On compensation: let’s talk money

Conversations about compensation are awkward for a lot of people. But it doesn't have to be that way. Salary transparency is a valuable tool for promoting pay equity and improving employee morale. Once you get used to being direct in talking about money, everything sails smoothly.

How Salary Transparency Can Save Your Organization Money

Compensation can be an uncomfortable subject to talk about. But being transparent about pay practices can save companies thousands of dollars each year. Why? Compensation is the number one driver of employee engagement and retention, according to a 2016 Global Workforce Study by Willis Towers Watson.

Additionally, a recent study by Kronos Incorporated found that 95% of HR leaders say employee burnout is a major problem for workforce retention. The study also found that unfair compensation is the biggest contributor to burnout. Even though 87% of HR leaders say improving retention is a top priority, 20% say there are too many other priorities to focus on it in 2017.

Comparing Compensation with Employee Turnover Costs

As the marketplace becomes more competitive, businesses need to focus on employee retention to avoid the high costs of hiring new talent. According to M4 Workforce Solutions, employee turnover costs an organization 150% of an employee’s salary to replace them. And that’s just for a mid-level employee. The costs go up to 400% of an employee’s salary for replacing high-level employees.

Why such high costs? It takes time to identify candidates, conduct interviews, and train new employees. TLNT.com also identifies two other costs: separation costs (severance pay, insurance claims, etc.) and productivity costs (the hours of productivity that a company loses while the position goes unfilled).

Retaining employees keeps productivity up and prevents companies from needing to dedicate any additional resources to the process of recruiting, interviewing, and training.

Furthermore, pay is more than just a number on a check. It is an emotional measure that reflects employees’ perceived worth and value to their organization. And of course, how employees feel about their pay influences how engaged they are in their work.

If employees aren’t feeling appreciated, they are more likely to join the 51% of employees who are currently looking for new opportunities, according to Gallup. This is where HR needs to step in and open up the organization-wide conversation about compensation and increase pay transparency.

Listening to Employees' Perspective Builds Salary Transparency

In a recent study of high-turnover companies conducted by Quantum Workplace, the second-highest-rated issue in employee engagement was the organization’s willingness to listen to an employee’s perspectives. Employees want to be heard especially when it comes to issues they have with compensation. You want to have employees feel comfortable talking about their pay. If they aren’t, they will likely become disengaged and leave the company.

For example, take Whole Foods. They go so far as to release every employee’s total salary and bonuses from the previous year in its annual wage disclosure report. If employees are concerned about their compensation, they are encouraged to make an appointment with HR to discuss their issues.

Moreover, if your company isn't ready for full pay transparency, increasing the frequency of conversations between HR, managers, and employees about pay will make employees happier and less likely to leave. No matter how your organization approaches pay transparency, being more transparent about pay helps employers attract and keep top talent.

Using Analytics Tools in Approaching Pay Transparency

In response to an increased focus on retention and pay transparency, companies are turning to analytics tools. It allows them to measure their position within the market and the effectiveness of their pay programs. In fact, a recent study from Gatepoint Research found that 62% of respondents with engagement and retention issues wanted their compensation management tool to better analyze pay practices and trends.

With Salary.com’s all-new CompAnalyst solution, organizations can have complete access to the most updated and accurate compensation information on the market. Along with it is proactive analytics that identify pay equity and flight risk concerns within the organization.