Dive Brief:

• Although many companies have compensation philosophies in place, there is a lack of communication to employees about the details, according to Salary.com. The software company's 2020 Pay Practices and Compensation Survey, which took a look at communication practices and the connection between employee engagement and compensation among other topics, found some employers have put pay equity planning on the back burner.
• Salary.com's report, released in December, is based on an online survey of 1,381 U.S.-based organizations and 14 based in Canada. The majority (73%) of respondents said they believed their employees were paid fairly. However, more than half (55.6%) of respondents said their organization does not have a formal process to address pay equity. Although 62% of respondents said their organizations have a formal compensation philosophy, just over half (52%) of respondents communicate their compensation plan to their employees, according to the report. The majority (74.3%) of respondents said managers at their organizations are not formally trained to talk with employees about how their compensation is determined; and about 19% of respondents said that top management or HR provide the formal communication of the compensation philosophy. "Communication about pay is the most critical element of compensation management," the report stated. 
• More than 55% of respondents said their current pay policies were positioned to successfully retain employees. But less than half (46%) of respondents rated employee engagement at their organization as above average. Creating a culture of honest performance assessment; fair and equitable treatment; meaningful compensation philosophies; and effective communication between managers and employees play "a strong role in building a culture of engagement," the report stated.

Dive Insight:

HR professionals and department managers are most likely the communicators when it comes to compensation practices, but coordination with the C-suite is vital to ensure a company's financial health, according to Salary.com.

More than half of respondents indicated that the CEO is responsible for approving pay decisions, while their internal HR teams and managers were more likely to be responsible for setting pay rates and communicating pay decisions, the report found. However, C-suite positions are responsible for setting compensation budgets for an organization, according to the report. It is vital to "provide executive decision-makers with data so that stakeholders setting the budget have a holistic understanding of the budget makeup and how changes in financial health could affect the organization," the report stated.

"Communication, a critical element of pay program success, continues to be an area where organizations are lacking," Chris Fusco, Salary.com's senior vice president of compensation, said in a statement. "Any manager at any company must be able to honestly and accurately answer the question from an employee, 'How is my pay determined?'." Employers must become more transparent and "let go of some of the discretion" that is part of making pay decisions in order for employees to understand a compensation philosophy, Fusco said. 

At a time where there is an increased focus by employers and employees on pay equity and pay disparities, some employees may even decide to publicly post their pay, Tauseef Rahman, partner at HR consulting firm Mercer, previously told HR Dive. "Employers have long had the opportunity to get ahead of any message by employees by being more transparent on pay philosophy and pay ranges," Rahman said.

Several company leaders who have implemented varied pay transparency strategies previously told HR Dive the common denominator is the strategy must be in alignment with company culture and is not a one-time effort. Limeade, for example, has implemented pay transparency internally. The company reports a pay range that includes company averages and external data for comparison with every job offer. Every six months, their database refreshes, and Limeade completes a yearly analysis to update all salary ranges and pay grades.