency Directive is introduced.
Paying people fairly is fundamental to attracting and retaining talent. Not having well designed pay structures and processes makes it more difficult to deliver fair pay and could make your organisation vulnerable to criticism from investors, ratings agencies and even governments.
At WTW, we have daily conversations with clients about how they can ensure pay is fair and equitable. We believe there are three pay equity levers that are fundamental to get right and which enable pay equity and greater pay transparency: structures and processes, education, analytics and reporting.
1. Implement the right structures and processes
Getting the right structures in place is a core foundation of pay equity for any company. As an organisation, you should have a clearly designed job architecture and levelling framework that allows you to identify employees doing comparable work. Are these aligned with pay ranges?
While it is acceptable to have pay differences based on objective factors, such as location and performance, these parameters should be clearly defined as part of your rewards approach. The key issue to avoid is any unexplainable difference in pay.
Employers should design consistent and fair pay processes that they follow in all pay decisions and for all employees, both current and new and whether on recruitment, on promotion or as part of pay review.
2. Educate decision makers on how to apply a fair approach
After having structures and processes in place, it is of vital importance for everyone involved in pay decisions to fully understand how to apply a fair approach and use the structures and processes as intended.
Pay equity and transparency can’t just come from the top of an organisation nor can it just be down to HR and Reward to make this happen. It needs to be seen as a joint responsibility.
Education is another key lever in the process of becoming more transparent. For companies that are progressing well towards pay equity, one of the big tasks is manager education. They are striving to make all managers fully aware of the company’s pay management philosophy and approach. Also, they are clear that managers need to understand how to use the available structures and processes to make pay decisions fair and consistent.
3. Conduct checks through analytics and reporting
Where structures, processes and education can be seen as key for greater transparency and fairness, organisations will need to conduct checks to make sure that processes are operating as intended and delivering the desired results.
We expect to see greater gender pay gap reporting requirements both in the EU but also in other parts of the world.
This means organisations will need to make sure that they have the analytics and reporting capability. This will enable them to spot any areas within their organisation that require extra focus but also to demonstrate to external stakeholders that they deliver fair pay.
When it comes to designing analytics, it is important to have clarity on the questions that you want to answer. The key questions that companies typically look to answer are:
- Do we have any differences in pay that we can’t explain by objective reasons?
- Are any of those differences in pay related to gender, ethnicity, or any other protected characteristics?
- What are we going to do about it both in the short-term and long-term?
Focus on pay equity and transparency is rapidly increasing across the world. Now is the time for organisations to get ready and build confidence that they are delivering pay equity. The best way to do that is by building strong foundations.
Education should be a priority: companies should train managers and ensure their structures and processes are running as they intend. That way, whenever someone asks questions about pay, you should be in a far better position to answers those questions.
Finally, put a price on your jobs. This will put your company on the front foot; the regulation is coming in a few years and prospective employees will welcome this transparency.
In partnership with WTW
WTW is a leading global advisory, broking and solutions company.
