Building Pay Transparency – through Pay Range Design
Laws around the world are changing in response to demands about pay transparency. Employers are being held accountable by legal regulations and employees to be more transparent about pay. Even in states/countries where pay transparency is not a legal need (yet), designing clear pay ranges can help.
Typically, CompTeam recommends three scenarios in which employee pay should increase:
Designing pay ranges can sound complicated, but involves a set of simple, effective steps:
Step 1: Develop an Understanding of the Roles
Each role contributes to your company’s success. Hence, it is important to understand the role and the responsibilities it carries. By classifying roles into a clearly defined structure, you can get a sense of the relative ‘worth’ of each role.
This helps you to hire the right people and enables internal movements and hierarchies.
Step 2: Choose the Right Market Benchmarks
The cornerstone of your compensation strategy and accurate pay ranges is the reliability of your market benchmarks. Relying on freely available crowdsourced data is tempting but it may not provide sufficiently large or accurate sample sizes, and may not be validated against factual data.
It is best to opt for market-vetted surveys from trusted companies, which rely on advanced statistical tools to offer an unmatched level of credibility and reliability.
Step 3: Analyze Current Employee Pay
Review employee salaries in depth because pay is how people get a sense of self-worth and self-esteem. Pay ranges need to reflect this and ensure that people feel motivated and engaged with a figure they consider as fair compensation for their efforts.
Review how your pay practices compare with the market benchmarks and understand the actions you need to take to align with the needs of your people and your compensation strategy.
Step 4: Design the New Ranges
Create the new ranges that align with your compensation strategy and your market positioning. Ensure that the output leads to a more competitive position in the market, allowing you to attract, retain, and engage great talent.
Step 5: Communicate, Communicate, Communicate
Inform all your key stakeholders – leadership, people managers, and most importantly, the people themselves of the changes that you are making.
Before implementing the new pay ranges, onboard people into what is changing and why. Enable managers to have better pay conversations with people and link the compensation strategy with the employer value proposition (EVP).
Step 6: Monitor and Realign
Compensation strategy can never be a ‘fill it, shut it, forget it’ aspect. By the time you start implementing pay ranges, market factors would already be shifting, leading you to be less aligned with the market.
By monitoring and adjusting pay ranges regularly, you can prevent turnover and maintain high employee morale.
Conclusion
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.
Download your free guide to pay benchmarking internal pay ranges here.
About the Author
Sumit Singla
Founder of eleventHR Consulting.
Sumit has been working in HR & HR consulting roles for 16+ years across sectors and verticals and specializes in organization design, wellbeing, storytelling & design thinking, and performance management. In his career with consulting firms such as Aon, Deloitte, and Accenture, he has successfully led programs aimed at total HR transformation for clients. Recently, as Associate Director for India Consulting at Deloitte, he worked with clients on cultural transformation and HR process and policy design. He also organized and spoke at conferences and events about a variety of topics relevant to HR today. Now self-employed, he works with clients across the globe on a variety of HR solution areas.
Howard Nizewitz
Howard’s extensive expertise in compensation management comes with a 25-year track record of implementing strategic and successful compensation programs in the financial services and technology industries with a global and regional focus. His tenure includes positions at Barclays, Citigroup, and JPMorgan. Other areas of expertise include HR consulting, Deferred compensation, incentive plan design, and talent management. If you want to learn more, please contact Howard at [email protected] or schedule a free consultation on the compteam.net website.
