Refining Your Compensation Practices

PREP Blog Series: Promote | Refine | Empower | Pivot

“Rigorously examine your compensation practices and then confidently state your position” – Advice from a VP Total Rewards

Fair pay and pay transparency aren’t just noble aims – they are proven strategies to attracting and retaining talent while also encouraging higher engagement and productivity. But while pay transparency offers numerous benefits, it is a double-edged sword. I was speaking with a client recently and she said “we’re going to open Pandora’s Box and we really don’t know what’s going to come out.”

Preparing for pay transparency necessitates that organizations strengthen the rigour of their compensation practice to mitigate risks such as poor retention, distrust, or increased resistance because it’s believed that your pay is inequitable or uncompetitive

PREP-Refine-0

Practical Steps Toward Refining Your Compensation Practices

Conduct Regular Audits:

Regular audits of compensation practices help identify and rectify disparities or inconsistencies. This includes reviewing internal equity including pay equity, salary ranges, performance evaluation criteria, and procedural effectiveness For example, take stock of your job documentation – are job descriptions or role profiles complete and up to date? Also, we recommend auditing how your performance ratings map to salary ranges on a regular basis (every quarterly, semi-annually, or time with the usual cadence of out-of-cycle reviews). If there is a top performer, as measured by credible performance data over a period of time (e.g., 2-3 years), and that individual is paid in the bottom half of their salary range, it could be a potential issue. 

Promote Fairness and Equity Through Job Evaluation

A tailored and effective job evaluation framework reduces the likelihood of biases creeping into the process, whether based on gender, race, or other factors. When employees perceive fairness in compensation, morale improves, trust in leadership deepens, and it enhances your reputation as an equitable employer committed to fair compensation practices.

Conduct Market Benchmarking
Data obtained from a market review is essential to addressing the perception and reality of your relative market position. Employees commonly compare their compensation against the market and co-workers. But who are they comparing themselves to and what at information are they using? Your organization can prepare for evidence-based and transparent discussions by conducting a rigorous review. If you are, in fact, paying below market you can either rectify or address that practical reality. But in most cases (sometimes up to 80%) those who are paid at or above market believe that they are paid below market. Data alone may not sway that impression but it’s a start.

Using Technology To Enable Appropriate Pay Transparency

Analytics tools can provide insights into pay equity across demographics and identify areas needing attention. Similarly, providing Managers with data and insights through your systems promotes evidence-based decisions and consistency. While I am not an HR systems expert, my advice starts with giving practical consideration to system access and how information flows from your systems to managers and employees is a key consideration when navigating your path to pay transparency.

Empower Your Managers

It is vitally important that your managers are equipped and empowered to make credible decisions and communicate how your organization’s pay practices impact individuals with an appropriate level of transparency. It’s so vital that it’s a key pillar in our PREP For Pay Transparency model and it’s the subject of my next blog post. So, I will just say that providing appropriate guidelines (e.g., merit grids), tools (e.g., calculators), and resources (e.g., Manager’s Guides), is foundational to refining your compensation practices.

Emphasize Transparency In Communication

Transparent communication about compensation practices, including how salaries are determined and adjusted, builds trust and reduces speculation. Open dialogue encourages employees to raise concerns and increases employee understanding and acceptance of compensation practices. At a minimum, vetted information should be shared through your intranet (with appropriate controls) so that employees can self-serve. Then, be prepared to answer questions from managers and individual employees. It’s a good litmus test to establish if your communication regarding pay is clear, direct, and sufficient to answer most employee questions and concerns.

Conclusion

With increasing regulations around pay transparency, organizations face legal and reputational risks if disparities in compensation are uncovered. Strengthening compensation structures proactively addresses these risks by ensuring compliance with legal requirements and demonstrating a commitment to ethical business practices.

As your organization prepares for increased pay transparency, strengthening compensation structures becomes a strategic advantage and also a necessity. By promoting fairness, aligning with organizational goals, and mitigating risks, robust compensation structures lay the foundation for a transparent and equitable workplace. Investing in these structures demonstrates a commitment to employee well-being, organizational integrity, and long-term sustainability. Ultimately, a well-structured compensation system not only supports compliance with evolving regulations but also enhances organizational effectiveness and employee satisfaction in a competitive global market.

I champion stronger solutions through sharing of diverse of perspectives, experience, and expertise. To engage with me on Pay Transparency and The Modern Workforce or Effective Pay Practices, let’s keep talking.

Kathleen Jinkerson, VP HR & Total Rewards Solutions

Scroll to Top