With salary transparency laws sweeping the country that has prompted many employees to talk about their salaries, companies are quickly learning how their employees feel about what they're paid.
The verdict: nearly 70% of the workforce is not happy.
Only 32% of workers feel like they're paid fairly, according to a Gartner survey of roughly 3,500 workers conducted in November.
The percentage of workers who believe they're paid fairly "is much lower than we thought we'd find," said Tony Guadagni, senior principal for research in the HR practice at Gartner. "We found that people's perceptions of pay are often divorced from actual compensation. How a person feels about their organization broadly is much more influential in their perception."
With recession concerns and inflation impacting salaries and raises, compensation and leadership experts offer advice for what companies can do to help their employees feel fairly compensated and increase trust in the organization.
"2023 is going to be the year of retention," said Ruth Thomas, a pay equity expert at Payscale, a compensation software and data company. "Establishing a level of trust will help employees deem that they're being paid fairly."
Match the market and pay equitably
A company's success with compensation starts with paying internal employees and new candidates the market rate for their positions, and then basing future raises on performance, said Mary Rizzuti, a partner at Compensation Resources, a human resources and compensation consulting firm.
"Conduct an internal equity study to see if there are gaps between employees in similar positions with similar skills," Rizzuti said. "If there is a gap, you have to budget and forecast your compensation dollars to match employees across these positions."
Equitable pay changes over time, and companies need to be open to continuously reviewing what they're paying their employees, said Aaronde Creighton, chief diversity officer at the Leadership Circle, a business leadership development firm.
"There are opportunities for companies to constantly recalibrate," Creighton said. "Understand that the skill set they're hiring for and the skills that they have internally need to constantly be reviewed for what the market is bearing for those types of roles."
Whether it's required by law or not, companies should outline their pay structure for all positions, so all employees understand.
"It should be easy for people to see the range that they can expect for their current position if they're an internal candidate, and external candidates need to have that same information," Creighton said.
Creighton said this salary review should happen every few years to help prevent communities, such as people of color and women, from being paid less over time.
"Make sure that internally there isn't any disparity or discriminatory practices," Rizzuti said. "After you've done all of that work, then the next key ingredient for a company is having a good communication policy."
Communicate your pay structure
It doesn't cost much for a company to be transparent with their employees about how salary ranges are determined, Guadagni said, and it doesn't cost anything just to communicate those determinations outward.
"Communication has the greatest impact on both restoring an employee's trust in the organization and improving perceptions of pay fairness and pay equity," Guadagni said. "Open communication also tends to be among the things that are the lowest risk to the organization."
Guadagni said companies that communicate how they're at least trying to compensate employees fairly have increased trust from their employees.
"We found one of the most impactful things a company can do is just say that they strive to pay people fairly, and go a step further to say what they do annually to make sure people are paid fairly," Guadagni said. "That's enormously impactful in shifting those perceptions of both organizational trust and pay equity."
Rizzuti suggests companies schedule meetings where they share their compensation policies.
"Some companies call these town halls, or touchdown meetings, to give employees a 'comp one-on-one,'" Rizzuti said. "It answers questions like: How is compensation determined? How do we layer in performance within that compensation? It's a roadmap for you to explain how you've arrived at what everyone is earning."
Ask your employees what they value
As the last two years have shifted employees' expectations for more flexible work options, employees also desire a holistic compensation package that offers health benefits, investment options, educational stipends, and career progression opportunities.
Rizzuti said companies should ask their employees what they value as a benefit, and then offer different opportunities based on what their specific employees want the most. Companies can usually start with an engagement survey, or a simple poll that asks employees, "What's important to you?"
"That's where fairness and the feeling of value comes in for employees," Rizzuti said. "It comes when employees know that their employer asked them what's most important to them and then delivered."
Rizzuti said the impact of these benefits help employees feel fairly compensated, even though it's not directly related to salary or raises.
Thomas said one of the top reasons that employees leave a company is because there's a lack of career progression. If a company doesn't offer opportunities for growth, then employees will feel increasingly underpaid over time.
"I anticipate that annual reviews and budgets are not going to meet employees' expectations who want to get raises this year," Thomas said. "For employees who feel like they're paid unfairly, then the main way they're going to progress their pay is moving up in the company."
Companies should make it clear if employees gain certain skills, it means moving to certain positions, Rizzuti said. This combined with transparent salary ranges is a holistic way for companies to alleviate feelings of pay unfairness.
"An employer should communicate that they're willing to invest in employees' career progression,'" Rizzuti said. "It's nurturing and what we call 'internal recruiting.' Employers should have this holistic plan, and invest in employees to move their career along."
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