Implementing pay transparency

Pay transparency is a strategy that can impact talent attraction, employee engagement and work culture . If your organisation is thinking of implementing pay transparency, following the best practices will help organisational leaders navigate the change and respond to concerns that could be raised by future candidates and current employees.

The pay transparency movement is globally gaining momentum. Many talent acquisition teams are now implementing pay transparency, understanding requirements and quickly adopting tools and processes, but that's just one small piece of a much larger puzzle. To successfully implement pay transparency, organisational leaders need to plan carefully, manage the change thoughtfully, consider the work culture they want to sustain or build and, perhaps most importantly, proactively communicate with employees and managers about what pay transparency means for them.

To identify best practices for rolling out pay transparency, we spoke with three leaders at ADP, Jason Delserro, Chief Global Talent Acquisition Officer; Deb Hughes, Senior Vice President HR, Communications and Change Management, and Kristen Appleman, Senior Vice President of Health, Wealth, Tax, Compliance and Business Development. They offered their wisdom and expertise on this new challenge.

What is the value of pay transparency?

Understanding the purpose and value of pay transparency can help organisational leaders build a strong foundation on which to build their programs and processes. Ultimately, pay transparency is about equity, Hughes explains.

This only works, of course, when employers use pay transparency in the right ways. Delserro cites complaints from job seekers about employers posting "super wide ranges that tell us nothing." That's a sign that the organisation's approach to pay transparency may lack authenticity. Delserro suggests that employers look for ways to "balance what you're putting out there with being sensitive to your employees."

Used correctly, pay transparency practices can help organisations attract better candidates and streamline the screening process.

"Applicants don't want to waste your time if their expectation of a wage or a salary is not within range," Appleman says, "and that can be difficult to get to very quickly without pay transparency. You want to know not only does this person have the skills and experience for the job but whether they're going to be in a range that you can afford."

Best practices tips for implementing pay transparency

The journey toward pay transparency may look different for every organisation, but there are key steps every employer should take to set off in the right direction.

1. Conduct a pay audit

It's ideal if organisations can do a comprehensive pay audit to address any existing inequities before pay transparency practices begin. It can be difficult to successfully implement pay transparency without understanding your starting point. Organisational leaders need to be able to take on pay transparency practices with the confidence that their employees are being paid fairly.

Delserro notes one concern that employees could react to pay disclosures by saying, "I'm a little bit below the midpoint. What does that mean about my performance? What does that say about me as a person?" For this reason, organisations might consider looking at pay equity as part of an annual focal-point review. Performing an audit before implementing pay transparency can uncover "inequities that were perhaps missed, which creates an opportunity to right-size people and make sure that we're paying them fairly," Delserro explains.

The spotlight on gender pay equality has intensified in Australia with the introduction of new legislation by The Workplace Gender Equality Agency (WGEA), commencing 1 August 2023. Employers with more than 100 employees are now required to report on gender pay gaps, reduced from the previous threshold of over 300 employees. Many organisations, through this legislation, will be actively conducting a pay audit, providing many with an opportunity to consider introducing pay transparency, where they may not have done so previously.

2. Deliver transparent communication

Before, during and after the rollout, organisational leaders need a clear communication plan that includes formal messaging as well as guidance for one-on-one conversations. This is a crucial part of successful pay transparency implementation. Anticipating employees' questions and concerns is key in guiding communications, particularly when an appropriate pay range for a given location exceeds the maximum range for employees in another area.

"Say we have an employee who works one state, making X amount," Hughes says, "and we post a national pay range where they're not even at the minimum of the national range , and there's another employee who's performing that role in another state. That range might work perfectly for one state, but without geographic context, those are the conversations that are going to be really difficult."

It's a good idea to prepare leaders with education and talking points to help them navigate these concerns.

3. Fuse pay transparency into the work culture

Rolling out pay transparency practices means change, and because it's tied to employees' earnings, this particular change is bound to inspire emotional responses. By planning the implementation thoughtfully and crafting compassionate communication around this change, organisational leaders can answer questions and allay fears before they arise in many cases.

"Working with an external HR consulting firm and tapping into their HR expertise can help with this," Appleman advises. "They can help you evaluate your culture. What are the things that you're doing? How do you show or communicate things or train those that are doing interviewing in a way that is going to help candidates and employees feel excited and engaged?"

4. Set goals and measure your progress

You'll want to have ways to measure compliance and accuracy, Hughes says. For example, you'll need to know if your job postings and internal and external processes abide by Australian employment laws. In addition, it can enhance your organisation's pay equity approaches if you establish a system that helps you leverage the insights you gather along the way.

"Consider setting up feedback loops to understand the sentiments of your leaders, candidates and employees," notes Hughes.

Gather input on your leaders' ability to articulate why employees get paid their salary amount and how much employees understand the rationale. Asking these kinds of questions can uncover disconnects between your pay transparency philosophy and the stakeholder experience, she adds. Checking on these sentiments regularly provides insights to offer additional manager training and leader support and a higher likelihood of addressing and correcting any confusion before it affects talent attraction or employee retention.

5. Striving for pay transparency success

As pay transparency is becoming the norm in more organisations, employers are better advised to investigate how this will improve their employer brand. It's important to get it right. As adoption continues to expand, organisations that embrace pay transparency practices thoughtfully and intentionally — with a clear understanding of pay equity among employees and sentiments around new practices — are likely to come out ahead. Incorporating pay transparency into the organisational culture in authentic, organic ways will help employees adapt to the change and allow organisations to reap the many benefits pay transparency has to offer.