Pay transparency is the hottest HR news to come along in a while. A recent study showing 84% of Canadians favour laws requiring salary range disclosures in job postings, and employees are increasingly interested in understanding how their pay compares to peers and the rationale behind their compensation.
Many jurisdictions have recently adopted pay transparency laws, and others are sure to follow. Legislatures in 6 of Canada’s 14 jurisdictions have passed pay transparency legislation - Federal, BC, Newfoundland, Nova Scotia, Ontario and Prince Edward Island. Ontario and Newfoundland however have yet to set a date in which it will actually take effect.
In those jurisdictions in which laws have come into effect, employers are required to:
List salary information or salary range for a position in job ads;
Refrain from seeking information about a job applicant’s pay history;
Refrain from retaliating against applicants for asking about their pay or discussing how much they make with co-workers;
Some jurisdictions are also requiring the disclosure of AI technology use in the recruitment and selection process.
While not a requirement in all jurisdictions presently, it is best to plan ahead as preparation can take time and requires research and insight.
Here are some tips from TAP Strategy & HR Consulting to prepare for pay transparency:
Create a Compensation Philosophy That Considers Pay Transparency:
As a starting point, it’s important to provide overall direction and commitment about how compensation choices will be made. Compensation should reflect the values of the organization and identify whether you intend to pay under, at or over market rates to attract and retain quality talent. How will other elements of total rewards round out your offering? A short statement should be prepared to communicate your commitment to fair pay.
Perform Competitive Benchmarking
Every two to three years, you should conduct a salary audit and ensure that salaries are competitive to other similar jobs within your marketplace. If you hire remote workers, determine the competitiveness of your salary ranges in those marketplaces from which you draw labour.
Determine Compensation Framework
Have a well-defined compensation framework, that groups jobs with similar responsibilities, scope, complexity of duties, qualifications, and impact into similar job levels. Each job level should have a minimum, midpoint and maximum base salary to allow for an appropriate “range” of varying skills and experience. The range should be narrower for the lower job levels and increase in breadth for higher levels to allow for the (typically) longer time period spent in the ascending grade levels.
The framework can also define the responsibility, supervisory, strategic and financial accountabilities at each level. Sophisticated frameworks may also define key competencies necessary at each level.
Share Compensation Framework with Management
The framework is intended to help managers with discussions with staff about where they are paid in the range relative to midpoint and what is required to get to the ‘next level’. Employees new or developing in a role can expect to be paid between the minimum and the midpoint, while more experienced incumbents would likely be paid between the midpoint and the maximum.
Employees who reach the maximum in the range, could be ‘red-circled’ so their pay does not exceed the level deemed appropriate for the job level. It’s not necessary to post the entire framework to all staff, but employees should be empowered to ask their manager for their current pay range and position within it, as well as understand the next pay level they may be striving for.
Consider Internal Equity
It’s important to also vet your current salaries across various subsets of employees (i.e. male vs female, racialized groups vs non-racialized groups) to ensure there are no gender pay gaps or unintended differences across your diverse employee population. This is a vital review step in most Diversity, Inclusion and Inclusion (DEI) action plans.
Determine Salary Budgets
Anticipate questions and concerns and proactively deliver transparent communication to employees. It’s best to get ahead of questions about how and when salary increases will be addressed and develop a process. Since compensation is usually one of the largest company expenses, it’s best to consider the budgeting cycle and identify a salary allocation process that aligns with getting needed compensation budget dollars planned ahead of time.
It’s helpful to identify a date where salaries will be reviewed each year, and the review can be linked with performance management (or not) as there are pros/cons for both. It’s important to note that while annual salary reviews do not guarantee an increase, strong performance and achievement of assigned goals will often result in a pay increase. The value of the increase should depend on many factors, including performance, the employee’s position within the range, inflation, market conditions and the available compensation budget and the company’s ability to pay.
Avoid “COLA” Increases
Some companies separate cost of living increases from merit and base the former on reported Consumer Price Index (CPI) or COLA reported averages. However, inflation is much more elastic than average salary increases which tend to be less erratic and lag behind inflation. A COLA increase tends to lead to “entitlement” for an annual increase, with expectations for a consistent application across the team. The preference is to consider COLA as one of many factors; allowing for more discretion on how to spend the salary allocation fairly.
The goal is to be able to justify each person’s position relative to the midpoint for the job level, to allow for transparent conversations about pay with staff. Click here for 2024 salary projections.
Consider Total Compensation
To make the most of Pay Transparency Legislation, it is important to highlight all elements of employees’ compensation, including the value of benefits, RRSP / RPP contributions, bonuses, commission, recognition awards, etc. as well as the value of vacation and sick time. Some print annual statements or leverage their HRIS system to provide “Our investment in You” to remind staff of their total rewards package.
This can be powerful messaging, as employees often think only about base salary and may not appreciate the full value of their package.
Create a Compensation Policy
It’s recommended to compile a Compensation Policy, designed as an internal document for Senior Management to guide strategic, fiscally sound decision-making relating to compensation. It should outline the values and philosophy behind your organization’s approach to compensation, internal equity and competitiveness.
It should also provide governance and lay out guidelines for administering pay and other elements across various scenarios, (i.e., new hire pay, signing bonuses, acting pay, promotions, transfers, scarcity of skill, approvals, etc.).
Preparing for Pay Transparency - Recruitment Practice Changes
Modify your methods for posting open positions and include salary (or range) in your job advertisements. Alter your interview guides to ensure you handle questions related to pay expectations and salary ranges in a compliant manner.
You can no longer legally ask, “How much are you making now?”, for example. It is believed that women and unrepresented groups may create a perpetual pay gap by revealing current earnings and (negatively) influence the decision on pay for a new role.
Reporting for Pay Transparency
Reporting is a key element in many jurisdictions. While each has differing requirements, you need to be prepared to invest the time and resources to fulfil this responsibility. For federally regulated organizations, click here for more info about pay equity reporting.
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How can TAP Strategy & HR Consulting help you prepare for implementing Pay Transparency?
Knowledge, experience, and the right resources. Our team of experts can help you navigate the complexities and get you ready for when the time comes.
TAP subscribes to a wide number of paid salary surveys and has a proven methodology to help you benchmark your salaries and other pay-related factors. Contact us for a no-obligation chat about your needs.
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