Your pay brand is what employees and candidates believe to be true about your organization’s pay and rewards practices. Rewards include anything deemed valuable by employees including base pay, bonuses/incentives, growth opportunities, meaningful work, benefits and perks, recognition and more.
Employees’ beliefs about your pay practices may or may not be aligned with your actual practices. For example, even if your company leads the market in comp and benefits, some employees may still believe they’re underpaid.
In today’s highly competitive market, it’s going to be increasingly difficult to attract top talent or garner employee loyalty without a compelling pay brand. Yet, creating a compelling pay brand isn’t something you can do overnight. And if you’re not careful, you could make costly mistakes that can shift your compensation spend — often a business’ biggest expense — from a motivator to a demotivator.
Let’s take a look at some practices that can damage your pay brand.
1. Simply following the market
Some organizations think getting pay right is about finding market data and then tracking the market with their compensation. These organizations haven’t made a lot of intentional decisions about how and why they pay the way they do.
The truth is the way you pay sends a message to employees about what your organization values and whether you care about them. You can’t stand out by following the pack. And you also run the risk of overspending for certain positions and becoming uncompetitive with others. At a time when job seekers have many choices in terms of where they commit their talents, why would they choose you?
At this time, it is paramount to put a stake in the ground. Decide what you value as an organization, what you want to reward, and what your unique selling points are to employees and prospective candidates. Think about how you can align your rewards to your company values. Then, take all of these answers and incorporate them into a formal compensation philosophy statement.
Example Companies That Are Breaking Out From the Pack
Everyone knows wages tend to be low for retail workers and those in the food & beverage industry. Many employers pay their entry-level associates workers just barely above minimum wage. Yet, multiple brands, including Costco, Gap Inc, Patagonia, Trader Joe’s’, In-N-Out Burger, Chobani and others have decided to buck the trend and pay their workers a living wage. A living wage is one that covers the basic necessities: food, water, housing, health care, education, clothing, transportation and child care, and the amount varies by location. Many of these businesses have gotten public recognition for their commitments.
For example, Chobani, the Greek yogurt brand, not only pays workers in its upstate New York Factory over twice the minimum wage, it also has an equity sharing program in which employees collectively own 10 percent of the business. The company allotted shares to its employees based on tenure, reportedly helping some of the company’s longest serving employees become millionaires.
Hamdi Ulukaya, CEO of Chobani, photo from Twitter
Additionally, effective in 2017, Chobani implemented a paid parental leave policy, offering 100 percent paid parental leave for six weeks for all full-time hourly and salaried employees who have completed at least 12 months of continuous employment. The program extends to both mothers and fathers for the birth, adoption or placement of a foster child into the home.
Because of how it treats its employees, Chobani has consistently been recognized as Great Place to Work and in 2017 was recognized by Fortune as one of the top 50 companies changing the world.
2. Not thinking about pay or talking about pay as a total package
Credit: Quotefancy
If you’ve done the hard work of creating a fair and competitive rewards plan, you want to make sure employees value the rewards elements appropriately. Yet we know employees tend to undervalue their compensation package. In fact, only 22 percent of employees in 2018 believe they’re fairly paid.
One reason there is a perception gap is because organizations are not talking about pay as a total package. Besides base pay, you’re also spending a lot on benefits and perks. You may provide awesome benefits like unlimited PTO, flexible work schedules, professional development courses, access to coaching and an entrepreneurial culture. When you talk about compensation, it’s important to talk about it as a whole package. If you don’t talk communicate all the value components you provide, employees will not realize or appreciate all the ways in which you’ve invested in them.
3. Not Being Transparent Enough With Employees About Pay Processes
Here’s the other reason why so many workers think they’re underpaid: most organizations are still keeping their pay process a secret from employees. In fact, nearly half of all organizations we surveyed in 2018 told us they’re only telling employees what they make plus when they receive their paychecks.
Of course, it’s reasonable to be concerned about reactions from workers when you do share more information. For example, if you decide to share the range with employees for their position, it’s possible employees will share this information among themselves. Someone may find they’re paid less than someone else, even though they’re in the same role, and get upset.
But we believe there are very compelling reasons for becoming more transparent. First, if you’ve already done all the work to ensure your pay is externally competitive and internally equitable, why would you want to hide this great result from your employees?
Additionally, employees today increasingly expect to understand how and why they’re paid the way they are. Millennials — now about 50 percent of the workforce — do not view pay as a private matter and they’ve got all kinds of questions on their minds, such as:
- When can I expect a raise? What amount can I expect?
- What’s the criteria for getting a raise or a promotion?
- How am I paid compared to workers in similar roles within the organization?
- How am I paid compared to others in my role outside of my organization?
- What’s the range and the ceiling for my current role?
If questions like these aren’t answered, workers will spend energy wondering if they’re paid fairly. If they’re not certain your company is doing right by them, they will be restless and quick to jump ship when a better opportunity comes along.
At this time, the best thing you can do is to be proactive in your communication. Once you’ve ensured your pay practices are consistent and equitable, share your methodology or rationale for pay decisions with your employees. For example, you may tell employees how you look at the market, how you compare yourself against the competition, what criteria you use to make base pay increase decisions and what data sources you use to price your jobs.
You shouldn’t share everyone’s salaries all at once. We recommend taking a phased approach. For example, if you want to share employees’ pay ranges and where employees’ pay falls relative to the range, you should first conduct an internal audit to make sure your pay is competitive to companies your size and fair in terms of pay by gender and other factors. If you plan to have managers share pay ranges with employees, you’ll want to make sure managers are trained in answering common questions employees have about pay.
Check out this article to figure out the right level of pay transparency for your organization.
Glitch Leans Into Pay Transparency
Jessica Moy, Head of People and Culture, and Anil Dash, CEO
Glitch (formerly known as Fog Creek Software) is a company that values transparency. In 2018, they decided to share each position’s salary range with their employees. They connected this move back to their company values. Glitch CEO Anil Dash said he wanted to share salary ranges with employees so they are empowered to make good decisions. Here’s what he said in a Medium article:
We talk a lot about how everybody at the company should spend the company’s money as if it were their own. To do that right, we have to give everybody enough information to know what our people cost.
The company’s head of People and Culture — Jessica Moy — also cited the general discussion and changes in the tech workplace culture over the past few years as a reason for keeping salary transparency top of mind.
A huge topic in the the workplace in general is why don’t we know what other people make, why it’s a bad thing, and how [salary transparency] can help, especially when we’re thinking about the general wage gap between minorities, women, and other underrepresented groups. With that in mind, [we] wanted to really embrace diversity and inclusion, and realized that a really key part of that was to make salary transparency a priority. It’s definitely all related.
Yet, Glitch didn’t become fully transparent overnight. Before they told everyone the range for each position, they first conducted an internal audit to make sure they were competitive to companies their size and fair in terms of pay by gender and other factors. They also surveyed employees to figure out what employees wanted to know, so they could anticipate reactions.
4. Ignoring potential pay equity issues
At this time, pay equity isn’t something you can ignore. Salary information is easy to access online and legislators are reinforcing the right of employees to share pay information. If someone is being paid less than their co-worker in the same role, they’re very likely to find out the truth.
Additionally, state-level legislation around equal pay is becoming more stringent. These laws have expanded requirements for defensible, “bona fide” factors for differences in pay, and increased penalties and damages for violations. These newer laws have also made it easier for employees to bring about lawsuits for gender/race based pay discrimination.
It is in your organization’s best interest to proactively understand if pay disparity exists within your firm, admit the issues if you have them and fix them as soon as you possibly can. When an organization is candid with their staff about issues they discover and makes good-faith effort to remedy the issues, employees will be understanding and respect that you made this choice. In fact, this move can even help you garner greater respect from potential candidates and the public at large.
Salesforce understands and embodies this idea. In 2015, after conducting a detailed pay equity audit, Salesforce discovered that they were paying female workers less than men in similar jobs. The company decided to spend millions to adjust salaries for global employees to address statistical differences in pay. While most companies may decide to quietly fix the issue, Salesforce decided to air their dirty laundry on T.V. Last year, CEO Marc Benioff appeared on 60 Minutes to describe his company’s and his personal reckoning with pay inequality. By doing so, the company ignited an industry-wide conversation around closing the gender/race wage gap.
Because Salesforce chose to reveal their flaws and fix their mistakes, they were given credit and praise. Imagine your organization making a similar choice and how that choice could benefit your ability to recruit female and minority candidates.
5. Letting managers talk to employees about pay without proper training.
In PayScale’s latest Compensation Best Practices Report, we find that functional managers/directors communicate pay decisions 78 percent of the time. Yet, 60 percent of organizations don’t provide compensation training to managers.
When you ignore the training piece, you’re effectively setting your managers up for failure. Managers could provide inaccurate information, fumble employees’ questions or even throw HR under the bus (“I wanted to give you a bigger raise, but this is what HR allowed me”).
To have effective conversations with employees about pay, managers need to have an understanding of your compensation philosophy and strategy. They also need to be ready to answer common employee questions about pay, such as:
- How am I paid compared to workers in similar roles within the organization?
- How am I paid compared to others in my role outside of my organization?
- Why am I getting this amount for a raise?
- Why is my raise smaller than it was last year / why did I not receive a raise?
- What do I need to do to earn more next year?
Train your managers: Make sure they know what your compensation philosophy is, what your strategy is, the key dates in your pay increase cycles, and the criteria for giving raises. Help them anticipate questions that may come up from employees. Educate managers on the data sources you use to set pay and give them the tools such as total compensation statements to have pay conversations with employees.
Need help on training your managers? Review the best practices on our webinar, Tough Comp Conversations – A Guide to Doing Them Right.
What practices are you implementing to craft an intentional, positive pay brand? Share with us in the comments below or tweet us at https://twitter.com/payscale.
Banner photo by chuttersnap on Unsplash
Thanks for mentioning that a living wage is one that could cover payment for basic necessities like food, water, housing, health care, education, clothing, transportation, and child care. My husband and I are thinking about starting our own company and want to be generous in terms of employee salaries once the company gets rolling. We’ll be sure to be very mindful of these matters and find some great software to help us keep track of everything.