Senior Client Partner
Organizational Transformation
How to Implement Pay Transparency in 5 Steps
Our pay transparency road map guides you through understanding compliance, assessing and adapting pay structure, and implementing your pay program.
Going Beyond Pay Transparency Laws
Job seekers and employees have wanted it for years. Organizations weren’t so sure. But the conversation around pay transparency continues to gain momentum.
It might have started with legislation, as increasingly strict pay transparency laws come into effect in the US, UK, EU, Canada, and Australia. But pay transparency is now becoming a widespread demand among talent, affecting both talent acquisition and retention.
Defined broadly as the practice of openly sharing employee compensation information, pay transparency is about more than legal compliance. It’s about staying competitive.
Unsurprisingly, compensation is a top priority for employees. With seven in 10 firms currently taking a wait-and-see approach to pay transparency, opting for a proactive, well-implemented plan can create a major advantage for your business.
Our pay transparency road map will help you get started.
Step 1. Understand Pay Transparency Laws—Then Go Further
The first step for every organization is to dig into the current or upcoming legal requirements of pay transparency in the regions where your company operates.
Does the law state that you need to:
- Disclose salary ranges on job postings?
- Stop asking applicants for their salary histories?
- Report and share information to current employees on your company’s gender pay gap?
Legal requirements could include any of these points and more, so you’ll need to search the relevant governments’ websites to find out exactly what you need to do to comply.
Next, create a checklist of what you’ll need to do to achieve compliance, says Serkan Sener, a senior partner at Korn Ferry. The checklist should include:
- An overview of stakeholders affected
- Roles, responsibilities, timelines, and milestones
- Policies, procedures, and related documentation you need to update
- Training needed for leaders and HR departments
- A communication strategy, which should include FAQs for employees and managers
Now is also the time to define what pay transparency means to your organization and how it can help you compete.
Although it’s a new way of thinking, many employers are starting to see the business value of pay transparency. By openly sharing salary range information, you can build trust, attract top talent, and promote a more equitable, inclusive workplace.
“When it comes to pay transparency, organizations need to ask themselves if it’s good enough just to be compliant or if they want to leverage it to attract and retain the best talent,” says Donna Herdsman, Senior Client Partner at Korn Ferry EMEA.
Step 2. Run a Complete Pay Equity Analysis
Once you understand how pay transparency requirements will affect your organization, the next step depends on where you are on the pay transparency continuum.
Assess Your Compensation Philosophy
If you haven’t already, you'll need to conduct an end-to-end assessment of your compensation strategy, including:
- Career architecture
- Job descriptions
- Pay data by role
- Pay grades
- Location
This analysis can help you discover gender or other demographic pay gaps and their root causes, such as how a particular group is represented in senior roles, hiring, and promotion practices.
“The guiding principles are transparency, credibility, and trust,” says Yanina Koliren, a senior client partner at Korn Ferry North America. “This is an opportunity to review your entire compensation practice, from reward philosophy to program design and administration, not just pay grades.”
Benchmark Salaries
After the internal analysis, benchmark your pay structure against market data to understand your organization's competitiveness.
Benchmarking is also a great way to demonstrate fairness. “Data helps employers explain any disparities that arise,” says Herdsman. “It can also empower employees to hold their employers accountable.”
Develop Plans to Fix the Issues
Finally, decide how you’ll remediate gaps found in your pay equity analysis. Expect challenges around timing and trade-offs.
Remediation can have downstream effects that require further analysis, adjustments, and budget investment—so consider how your remediation strategy aligns with your overall pay equity and transparency goals and priorities.
“When you fix what’s broken, something else might break down as a consequence,” says Koliren. “A good remediation tool looks at the architecture from end to end. It will tell you how much money you’ll need to spend over what period and how the remediation will affect everyone involved.”
Step 3: Refine Job Architecture
A review of your job architecture is a critical step in your pay transparency journey. You need to be sure that you’ve categorized all jobs into the right grades or bands, and accurately documented the skills, qualifications, and competencies required for each role. “Job levels are a primary driver of pay equity,” says Tom McMullen, a senior client partner at Korn Ferry.
Refining your job architecture involves:
- Getting clarity on what the work is: Define and document each job’s duties and responsibilities, and make sure the job description is accurate and agreed upon by managers, HR and the employees who actually do the work.
- Determining the job’s internal value: Create job grades or bands that reflect what the value of the work is to the company internally.
- Setting compensation: This isn’t just about the market rate, but also deciding what your organization is willing to pay, based on its compensation positioning.
Best Practices to Get Job Architecture Right
1. Value work based on specific criteria
Letting managers decide how much to pay for a role without set criteria is “a recipe for internal inequity disaster,” says McMullen. With set criteria, you have a foundation on which to make decisions about why some jobs are bigger than others. It goes without saying that the criteria should be gender- and race-neutral.
2. Develop consistent structure and processes
Pay transparency isn’t a one-and-done exercise—and there needs to be consistency in how things are done over time. “This is about having the same process from last year to this year to next year,” says McMullen.
3. Provide tools to support information requests
Picture it: Jane in accounting sees her colleague’s job posted with a salary range higher than hers, and she perceives her own work as harder. She’s likely to bring that to her boss—who should have already received training, documents, or tools to help answer such questions.
McMullen also recommends creating channels of communication for all employees. “The flow of info should go both ways,” he says.
Step 4. Refine or Redesign Your Rewards Strategy
The next step is to define your approach to the pay transparency policy in the context of your organization’s total rewards strategy.
Going beyond compliance with pay transparency means sharing not only how you pay employees, but also how you make compensation decisions and where they fit into the overall picture of salaries, benefits, incentives, and reward practices.
Align Compensation to Your Values
If you haven’t already, start to look at how your organization can use benchmarking, employee recognition, and rewards to shape and communicate an equitable employee experience. It’s an opportunity to focus on who you are, establishing a link between your rewards program and your employee value proposition.
In a way, how you design your programs and implement pay equity and transparency becomes a testimony to who you are as a firm.
Focus on Fairness and Consistency
“Consider building a global and transparent job framework and underpin it with an internationally recognized and accepted, gender-neutral, and fair job evaluation method,” says Harm van Vijfeyken, a senior client partner at Korn Ferry EMEA. “This will foster a culture that not only repairs equal pay now but also creates a mindset of fairness going forward.”
Organizations need to ensure the design of their rewards strategy enables the ability to be transparent about pay. That can’t happen if you’re discretionary and inconsistent in design and application.
If frameworks and processes are missing or too loose in areas such as job evaluation, market pricing, base salary increases, promotions, or bonus determination, they need to be improved before the firm can be transparent.
Importantly, explore your existing compensation management systems to make sure you have the right tools and capabilities to administer pay, create job descriptions, model scenarios, and equip your analytics team to stay on top of market trends.
Step 5. Lead, Communicate, and Monitor Changes
Leading an effective pay transparency program involves culture, commitment, and communication.
Internally, use proactive, transparent communication to share the principles and intent around your rewards strategy.
Explain the Process
Be upfront with data analytics and share your action plan with employees. If an employee feels they’re missing out on compensation because of a pay gap, they’ll understandably want to see the gap rectified quickly.
That said, closing pay gaps takes time. Be sure to manage employee expectations about timing and equip managers with messaging that underscores the total rewards strategy—including career development, culture, and other elements beyond just pay.
Reevaluate Regularly
As you execute, continuously monitor and evaluate the impact of pay transparency initiatives on employee engagement, talent attraction and retention, and overall business performance. Adjust activities where needed and keep open communication with employees throughout the process.
Depending on your specific regulatory requirements, set up a process for regular reporting and impact assessments. And review compensation data and practices regularly to keep up with compliance and competitors.
“Even if you don’t have the perfect dataset, be transparent about your data sources and methodology so the information is credible and defensible,” says Koliren. “If you prepare well and follow all the steps, the results will be positive.”
From practical experience, we know that companies that place greater emphasis on empowering HR and leaders tend to perform better in terms of speed of change and employee engagement.
“We’ve also seen pay equity issues resurface due to a lack of understanding of the issue or unconscious bias from managers,” says Sener. For this reason, supporting and enabling management with the right tools helps create a sustainable solution.
Your Pay Transparency Journey Starts Here
Investing in a pay transparency program now will create lasting value for your business for years to come. By working through the four steps, you can proactively prepare for upcoming regulations, build competitive advantage, and strengthen your organization’s position as an employer and brand committed to fair practices.
Get started with our webinar, How to Lead Through Pay Transparency.
Related Insights
-
Insights to your inbox
Stay on top of the latest leadership news with This Week in Leadership - delivered weekly to your inbox.
