HR Expert Explains How Pay Transparency Can Benefit Your SMB

Leading HR professional shares tips and technology for implementing pay transparency.

Pay transparency, or the practice of companies openly sharing pay ranges and salaries with employees and candidates, is more than a business buzzword; it has the potential to change people's lives.

But for employers, implementing pay transparency requires facing uncomfortable truths, having honest conversations, and committing to constant improvement, says KC Jorgensen. As the chief people and customer experience officer at StyleSeat, Jorgensen is a passionate employee advocate who believes clarity and transparency around pay benefit both employees and organizations. 

We spoke with Jorgensen about how pay transparency can help small and midsize businesses (SMBs) thrive. She shares her thoughts on workers' changing expectations, some tips on how to create a pay transparency policy at your company, and the role of HR technology in supporting change and growth. 

The positive impact of pay transparency

Websites such as Glassdoor, as well as diversity, equity, and inclusion (DEI) initiatives, have brought pay transparency to the forefront and sparked more conversations about what employees need to thrive at work, says Jorgensen. 

"Teams in general have higher expectations of organizations today," she says, and adds that pay transparency can help employers meet candidates' and employees' expectations.

And from an employer perspective, Jorgensen says, "for years we have seen so much research and data that trust between leadership and other employees has eroded."

"Pay transparency is one of the first things in a long time that really helps to improve trust between companies, employers, leadership, and the rest of the team."

KC Jorgensen

Chief people and customer experience officer

This benefits employers, Jorgensen says, because "trust helps produce many of the business outcomes companies want."

Pay transparency goes beyond salary ranges

You may think of pay transparency as sharing salary ranges in job postings. While that's a start, Jorgensen says it's only the tip of the iceberg. 

Achieving that goal requires education, however. Jorgensen says many business leaders and even HR professionals don’t understand the nuances of how decisions about pay are made and the impact of those decisions, not only on individuals but also on the business itself and its opportunities or options.

Examining how pay decisions are made can help support pay equity and close the gender and wage gap, Jorgensen says, explaining how "devaluation theory" affects the wages paid to women and people of color.

"Research shows that work performed by women or certain racial groups is undervalued. If a society does not value a person's gender or race, the person's work is not valued either," Jorgenson says. 

Devaluation can affect decisions impacting pay. For example, if an employee's performance is undervalued, they may not be given opportunities for promotion. 

"Pay transparency describes the what and the how. What are the salary ranges for a particular role? How are pay decisions made? Pay equity is about fairness," says Jorgensen. "There's a relationship, but what often gets missed is clarity around these decisions. When we have more decision clarity around how we measure performance, how we give opportunities, how we give awards and recognition, we can make sure that transparency helps to nudge us towards equity."

How to implement pay transparency in your organization

Jorgensen advises SMBs seeking to get started with pay transparency to follow these steps:

1. Have an honest, open conversation with the executive team to gain buy-in and understanding. Find out what they believe about pay transparency and then share with them the vision of what pay transparency can do for your organization.

2. Determine your compensation framework. This involves a lot of decisions. "Be thoughtful about it," says Jorgensen. "Understand the outcome you hope to achieve. Does that particular practice actually get you there?"

3. Announce your plans. Explain the who, what, when, why, and how of your pay transparency program. "Lean very heavily into why you want to do this and what outcomes you're expecting," says Jorgensen, "but also mention you might not get it right [the first time]. There is no such thing as perfection when it comes to pay transparency, so let them know that you're going to continue to work and perfect the system and you need their help."

4. Partner with finance. Pay transparency inevitably requires giving at least one employee a meaningful raise—and might require many. If you can't afford this, employees will lose faith in your pay transparency initiative. Determine how you will phase in wage increases and don’t roll out pay transparency before the business is financially capable.

5. Listen and learn. Jorgensen recommends creating focus groups that include leadership from all departments. "Employees have relationships with people in other departments," she says. "Even people who feel they are being paid fairly will look out for others."

6. Continually improve. Audit, evaluate, and iterate over time to fine-tune your pay transparency program. Through it all, keep communicating both up and down the org chart. "Don't make decisions in a vacuum," Jorgensen cautions. "Get enough people involved to help you make the right decisions."

Optimizing your HR tech stack for pay transparency

Whenever you're trying to improve your HR practices, whether it's for pay transparency or another HR strategy, it's a good idea to reevaluate your tech stack. How will you aggregate the data you need to set up your compensation framework? Which tool will you use to track your progress? How can you solicit and receive input from key stakeholders? 

According to Capterra's 2023 HR App Sprawl Survey,* SMBs' HR software stacks are small (five systems on average), with half of these solutions performing overlapping functions. What's more, only two-thirds of HR software applications are regularly used.

The human resources information system (HRIS) can be the most important tool for an SMB's HR team, Jorgensen believes. "The functionalities around data reporting have been game-changing for people operations," she says. "For so long, we didn't even know how much data we were sitting on."

To avoid going down a data "rabbit hole," however, look for a solution with the right feature set to capture the right data at the right time for your needs, Jorgensen advises.

The future of pay transparency 

Although great strides have been made toward pay transparency and equity, Jorgensen believes there is still a long way to go. Going forward, businesses must address the wealth gap.

Beyond wages, she advises, think about what you're doing to help employees build wealth and save for retirement. For example, does company leadership have an exit strategy that will deliver a huge financial windfall for them, but little to nothing for the employees who have supported the business's growth? Jorgensen believes business leaders need to have more conversations about such topics.

The movement toward pay transparency has only begun, and Jorgensen says businesses that don't get on board will face an opportunity cost.

"If you care about attracting and retaining talent, pay transparency is going to come up in the conversation," she says. "The trend is not going to slow down. Companies need to decide: Do you want to be on the right side of employment history or not?"