Compensation – How Transparent Should We Be?
By Janet Salopek, President and Founder, Salopek & Associates
Follow-up blog post for March 12 webinar
The workforce today expects to understand how they are compensated and if they don’t know, they will ask! Are you ready for the question? And what will you say? Transparency is valued by our employees – it is how we attract, motivate, and retain them. If you are not prepared for transparency around compensation it will have a negative impact on your people. Having said that, it is important to make sure you are communicating and being transparent on the right things when it comes to the topic of compensation, as some things should be shared and others should not! Look to your compensation philosophy, which forms the foundation for your compensation program, for key messaging to share with your employees around how you make decisions with respect to their pay.
The Compensation philosophy outlines your organization’s approach to compensation. It states: what is important with respect to compensation (for example, internal equity vs the external market); what components make up the compensation in your organization (for example, base pay, group benefits, bonuses); who you compare yourselves to with respect to the market; how you position yourselves in the market; how jobs are valued; and, whether pay is linked to performance. All of these factors are relevant and important for your employees to know so they can fully understand how you arrived at their compensation. Practically speaking, what does this communication look like and how transparent should we be? What should or should not be shared with respect to key messaging?
Sample key messages that are worth sharing if it aligns with your Philosophy:
Internal equity and being fair is important to us; however, we must pay attention to the market to make sure your compensation is competitive. This message represents an organization who has a compensation philosophy that states that they will pay people relative to the market, and as a result, some positions will be get paid more than others because the market demands it.
We want to ensure your total compensation is competitive and as such we monitor salary & wages, benefits and incentive pay (if applicable) of organizations that are comparable to ours. This message represents an organization who wants to ensure competitive positioning of total compensation and are transparent to their employees that they have a process to compare compensation with similar organizations, which might be local, provincial or national depending on their compensation philosophy.
Individual and team contribution to the organization is important and as such we will compensate employees based on performance. We have a performance management program that provides feedback and your compensation will be determined based on this process. This message represents an organization who has a performance management program that is well designed and communicated, and Managers have been taught how to use it. Only organizations that are confident in their process and their managers’ ability to assess performance should contemplate this approach.
Some of our positions are paid more than others, and this is due to the market and other risk factors. This message represents an organization that has determined that all positions are important to its success; however, there are some positions that they need to compensate at a higher level because without them the organization may be at risk.
Some information with respect to compensation should not be shared and there is no benefit to transparency in the following examples:
Individual salary information and specifically the question – why does Mary get paid more than me? Personal compensation levels need to be confidential as privacy is legislated and it is just the right thing to do. Employees and Managers should not be discussing the salary of others as we know it breaches privacy legislation and is a demotivator for everyone. Be transparent to your employees and let them know that you just won’t discuss the compensation of others – explain why and expect that they respect confidentiality as well!
Publishing of salary scales when you have only one person in the job, or you have not explained your compensation program. Generally, we encourage organizations to publish job ranges so employees understand and are motivated by career and job progression. However, if you are a small organization and you only have one person in a job, or you have not properly communicated how you determine salary ranges, you may want to reconsider this approach; it does depend on your organization. An alternate approach is to first educate your people on the process of developing the ranges, and then consider providing the information on a need to know basis or communicate broader ranges for job classifications. Protecting the confidentiality of compensation for individuals who are the only ones in the pay grade is very important.
Transparency with your compensation program and sharing the guiding principles on how an organization makes decisions on compensation is encouraged and is a powerful strategy to attract, retain and develop your people. Employees today decide to stay with organizations that teach their managers to be transparent and compensation is no exception. However, certain compensation information is confidential and can’t be shared – it’s the law! Look to your compensation philosophy and make sure your managers understand the key messages that flow from this statement. Agree on what the key messages are and then make sure they share them with their staff.
Are your compensation practices fair and competitive? is a CCVO Capacity Building webinar. These webinars cover topics of interest to nonprofit professionals, and will include presentations on public policy, leadership, human resources, and technology - all at no cost. Listen in to learn, and build your capacity in the areas you’d like to know more about in order to be more effective in your job, for your clients, and the community. Upcoming webinar topics are listed below. Please visit the CCVO website for more information and registration details.
Raising the Bar on Partnering | Thursday, May 14, 2020
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