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Should Organizations Make Their Pay Transparent?

As diversity and inclusion, the #metoo movement, and pay equity laws continue to impact all organizations, pay transparency becomes a talking point. An important question that many are still trying to answer is – should salaries or salary ranges be shared? It depends on the organization and its readiness and comfort zone. As states continue to address pay inequities by making laws, many organizations will be obligated to perform an “inspection underneath the hood”. It is recommended that organizations back up their position as an equitable institution with fact. If ever in litigation, proof and documentation showing research about salaries will be necessary.

At minimum, organizations should recognize that pay inequity exists. There is much information that supports this. According to a 2018 report from the American Association of University Women, white women in the U.S. on average earn 79% of what white men make, while black women earn 63% of what white men earn, and Native American and Latino/Hispanic women earn an even a lesser percentage. Given that many non-profits are working toward social justice, an organization should consider performing a review of its compensation structure to determine if any inequities exist, and if they exist, to adjust them. Once this is done, an organization can start to have discussion about whether it is ready to be pay transparent.

This kind of openness can make any organization uncomfortable, especially if it is traditionally a very conservative one. Some fears are warranted, for example, complaints from disgruntled workers or jealousy between colleagues about pay differences may likely happen. But if an organization is prepared with its reason for any differences in pay, it shouldn’t be fearful.

Pay transparency can be impactful to a lot of people by rebalancing the pay inequities among genders and ethnicities. For example, studies have shown that men tend to negotiate salary increases more often than women; therefore men may potentially be paid more than women even if they are performing the same job. Being pay transparent can set pay inequity straight. Although currently there is only anecdotal evidence, pay equity can make employees happier because openness and honesty about pay and how pay is achieved can help employees to set and attain their goals. Lastly, being pay transparent can increase your candidate pool and attract a diverse workforce because candidates will have a clear picture of your organization’s salary range, know how they can achieve their desired salary, and be confident their pay will not determined by gender, race, age, or ethnicity.

Being pay transparent has to align with your organization’s strategy. It is not as simple as making the salary ranges available from one day to the next. An organization should consider performing an analysis and have a clear scope of the work defined. Setup clear objectives and measures to determine if pay transparency works with retention, recruiting, diversity, etc. Having this information clearly understood will enable both the employee and organization to have meaningful discussions about pay.

Contact a Kiwi Partners' HR Advisor if your organization needs assistance with compensation strategy.

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