The Compensation and Benefits function is no longer only about number crunching. Gone are the days when Rewards professionals were thought of as human calculators. The Industrial Age idea of pay being a transactional exchange for work done is outdated. Companies are increasingly looking at rewards and culture as related components of the overall Workforce Experience (Wx).
Employees link their pay with a feeling of self-worth and identity. As a result, feeling underpaid or unfairly paid can significantly reduce motivation and harm the Wx. Building transparency into your pay practices can give your people a sense of fairness and being cared for.
However, creating transparent, equitable, and fair compensation practices is an ongoing journey and not a one-time effort. The steps to arrive at such an outcome include:
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Listen to your people:
The best way to figure out how people are feeling is to ask them. Through tools such as surveys, interviews, and group discussions, you can understand the key questions people have about compensation.
Do people believe coworkers are better paid than them? Do they feel other companies pay more for the same role? Do they completely understand the rationale behind pay decisions?
Operating behind a wall of pay opacity can create frustration and a sense of being treated unfairly. Listening to people will let you know exactly what they think of your pay programs.
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Conduct a competitive compensation analysis (CCA):
Identify the market competitors in your geography to compare with and commission a study to compare pay. A CCA will be able to provide you with a sound rationale for your compensation strategy, based on the market position you want to target.
Are you at par with or ahead of the market in terms of pay? Are there significant disparities between your pay and benefits versus those of your competitors? Is this impacting your ability to attract, motivate, and retain people?
Answers to some of these questions will help you in deciding on a clear and meaningful pay philosophy.
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Create and communicate a tailored pay philosophy:
Decide on your market positioning and the factors that you want to consider for deciding pay, such as tenure, performance, competence/skill, etc.
Design your pay ranges in alignment with your overall pay philosophy.
Train managers and employees so that they understand the rationale behind pay decisions and can have better conversations with each other about performance and pay. With clear communication, employees can understand their own pay and pay increase processes, increasing their sense of fairness.
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Track changes in the market:
Articulating a pay philosophy and designing pay ranges is not a one-off activity. It requires regular monitoring of market data and adapting to it so that you don’t run the risk of falling behind.
Have you decided on a frequency for reviewing and revising the pay ranges? If you are using slightly older survey data, are you ‘aging’ it sufficiently to keep it relevant?
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Build trust and transparency in communication:
Consider creating a communication calendar that lists all the key compensation activities throughout the year. Fostering an environment of open conversation can reduce concerns about a lack of transparency or fairness.
As a leader, you have the opportunity and the duty to showcase how much you value your employees. A strategic approach to fair and equitable pay not only helps you stay compliant with the law but also creates trust and commitment among your people.
Overall, having clearly established pay ranges can make your company more attractive to employees and potential employees. Hence, undertake a structured exercise to design ranges that build transparency and create a meaningful experience for your people.
To talk about more ideas on creating workplace trust through equitable pay practices, reach out to us.
