Companies Look to Make Pay More Transparent

Study suggests most companies did not approve major pay raises last year, but top-performing companies were far more likely to have boosted compensation.

Good news: Businesses that are doing well appear to be sharing the wealth. That’s one of the ways to interpret a study on compensation practices by PayScale.

The survey of 7,700 business executives, HR managers and other corporate leaders involved in setting compensation finds that more than a third of companies gave at least some workers salary increases of more than 10% in 2016. Another 11% say they gave increases greater than 5%.

While that finding suggests that most companies did not approve major pay raises, the survey finds that top-performing companies were far more likely to have boosted compensation for employees. That makes sense; companies that made money had more to distribute to their workforce.

Top-performing companies are also more likely to say they train managers to discuss pay with employees and to purport to pay their workers fairly. Indeed, those running underperforming companies are often keenly aware that their employees are underpaid but feel they can’t do anything to remedy the situation until profits improve.

How are large companies determining how much their employees deserve? The survey shows that most try to keep up with local and national pay trends by conducting an annual analysis of compensation for the “full talent market.”

PayScale says the results also suggest more C-suite executives are beginning to get intimately involved in setting compensation out of a sense that it is an important part of business strategy that cannot be the exclusive domain of the HR department.

Another trend that bodes well for employees who feel underpaid is pay transparency. Given a 5-point scale of how much they disclose about compensation to workers, one-third of companies gave themselves at least a “3” rating.

On one end of the spectrum are companies where workers know little more about company compensation other than what they see on their own paycheck. On the other end are “radically transparent” employers that inform all employees about what everybody is making. In between are employers that may offer employees information about the salary range for their position or the market data they use to set wages.

“Our research indicates that a lot of respondents are interested in moving up the transparency spectrum,” Tim Low, senior vice president of marketing at PayScale, explained in an interview with BenefitsPro.

The “radically transparent” employers still represent a distinct minority that is heavily concentrated in the tech sector, he added.

While Low said that total transparency may not be the best bet for every employer, offering more information that helps workers understand the reasoning behind their pay structure is typically beneficial.

“You don’t necessarily have to be at a level 5 to experience the benefits of pay transparency,” he explained. 



Originally published on BenefitsPro. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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