Salary transparency and pay equity were top of mind in 2022. This year is proving to be no different: One of the top 2023 DEI trends HR Dive sources identified was continued conversation about pay. 

In a January report, McLean and Company researchers highlighted the importance of balancing internal and external factors regarding pay. “In a competitive labor market, organizations must find a way to balance transparent, modern pay structures with organizational needs,” McLean and Company researchers said.

In speaking to HR Dive about compensation strategy, one HR expert acknowledged that transparency should include pay, but said it should extend to other aspects of company culture and decision-making as well. Another emphasized pay transparency ought to be in alignment with the entire employee experience.

To achieve the dual goals of equity and transparency, McLean recommended four best practices for HR managers and company leadership. First, tap into market data. Second, establish job grades and pay bands. Third, create protocols for consistency, and fourth, communicate said policy company-wide

Gather the market data

McLean researchers underscored the importance of confirming the “target market” and identifying market comparators — that is to say, a group of employers occupying the same space in the same industry, whose salaries can be a benchmark for competitiveness.

This is on par with what compensation professionals previously told HR Dive. One PayScale exec said pay bands for roles are useful to ensure compensation is based on market value — not “whim or favoritism.”  

Researchers also recommend creating a policy to stay abreast of market changes.

Create a base pay structure 

Creating a base pay structure means defining job grades and preliminary pay bands based on the previously established competitive salaries in that business niche.

HR leads and C-suite members then review how this market data squares with organizational pay data. The final base pay structure is then approved by stakeholders.

Establish protocols for pay

The third step, McLean researchers said, is to create guidelines for different pay scenarios. This protocol would include raises and promotions, compensation strategy for lateral transfers and the like.

Rachel Stewart, practice lead, HR Research & Advisory Services at McLean & Company noted that if managers find during the compensation restructuring process that changes should be made, it’s “better to adjust, than to hold on to an approach that is no longer strategic” or serving “employee and organizational needs."

Clue staff into the new strategy

Lastly, financial decision-makers get on the same page about what pay transparency looks like at their organization — and what they want it to look like in the future. They build a policy to “bridge the gap between the two,” McLean researchers recommended, and they create a communication plan to talk about the new base pay structure and accompanying policies with the staff. 

Data from a Visier 2022 pay transparency pulse report indicates that pay equity is not just an issue of salary, but of knowledge around company compensation strategy. Researchers noted a generational divide, as well as discrepancies from the C-suite to the entry-level positions. Findings like the above may indicate the utility of creating and implementing a pay transparency communication plan — thereby further supporting equity goals.