In my most recent role, I was the Asia Pacific Compensation Lead for a US tech multinational, based in their Singapore headquarters. One of my most exciting projects was to co-design their global pay transparency roadmap. Now that I’m back in Australia, I’m looking into the state of pay transparency here. This is the first post on my shiny new blog. Welcome!
As I research the talent market in Australia, I’m surprised to see so few companies listing salary ranges on their job adverts. Almost all salary information on Seek and LinkedIn comes from recruitment agencies and government departments. Even our most prominent local tech companies remain secretive about their pay ranges, and they also don’t reveal much about their pay practices or philosophy on their corporate websites.
This is in contrast to the approach taken by multinationals like Microsoft and SAP, who are taking steps to be more transparent on pay. Microsoft publishes salary ranges for all job openings in the USA, but so far not in Australia. Supriya Jha, the Head of Diversity & Inclusion at SAP recently shared that “99.8% of our employees around the world had transparency on their pay range”[1] and according to them their investment in pay equity extends into all programs, processes and guidance in the organisation, as well as new features deployed in their SuccessFactors product.
The main reason most MNCs are ahead of us is legislation. In the US, companies have made fair and transparent pay practices a priority due to laws in several states mandating sharing salary ranges in job advertisements. In the European Union, companies will follow suit in the next 2-3 years as the Pay Transparency Directive[2] comes into force. Global companies with a presence in Australia may be affected by these changes, even though they are not required here, because some organisations will go for a blanket implementation.
Here in Australia, new legislation was recently introduced to address pay secrecy,[3] and the Workplace Gender Equality Agency (WGEA)[4] reporting requirements have been significantly beefed up, yet there’s still no specific requirement for pay transparency. That said, the WGEA does require that large organisations (over 500 people) have a strategy in place that delivers “equal remuneration between men and women” by next year. Increasing pay transparency is a viable strategic approach, because it is proven to be one of the most effective ways to address the gender pay gap. A report by Payscale[5] involving 1.6 million people showed that “the gender pay gap vanishes when respondents believe the way they are paid is a transparent process.”
So why is the adoption of pay transparency stalling, and what can Australian businesses do to implement new practices more quickly?
From my observation and experience, two reasons for slow adoption stand out, and they are interconnected. Firstly, business leaders fear that increased pay transparency will cause upset and drama within their workforce. With the cost of living crisis and salary budget pressure on their mind, it’s hardly surprising that bosses are reluctant to invite even more debate around pay. To an extent, their concern is valid due to the second reason; that many Australian businesses haven’t done enough to standardise pay practices. Job levelling and matching methodologies (from AON, Mercer, etc) are sometimes used, but companies rarely invest time to customise them to fit their organisation structure. Australian work culture isn’t exactly known for embracing formal office hierarchies, which is generally seen as a good thing. However, within a flat or informal org structure it’s hard to identify pay equity issues, and even harder to justify pay decisions to employees.
In recent weeks I’ve had the opportunity to talk with several HR leaders and industry experts about pay equity, and the barriers to adopting more transparent pay practices. Most flagged that pay practices lack maturity in both design and execution. Some also highlighted that manager communications and low executive awareness pose a risk. I’ve summarised the main issues identified, and separated them into three workstreams:
- Apply job titles, levels, and grades consistently, make necessary corrections for misalignments and create new grade structures as needed. Ensure incoming talents are positioned correctly.
- Train managers to make fair pay decisions and communicate them confidently. Address any discomfort in discussing pay by resolving underlying issues (see bullet 1).
- Understand and define the connections between pay transparency, pay equity, pay secrecy, gender pay gap, and related terms and assess their relative importance to the business. Consolidate these aspects into a single project portfolio and ensure executives are across the details.
After overcoming some of the barriers that make increasing pay transparency unrealistic, companies can consider creating an implementation roadmap. Depending on the distance between current and desired degree of transparency, the plan may span multiple years.
Pay transparency can be seen as a continuum, with focus being placed on increasing transparency over time. It’s likely to be a mistake to treat pay transparency as a “big reveal” of salary data; instead, it can be positioned and communicated to employees and it as a long term strategy that supports pay equity objectives.
Everything related to “what” and “how” an employee is paid can be taken as part of the continuum. Using an annual bonus scheme as an example, you can think about: bonus pool funding, individual bonus targets, individual performance criteria, and payment timelines. The degree of transparency of all pay elements (salary, stock etc) would be considered in a similar way.
Creating the scope for a pay transparency project can be a huge and daunting activity. There is so much information that can potentially be shared with employees, it’s hard to know where to start. My advice to implementers is to prioritise sharing information based on what is useful to employees and supports business goals. If unsure, consult employees and leaders to find out what they care about most. For example, if employees are confused about grading, then prioritise sharing definitions of each grade as well as promotion criteria. Look for easy ways to increase transparency and this will give your implementation momentum and help build trust.
If you’re interested in reading more about pay transparency implementation, I recommend that you take a look at a fantastic article by Jessica Reeves, the COO of Anaconda Inc. She highlights that there is no single correct approach to implement pay transparency, and I totally agree with her sentiment that “decision-makers must balance a strategy that aligns with company values and fosters a culture of trust.”[6]
I’m working on a second blog that addresses company culture, executive engagement, and communications. First I would love to hear from you:
What is the state of transparency in your organisation? Is pay transparency really a viable strategy for closing the gender pay gap? And should this even be a focus or do Australian businesses have more important things to think about?
If you’d like to talk about this or any other remuneration or HR topics, please don’t hesitate to contact me.
References:
[1] How SAP Is Embracing Pay Equity on the Road to Equality https://news.sap.com/2023/03/embracing-pay-equity-at-sap-road-to-equality/
[2] Gender Pay Gap EU Directive https://www.consilium.europa.eu/en/press/press-releases/2023/04/24/gender-pay-gap-council-adopts-new-rules-on-pay-transparency/
[3] Pay Secrecy https://www.fairwork.gov.au/pay-and-wages/pay-secrecy
[4] Workplace Gender Equality Agency (WGEA) https://www.wgea.gov.au/about/our-legislation/Closing-the-gender-pay-gap-bill-2023
[5] Does Pay Transparency Close the Gender Wage Gap? https://www.payscale.com/research-and-insights/pay-transparency/
[6] The Future Workplace Relies on Transparency https://www.spiceworks.com/hr/future-work/guest-article/salary-transparency-in-the-modern-workplace/