Pay Transparency 2.0: How Total Rewards leaders move beyond compliance

Here in coastal CA, Compa knows all about waves. After the first one passes, there’s likely a bigger set behind it.

This idea guided our latest webinar, “Pay Transparency 2.0: How Total Rewards leaders move beyond compliance.” Alongside Compa’s Charlie Franklin, Cassandra Lammers of The New York Times shared key takeaways from the first wave of pay transparency and what the next wave holds (hint: it’s beyond basic compliance).

Recap our summary and full transcript below, or jump back into the recording here.

What was on the table?

• How 2022 saw a groundswell of pay transparency 1.0 implementations in the US and where we’re at today, with more than half of all employees working in states with pay transparency laws
• Learnings from 1.0 and areas where companies can make adjustments going into 2.0
• Tips for companies looking to evolve narrowly or broadly into their pay transparency 2.0 journey

The new social contract between employees and employers

While the earliest pay transparency implementations were prompted by legislative and regulatory requirements, a more impactful shift is happening in the social contract between employees and employers. Life, in the wake of lockdowns and COVID, is changing so quickly that it’s affecting people’s decisions to work somewhere or not. 

Particularly, younger candidates are more reluctant to join a company if it’s not fully transparent. This commitment to openness to new and existing employees can be a form of goodwill for companies. After all, the grassroots demand for transparent information from candidates, and companies’ response to such, can be a big factor in attracting or losing talent.

Pay transparency in a soft market

Even in a soft market, candidates still care about transparency, which remains a key metric in their decision to pursue opportunities or not. Now that more than half of US workers are covered by some pay transparency legislation, the conversation around pay has shifted from under the table to out in the open, leaving employers accountable for transparent dialogue.

Pay transparency with internal employees

Companies with well developed job architectures and compensation practices will have an easier time dealing with internal employees than those that don’t. For these companies, being transparent will mean layering in additional elements of trust, engagement, and respect, particularly if their general vision and communication styles are transparent too.

According to Cassandra, pay transparency is an opportunity to show employees how they fit into the bigger picture, which ultimately reduces noise about whether someone is being paid fairly. It also causes companies to think big in terms of transparent culture.

Determining pay ranges

When determining pay ranges, there’s no magic bullet. Some companies may want to address issues openly and some may not. Questions to ask are:

• Will ranges be narrow or wide?
• Will ranges only include base pay?
• What about total rewards and other elements of pay? 
• What happens with bonuses?
• What happens with equity or long term incentives? 
• What happens with other rewards, benefits, recognition, trips?

Try thinking about pay more broadly, as a complete statement of an employee’s value. Whatever a company decides, it should treat employees and job candidates the same. Specifically, as Charlie mentions, it’s important to treat employees as “subscribers” who are regularly considering whether to re-up or not. Communication and engagement don’t end when a candidate accepts an offer — they continue.

Diversity, equity and inclusion

A full consideration of pay transparency should include parallel topics like equity, diversity, and inclusion. Taking a concerted view, companies should understand the relationship between these levers and know when one is pulled, others should move with it.

Pay equity and exceptions for unicorns

One sticky issue is that different places have different legal constructs around pay equity. The differences mainly exist around which factors can legally be used to differentiate compensation for two or more individuals who perform substantially similar work. 

Laws generally allow for specific and legitimate factors to be included that allow for differentiation (e.g. education, experience, and special skills). Applying these consistently, and being able to document them in administrative audits, is critical for compliance and the new social contract.

The more companies approach total rewards holistically, the better equipped they’ll be to brace for unknowns and quickly remedy discrepancies. Since employees naturally tend to be high or low performers, individual performance will be the biggest differentiator in overall pay.

Pay transparency 2.0

Cassandra, she states, believes in being as transparent as possible. Ideally, this involves a public portal or website where employees (and their respective spouse, significant other, or family member) can view pay from top to bottom, including:

• Pay
• Geographical differences
• Bonus system
• Equity practices
• Life insurance
• Disability insurance
• Health benefits and required contributions
• 401(k) and matching contributions
• Parental leave
• Vacation policy
• Training opportunities
• Education reimbursement

This level of transparency affords employees a closer sense of comfort and confidence in an employer that knows how to operate transparently, especially at a global level. Each employee should be able to view their pay in the context of complete value offered. This is called the “highest common denominator” approach, Cassandra says.

Combating compensation misinformation

Sadly, crowdsourced information is everywhere, and it can be easily manipulated or totally erroneous. Combating compensation misinformation requires: 

• A principled approach to compensation
• A clear compensation philosophy
• Communicating that philosophy
• Educating candidates and employees around that philosophy
• An up to date understanding of market dynamics

WIth these elements in place, a company can more easily and openly explain why an offer or pay package is fair, competitive, and relevant.

Having comp discussions early in recruiting

Recruiters should be talking to candidates about compensation early and often. It helps teams narrow down the field quickly and build trust early. Organizations that establish trust at the beginning of a candidate’s journey set clear expectations. When an offer is made, there are no surprises.

Volatile markets and equity packages

Noting the reality of risk, Cassandra believes in looking at equity packages in the long run. When companies are consistent and equitable in making grants, at the time they make those grants, the rest falls away. While it may be tough to deliver this message, it’s part of the risk-reward pull in stock-based compensation.

About Cassandra Lammers

Cassandra is a total rewards leader who’s designed, implemented and administered a range of global compensation and benefits programs. Focused on workplace equity, she maintains a hands-on approach to market competitive programs and has developed and implemented best-in-class job markets, architecture, and career path frameworks.

Her work centers on building strategies that promote consistency, transparency, equity, and total rewards. Cassandra has 18 years of experience in total rewards leadership at The New York Times, Audible, Samsung, GE and Lucent Technologies.