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Money + Investments

Employer pay strategies increasingly prioritize transparency and equity, Payscale finds

HR Dive

March 2, 2023

Money + Investments

Employer pay strategies increasingly prioritize transparency and equity, Payscale finds

HR Dive

March 2, 2023

Photo by Bram Naus on Unsplash

Dive Insight:

The report offers three takeaways for HR professionals, Amy Stewart, Payscale’s associate director of content and editorial, told HR Dive. First, despite the precarious economy, pay raises are looking higher again in 2023, compared to pre-COVID-19 years, although they are not likely to be as high as inflation, Stewart said.

Second, HR pros should place a greater priority on pay equity to help them prepare for pay transparency and make fair pay central to the employee experience, Stewart said. Pay equity, initially pursued to guard against legal claims, has gone “mainstream” and is now a core responsibility of compensation, experts have noted. Nearly two-thirds (63%) of the organizations that responded to the Payscale survey said pay equity is a planned or current initiative, with employers most commonly conducting pay equity audits to analyze for gaps due to gender; race, ethnicity or national origin; and age.

Third, “Pay transparency is the future,” Stewart said. The number of “organizations that say they are posting pay ranges in job ads has more than doubled since last year, although 19% of organizations are posting ranges without confidence in how they will be received by current employees,” she added.

Pay raises have been expected. In a survey released last November by global advisory firm WTW, U.S. employers said they plan to boost salaries 4.6% in 2023 due to concerns over inflation and the still-tight labor market. In February, Home Depot announced it would put $1 billion toward higher wages for front-line hourly associates, joining a number of retailers that have recently invested heavily in compensation.

But employer concerns about pay transparency are not unfounded. Pay transparency laws, which may help close pay gaps, can also lead to unintended consequences, research indicates. Close to 70% of U.S. adults who responded to a recent survey said they would likely demand the top of salary ranges posted, which could inadvertently take them out of the running if their experience doesn’t match the job’s requirements, a Resume Builder editor said in a write-up on the findings.

Also, while most of the respondents supported pay transparency laws, they said they feared it would be “problematic” to know their co-workers’ salaries.

Having a compensation strategy helps organizations manage these challenges so they can get pay right, Stewart said. However, to develop an effective strategy, “you first need to know your people strategy and labor market and how you compete for talent,” she explained.

It’s also important “to establish why and how compensation matters at your organization, including whether you are trying to attract and reward the ‘best of the best’ or develop a company known for its commitment to equity, upward mobility or whatever else might be central to your company values,” Stewart added.

She said an effective compensation strategy should include reliable data sources, a strong compensation philosophy, formalized pay structures, a total rewards program and “the commitment to continuously analyze your pay data in order to make initiatives like pay equity and pay transparency central to your people strategy.”

Organizations that have a dedicated compensation function are more likely to have an effective compensation strategy, Stewart indicated. Small to mid-sized businesses struggling with their revenue goals should still prioritize compensation as a key business function, she said.

This is because when data is everywhere and transparency is expected, compensation strategy becomes indispensable to talent strategy and people management, Stewart explained. “For some SMBs, the first step may be to elevate the importance of HR holistically, and getting pay right can be a driver to doing that,” she said.

Overall, HR can help their organizations make effective compensation decisions by staying on top of best practices, being able to conduct an internal pay analysis and by keeping up with what is going on in the external market, Stewart noted.


Read the full report here

Compensation will be among the top challenges for HR in 2023.
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