Why pay transparency makes sense

Why pay transparency makes sense
19 Dec 2017

The exposure of 11.5 million documents known as ‘The Panama Papers’ has been described as the “biggest leak in the history of data journalism”. The leak, which revealed detailed information about more than 214,000 offshore companies associated with Panamanian law firm and corporate service provider Mossack Fonseca, sent shockwaves around the world At least 12 heads of state and/or government leaders as well as other wealthy clients were identified and shown to have laundered money, dodged sanctions and avoided tax. The leak certainly proved more than embarrassing for the companies and individuals concerned, including highlyregarded organisations such as the Red Cross, all of which were worried about reputational damage.

But what would the impact of a similar leak of sensitive HR data outside, or even within, your organisation be in terms of reputation and employee trust – particularly if we’re talking about staff compensation data, which is often considered to be among the most personal of all?

The last eight years have taught us a lot about what impact employee remuneration issues can have on corporate reputation when they are made public. There have been seemingly endless scandals over bankers’ pay, ‘excessive’ executive remuneration packages, shareholders demanding pay transparency - the list goes on.

But while is obviously important to secure sensitive compensation data against disclosure to both employees and third parties, organisations also need to think these days about advocating fair and transparent pay policies. The age of pay transparency has arrived, partly as a result of more and more equal pay legislation and regulatory initiatives around the world. But it is also the upshot of increased levels of information-sharing via platforms such as Glassdoor and Payscale, which make it easy for everyone to access salary data for comparison purposes.

For too long, information about employee compensation was shrouded in secrecy and secreted away in HR’s annals. It wasn’t so long ago that disclosure was a disciplinary offence and every pay review letter was given the ominous footnote: “Details of your pay are strictly confidential and should only be discussed with your manager”.

What pay transparency means

But wage transparency does not necessarily mean that every employee should know what everyone else’s pay rate is - although some progressive start-ups such as social media management platform provider Buffer do make the salaries of the entire company public in an effort to create full transparency for both the internal team and its customers. What pay transparency actually means is that each employee is confident that their salary and bonus was properly reviewed and handled according to the same principles as their colleagues.

The Global Salary Transparency Survey conducted in workplaces across the US, Canada, UK, France, Germany, Netherlands and Switzerland by Glassdoor revealed that seven out of 10 staff members believe wage transparency is good for employee satisfaction. Some 72% believe it is also good for business. Yet despite this, 69% wish they had a better understanding of what actually constitutes fair pay for their particular job role and skill set, whether at their current employer or across the broader local market.

This all means that pay transparency and fairness are critical these days if employers want to engage and retain key talent. Workers want to know that their efforts have been recognised and that any pay award is commensurate with those efforts relative to their peers both inside and outside the organisation.

As a result, employers need to respond adequately and ensure their employees understand why they are paid what they are being paid. At the same time, it is also important that they take steps to protect individual compensation data from security breaches. Failure to do so will have far-reaching repercussions on employee morale as well as on the outside perception of the company by the public and its shareholders.

Things to consider

Incredibly though, a large proportion of organisations still manage their pay data using spreadsheets. It is still common practice for organisations to split, distribute via email and reconsolidate these spreadsheets during the annual salary and bonus review cycle. Ventana’s 2012 study entitled ‘Trends in Total Compensation Management’ indicated that 71% of respondents used Microsoft Excel to deal with compensation management.

The problem with this approach however is that, not only is such a manual process open to abuse, but it is also prone to human error and makes data integrity hard to maintain. No matter how many precautions you take to secure your spreadsheets, an experienced Excel user will always be able to bypass them while a novice may unintentionally undermine them. Therefore, it may well make sense to consider implementing one of the new compensation management systems currently on the market.

But if you have yet to start your journey towards introducing fair and transparent pay, here are a few considerations:

• Clarify the compensation process: If employees don’t understand on what basis they are renumerated, it will hit their motivation levels. If managers don’t understand it, they can’t communicate it
• Have the right data at your fingertips: Ensure you have the right information available to evaluate pay scales at the internal peer and external market level. Source and update market data on a regular basis and consider the fact that, over time, pay could become more person- than job-specific
• Identify pay discrepancies between employees: If you cannot account for and justify any perceived discrepancies, take corrective action. If the discrepancies can be accounted for and/or justified, ensure you document your findings
• Streamline processes and use appropriate technology: Ensure your approvals and reward policy compliance processes are fit-for-purpose and that sensitive data is adequately protected.

 

Ruth Thomas is a founder of, and senior consultant for Curo. With more than 25 years of global HR and reward management experience in the financial services sector, she also has international expertise in managing compensation processes and designing pay and benefit structures, salary progression systems and management incentive plans. Her corporate experience includes working for Lloyds TSB Group, PwC, Dow Jones Group and Credit Suisse.

The exposure of 11.5 million documents known as ‘The Panama Papers’ has been described as the “biggest leak in the history of data journalism”. The leak, which revealed detailed information about more than 214,000 offshore companies associated with Panamanian law firm and corporate service provider Mossack Fonseca, sent shockwaves around the world At least 12 heads of state and/or government leaders as well as other wealthy clients were identified and shown to have laundered money, dodged sanctions and avoided tax. The leak certainly proved more than embarrassing for the companies and individuals concerned, including highlyregarded organisations such as the Red Cross, all of which were worried about reputational damage.

But what would the impact of a similar leak of sensitive HR data outside, or even within, your organisation be in terms of reputation and employee trust – particularly if we’re talking about staff compensation data, which is often considered to be among the most personal of all?

The last eight years have taught us a lot about what impact employee remuneration issues can have on corporate reputation when they are made public. There have been seemingly endless scandals over bankers’ pay, ‘excessive’ executive remuneration packages, shareholders demanding pay transparency - the list goes on.

But while is obviously important to secure sensitive compensation data against disclosure to both employees and third parties, organisations also need to think these days about advocating fair and transparent pay policies. The age of pay transparency has arrived, partly as a result of more and more equal pay legislation and regulatory initiatives around the world. But it is also the upshot of increased levels of information-sharing via platforms such as Glassdoor and Payscale, which make it easy for everyone to access salary data for comparison purposes.

For too long, information about employee compensation was shrouded in secrecy and secreted away in HR’s annals. It wasn’t so long ago that disclosure was a disciplinary offence and every pay review letter was given the ominous footnote: “Details of your pay are strictly confidential and should only be discussed with your manager”.

What pay transparency means

But wage transparency does not necessarily mean that every employee should know what everyone else’s pay rate is - although some progressive start-ups such as social media management platform provider Buffer do make the salaries of the entire company public in an effort to create full transparency for both the internal team and its customers. What pay transparency actually means is that each employee is confident that their salary and bonus was properly reviewed and handled according to the same principles as their colleagues.

The Global Salary Transparency Survey conducted in workplaces across the US, Canada, UK, France, Germany, Netherlands and Switzerland by Glassdoor revealed that seven out of 10 staff members believe wage transparency is good for employee satisfaction. Some 72% believe it is also good for business. Yet despite this, 69% wish they had a better understanding of what actually constitutes fair pay for their particular job role and skill set, whether at their current employer or across the broader local market.

This all means that pay transparency and fairness are critical these days if employers want to engage and retain key talent. Workers want to know that their efforts have been recognised and that any pay award is commensurate with those efforts relative to their peers both inside and outside the organisation.

As a result, employers need to respond adequately and ensure their employees understand why they are paid what they are being paid. At the same time, it is also important that they take steps to protect individual compensation data from security breaches. Failure to do so will have far-reaching repercussions on employee morale as well as on the outside perception of the company by the public and its shareholders.

Things to consider

Incredibly though, a large proportion of organisations still manage their pay data using spreadsheets. It is still common practice for organisations to split, distribute via email and reconsolidate these spreadsheets during the annual salary and bonus review cycle. Ventana’s 2012 study entitled ‘Trends in Total Compensation Management’ indicated that 71% of respondents used Microsoft Excel to deal with compensation management.

The problem with this approach however is that, not only is such a manual process open to abuse, but it is also prone to human error and makes data integrity hard to maintain. No matter how many precautions you take to secure your spreadsheets, an experienced Excel user will always be able to bypass them while a novice may unintentionally undermine them. Therefore, it may well make sense to consider implementing one of the new compensation management systems currently on the market.

But if you have yet to start your journey towards introducing fair and transparent pay, here are a few considerations:

• Clarify the compensation process: If employees don’t understand on what basis they are renumerated, it will hit their motivation levels. If managers don’t understand it, they can’t communicate it
• Have the right data at your fingertips: Ensure you have the right information available to evaluate pay scales at the internal peer and external market level. Source and update market data on a regular basis and consider the fact that, over time, pay could become more person- than job-specific
• Identify pay discrepancies between employees: If you cannot account for and justify any perceived discrepancies, take corrective action. If the discrepancies can be accounted for and/or justified, ensure you document your findings
• Streamline processes and use appropriate technology: Ensure your approvals and reward policy compliance processes are fit-for-purpose and that sensitive data is adequately protected.

 

Ruth Thomas is a founder of, and senior consultant for Curo. With more than 25 years of global HR and reward management experience in the financial services sector, she also has international expertise in managing compensation processes and designing pay and benefit structures, salary progression systems and management incentive plans. Her corporate experience includes working for Lloyds TSB Group, PwC, Dow Jones Group and Credit Suisse.

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  • Posted On March 14, 2021 by hhgxcwebli

    Muchas gracias. ?Como puedo iniciar sesion?

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