Compensation Transparency: To Share Or Not To Share

Shakespeare, if he retired as a playwright and took a job in human resources, might have said the following:

‘To share salary, or not to share salary, that is the question:
Whether it is nobler in the office to suffer
The slings and arrows of transparent compensation,
Or to take arms against a sea of spreadsheets
And by opposing, end unfairness
To work, to sleep, no more.”

All poetic license aside, “to share or not to share” is a critical question for all people teams. The widely debated issue of compensation transparency has never been more relevant than it is today.

Pave’s community of compensation professionals gathered recently for our webinar, The Five Levels of Compensation Transparency, and we asked this question to a few hundred people ops pros around the world:

What does your company share as it pertains to compensation bands?

‍Before we get into the data, let’s take a look at the options. Think about where you company stacks up:

Level 1: I share nothing, employees know what I’m paid and that's it
Level 2: I know my compensation and how I can think about equity 
Level 3: I know my compensation and where I sit in my compensation band
Level 4: I show all the job bands in the job family
Level 5: I know what every function in the company makes

Here’s the data from our webinar participants:

• 44% said, “I know my compensation and how the company thinks about equity.”
• 27% said, “I share nothing, employees know what they’re paid and that’s it.” 
• 6% said, “I know what every function in the company makes.”
  

With that, let’s dig in a bit deeper to answer the question, “to share or not to share.”

How to Build a Comp Philosophy From Scratch

Launching a compensation strategy can be overwhelming, but it’s a crucial part of ensuring your culture is intentional and rewards the behaviors you want to see. A compensation philosophy outlines the approach and reasoning a company uses while making compensation decisions.

Torie Runzel, VP of People, Divvy Homes, is passionate about empowering individuals at all levels. She builds people functions where team members feel supported and are able to develop their careers. Ultimately creating a culture where people love coming to work every day. 
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On the topic of building a cohesive comp philosophy from scratch, Torie suggested that people teams ask three key questions:

“First, are we doing performance management well? This means employees are graded fairly on the work they’re doing. Next, do we have a leveling structure that outlines competencies? This assures the company has comp bands that make sense and are market accurate. Finally, do we have a philosophy in pay practices that are shared and aligned? This allows you to identify any inequities and help managers adjust compensation accordingly.”

Once you’ve answered these three questions, the next step is to leverage the right technology so you can share where people actually are within their band.

Without such a platform to help you communicate compensation across the organization, all the diligent effort you put towards a comp philosophy will have been in vain.

New Employee Expectations Around Transparency

The pay transparency debate has reached center stage, and many companies are scrambling to understand how transparent they are and should be. Naturally, companies have varying levels of transparency depending on how strong their foundations are, how confident the company is, and how prepared and empowered their managers are to have these conversions.

Brit Malinauskas, VP, People & Workplace, HOVER, is entrusted with maintaining the happiness of employees, whether it be through perks, benefits, or recognition and awards. 

On the topic of whether companies should openly talk about merit, bands and other behaviors, Brit gave useful historical and cultural context around what employees expect in today’s market:

“Regardless of whether a company posts their strategy internally or externally, having it is the most important. Employees more than ever are demanding an understanding of fair processes internally, so it’s amazing that some companies are publishing transparently. Human resources has gone through a significant transition with more open source sharing, since the field wasn’t transparent like that ten years ago."

If your company isn’t there yet in its lifecycle and doesn’t have the infrastructure to be as public as others, there’s nothing wrong with that. 
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Outlining your comp practices for what employees can expect still matters. Check out Pave’s Comp Philosophy Guide if you’d like to see a general curriculum for how to structure such a program.

Forming A Comp Strategy That Preserves Fairness

Gerald Lou, a consultant who led teams at Tesla and Netflix, now works with growth stage companies to build scalable, bespoke compensation programs which allow them to grow their businesses and teams.

We asked him how a company’s comp cycle strategy might land everyone in a fair place. Gerald’s answer about ensuring consistency with managers was both realistic and empowering:

“It’s inevitable in hot talent markets that everyone won’t come in at a fair place. But a good comp philosophy strives to get everyone into a fair place eventually. Employees might not get there in one go, but they will over time. For example, imagine one person came in low in the band, and another one came in high in the band. If they both meet expectations for the same performance, then the person who is higher in the band gets a lower increase versus the other. This naturally creates the hump in a normal distribution, which assures you’re pulling everyone in.”

Pave can best support this very issue in your next comp cycle. 

The recommendations that you put forth are based on a matrix of performance scores, as well as where an employee is in their band. And then promotions, ranges, and budgets are based on such calculations. 

Doesn’t that sound like a better system than what human resources did in the past? Dividing up equally based on headcount, total comp, and so on, wasn’t an equitable approach. 

And thankfully, now there are tools to help you build a comp strategy that preserves fairness.

Creating Offer Letters That Truly Show Value

Recruiters lose out on talent to competition because candidates don't understand the total value of the offer. Providing something more emotional from an offer letter standpoint can help close that knowledge gap. 

Strategically, the more effort you put into explaining to a candidate and employee what their equity is valued at, what it could be valued at, and how you think about it as a company, it shows you’re actually putting thought into it. Not just checking a box.

Gerald Lou brought the following perspective:

“How could a candidate even evaluate the offer unless they understood terms like preferred shares, 409A valuation, dilution and ultimate liquidity strategy? People need an interactive asset to reinforce the upside of joining a new team. Otherwise it’s hard to calculate what the offer means to them.”

Visual offer letters deliver a clear narrative around it and having an opinion as a company, and training recruiters on how to talk about it is really important. They enable your company to educate all candidates, not just candidates that ask. That’s equality.

Sadly, so few people have an accurate understanding of equity and shy away from it. People ops teams need to make sure total rewards are part of the conversation. The visual offer letter is an engaging tool that they can play around with to learn more about. 

If you want to elevate your communications above the classic impersonal form letter or pdf, then the question of “to share or not to share '' is a moot point.

Once you’ve found the right person, put a punctuation mark on the candidate experience with a celebration of human potential, performance and compensation.