How to Prepare for Pay Equity Conversations with Employees & Leadership

When it comes to compensation, and specifically conversations surrounding pay equity and pay transparency, the stakes and emotions are high for everyone involved. CFOs and employee breadwinners alike must weigh their income against expenses, stick to their budgets, and make financial plans for the present and future. But compared to C-level executives, it’s employees who are usually on the receiving end of compensation decisions without much insight or influence into how those decisions are being made.

“Am I being paid fairly?” is an important question that becomes more pressing when times are tough, and HR is tasked with answering it properly. Ideally, this includes coordinating on pay equity initiatives with leadership, then training managers to help the organization convey the right information in the best way possible. When successful, HR’s efforts bridge the communication divide between the boardroom and employees’ kitchen tables, effectively aligning everyone’s expectations and protecting the company’s talent investment.

That responsibility is a stressful one for HR, but you don’t have to go it alone. We’re here to help you confidently and capably discuss pay equity and pay transparency with everyone at your company, from executives and managers to entry-level employees. In this article, we’ll lay out three important steps to get you started:

1. Understanding how your employees currently feel about compensation
2. Laying out a solid compensation plan you can lean on going forward
3. Plugging into expert-led conversations that are already happening

Uncover How Your Employees Really Feel

Organizationally, the biggest hurdles to pay equity and pay transparency are lack of understanding and communication. In the HR Disruptors session, “Pay Equity Conversations Don’t Have to Be Uncomfortable,” HR expert Becky Lakin emphasized the importance of identifying and filling the gaps in your knowledge about your workforce. In effect, she asks: what do you know, and what don’t you know? Followed immediately by, how do you show what you know and don’t know? Some of these knowns and unknowns include:

• Employee sentiment
• Internal pay equity
• Employee demographic data
• Turnover rates
• Etc.

Becky’s focus on knowledge gaps is critical because discovering how your employees really feel about their compensation is the best starting point for building a plan that’s tailored to their needs—and your company’s. Your route for finding these answers can include engagement surveys, HRIS data and reporting, and one-on-ones with individual employees, but it’s also useful to keep an eye on overall industry and market trends.

In our 2022 compensation trends report, we discovered that a significant percentage of employees are dissatisfied with their earnings, and most would think about quitting if they found a better paying job.

• 75% of employees would consider leaving their current job for a salary increase.
• Nearly a quarter of employees report feelings of frustration, unhappiness, and resentment regarding what they make at work.
• More than a third say that their compensation is directly associated with their mental health.

People just want to know they’re being paid fairly and what actions they can take to start making more money, and if companies don’t get ahead of these concerns, it can lead to dissatisfaction and retention issues. In fact, according to a 2021 compensation report by Payscale, much of the unease employees feel regarding their compensation likely comes from a simple lack of communication: more than half of employees who were paid above or at market believed they were actually paid below market. What a regrettable, avoidable, and costly misperception in terms of employee satisfaction and workplace morale!

Pay equity and pay transparency do matter to employees, but it’s also important to consider that transparency doesn’t necessarily start and end with compensation. It’s about communication. Simply bringing your employees along for certain business decisions and keeping them informed can have a dramatic impact on their perception of the company and its leadership, their commitment to the employee experience, and the company’s financial stability.

In short, the issue of pay equity and transparency is far more broad than the question of who’s getting paid what. It’s about painting a complete and honest picture of the value your organization brings to the individual employee through timely and effective communication, and a full-fledged compensation strategy gives you something to communicate when clear communication matters most.

Lead with a Solid Compensation Strategy

According to Payscale, “Most organizations want to have more pay transparency but are hesitant to share their pay practices without first having a formal strategy with attention toward pay equity.”

You’ll find everything you need to know about developing a formal compensation strategy that suits the unique needs of your organization here, but in the early stages of your conversations with leadership, a useful foothold is being able to articulate the “why” behind the initiative. Your “why” may echo Payscale’s two most cited reasons for enacting pay equity initiatives via a formal compensation strategy:

• As part of a proactive talent strategy (83%)
• It’s central to company values (82%)

The motivation to advance a proactive talent strategy tracks with our own finding that 60 percent of job seekers rule out employers who aren’t transparent about salary.

Meanwhile, forging the connection between compensation and company values should also resonate with any existing culture initiatives—another critical component of overall engagement and retention efforts. When you’ve put in the work to polish up your mission, vision, and values until they’re crystal clear for the whole company, adopting that same language to advance important, strategic HR initiatives is a powerful communication tool as you seek buy-in from key stakeholders and collaborate with other leaders at your company.

Other reasons for developing a compensation strategy for the purposes of pay equity, which you may share with Payscale’s respondents, include:

1. In response to employee feedback (53%)
2. To comply with legislation (46%)
3. Part of an ESG (environmental, social, governance) strategy (36%)

As pay transparency laws become a reality for many businesses, it’s important for HR and business leaders to familiarize themselves with their legal responsibility surrounding pay transparency. This can include bans on asking candidates about salary history as well as the legal requirement to include pay ranges on job postings, but whatever laws immediately affect your business, it’s a good idea to keep tabs on what’s happening across the nation.

When you stay informed and incorporate the intent of pay transparency legislation into a proactive compensation strategy—to improve pay equity for all workers—you can feel confident your bases will be covered now and in the future. You can lean on your plan, lead with it, and return to it as a source of truth for all your future pay conversations.

Find Your Internal and External Support Systems

“Pay inequity is a culture killer!” says Anita Grantham, Head of HR at BambooHR, in episode 3 of our HR Unplugged series.

As you work on gaining alignment with leadership and forging partnerships with other departments to advance your pay equity initiatives, frame your talking points around already established company objectives, such as culture, retention, and recruiting goals. Adopting Anita’s mindset of prioritizing pay equity as a culture keystone will help you build a foundation on common ground with your colleagues so that even if you hear something like, “I don’t think we have a pay equity problem,” from a colleague or business leader, you’re prepared to respond with something relevant and resonant.

“We may or may not have a pay equity problem,” you might reply, “but leaving it up in the air doesn’t align with our values and it’s not doing us any favors with our recruiting and retention goals. Wouldn’t it be great to have a process in place to prove to current and prospective employees that we don’t have a problem, or identify where we do?”

This response follows the advice of Jiquanda Nelson, CEO of Diversity Window and another contributor to our “Pay Equity Conversations Don’t Have to Be Uncomfortable” HR Disruptors session.

In this article, we’ve quoted Jiquanda Nelson, Anita Granthram, and Becky Lakin, but they’re just three of the experts we’ve platformed to give you access to a support system outside your company. However overwhelming it may feel to lead the charge on pay equity at your organization, you do have the power to make a difference, and you’re not alone. We’ve created communities and discussion series to drive this message home, and we’d encourage you to prepare for future compensation conversations with the employees and leaders at your company by taking part in expert-led conversations that are already happening.