Chief Human Resource Officers (CHROs) have an impressive range of responsibilities in managing an organization, but there are growing demands for one facet that deserves a closer look. With rising calls for pay transparency, CHROs now have to balance the scales on disclosure and competitive standings, giving in to workers’ demands for more clarity on pay.
The change in approach to corporate pay transparency is not only relevant due to the public sentiment regarding these practices, but also due to the shifting regulatory landscape that is leaning towards more openness in business practices. From the EU to the US, there are various pay transparency laws that are coming into effect, making it important for CHROs to keep up with the times and shift their own stance to ensure pay transparency compliance in all regards.
The CHRO’s role in promoting pay transparency is paramount in any organization, with shifting regulations fast approaching. (Image: Pexels)
CHROs Need to Take on Pay Transparency at Their Organizations Before It’s Too Late
Pay transparency refers to the process of disclosing the specifics of pay for each role openly to ensure that workers are aware of the compensation provided for each post. The demand for an increase in pay transparency primarily stems from job seekers who want clarity on the compensation offered by an organization for each position. Part of this is because employees want to know which jobs fit their needs best. It also helps them negotiate a fair offer instead of playing games with the HR teams and recruiters to understand how much they are actually willing to pay for a role.
Skirting lowball offers is a central benefit of pay transparency, but it also motivates businesses to offer better pay while hiring to ensure their job postings are as competitive as other businesses in the industry. It also encourages businesses to pay their existing employees fairly for their work when they are willing to bring in fresh talent at higher pay. Pay transparency supports pay equity strategies, ensuring that everyone hired for a specific role is compensated the same, rather than a disbalanced approach towards some communities.
Almost everyone benefits from an increase in pay transparency, except for employers. On one hand, they do benefit from being guided towards more ethical practices in their approach to their employees. On the other hand, employers do have to make significant adjustments in their pay scale to ensure that no employees raise the alarm on unfair business practices.
What Is the CHRO Role in Pay Transparency Compliance?
CHROs are typically leaders of the workforce, and their jobs, while highly complex, also require them to set the guidelines of work practices for the organization to follow. The intricacies of hiring fall to CHROs, who must determine the regulations around hiring. As a result, they also have the responsibility of setting the standards for pay transparency across the organization.
Addressing corporate pay transparency isn’t as simple as slapping on an approximate pay scale onto a job description and uploading it onto a hiring portal. It requires considerable research into competitor practices and standards, current pay packages, benefits, and pay calculations, and the creation of guidelines for the rest of the HR team to follow. Pay transparency isn’t just essential in hiring; such disclosures also help existing employees better understand their position within the organization.
With greater transparency, employees are inclined to feel more reassured about the standards of fairness at work, enhancing their trust in the business. Such environments encourage retention, as employees feel more secure in the organization’s ability to support their future growth as well. Employee relations and retention are also part of a CHRO’s responsibility, making pay transparency an important consideration in multiple regards.
How Can CHROs Increase Pay Transparency in Their Organizations?
Promoting pay transparency can be a controversial stance to bring up in some organizations, but it is important for CHROs to explore the pay trends and prepare for incoming change. There are many ways to increase corporate pay transparency to ensure compliance, from auditing the organization to studying competitor practices. The work starts with establishing a clear “pay philosophy” for the organization, to set fixed terms on the company’s approach to pay.
Augustus Vickery, Director of the Gartner HR practice, provided some insightful advice to Gartner on what CHROs can do to increase pay transparency. He recommends that CHROs:
- Revisit the organization’s current philosophy on pay in collaboration with the cross-functional HR team
- Interact with executive leadership teams to update them on the current standards, the regulatory landscape, and what their recommendations are for the future
- Make adjustments to the current compensation of employees based on the updates made to the pay philosophy
Pay transparency strategies begin with cleaning up the internal confusion around pay first, before open declarations are made to the public. Once an organization and its CHRO get their affairs in order and ensure that all employees are fairly and evenly compensated according to their roles, the work can begin on building job postings that accurately reflect the company’s pay philosophy.
Practice Pay Transparency Compliance Before Laws Are Set in Motion
Staying informed about the shifting regulatory landscape is important not just for CHROs but for HR teams at large. While there is considerable confusion about when rumored pay transparency regulations will be set in motion, it is important to get a head start on the groundwork to support pay transparency.
Many employers are reluctant to support pay transparency as it requires a considerable overhaul of the business and involves many dents to their workforce expenses. Still, it falls to CHROs to convince them of the benefits of pre-empting the legal regulations and winning the trust of the workforce by introducing transparency into all aspects of the business operations as soon as possible.
Subscribe to The HR Digest for more insights on workplace trends, layoffs, and what to expect with the advent of AI.