Pay transparency is becoming a hot topic as more companies look to:
- attract and retain top talent
- ensure their financial wellness
- create a fair workplace environment
- comply with evolving regulations
More than 40% of U.S. job postings on Indeed now include employer-provided salary information, according to Hiring Lab. This marks an increase of 137% over the last three years.
By adopting pay transparency, your company can benefit from:
- increased employee satisfaction
- improved productivity
- open communication
- a greater sense of trust
- an inclusive work environment
Consider the following best practices for implementing pay transparency in your organization.
How pay transparency affects employees’ financial health
Financial stress is a major concern for employees today. The American Psychological Association recently revealed 65% of Americans say money is a significant source of stress, the highest recorded since 2015. Financial stress can lead to a lack of focus and motivation, which can result in decreased productivity and poor job performance.
Forbes describes the negative impact financial stress has on employee health. These issues can further harm employee performance and productivity, as well as increase health care costs for employers. For example, employees who struggle financially are more likely to miss work.
In the past, it was unthinkable for employers to help workers with their personal finances. But employees’ expectations have changed. Today, talent favor companies that take steps to proactively address the financial health of their people.
Pay transparency best practices
For employees
Salaried workers receive a portion of their annual wage each pay period. The amount deposited into your bank account is about the same every period — if you don’t experience any payroll errors.
Hourly workers face some unique challenges when it comes to income. Your pay can vary from paycheck to paycheck depending on hours worked, overtime and seasonal fluctuations. These variations make it more difficult to calculate your earnings up front. This forces you to take a proactive role in verifying your pay to ensure the amount is correct.
These steps can help you gain insight into your net pay:
- Understand your pay structure — Take time to familiarize yourself with your employer’s pay policies, including hourly rates, overtime rules and percentages, and any additional compensation like bonuses or commissions.
- Keep track of time — Maintain a personal record of hours worked, including regular hours, overtime and any breaks. This log will be invaluable when you compare your time sheet to your paycheck.
- Review your paycheck — If you don’t understand what’s on your paycheck, ask a payroll admin for an explanation. Make it a habit to review your paycheck as soon as you get paid. Look for discrepancies between your personal log and the information on your paycheck and address them promptly.
- Be prepared to support your claim with evidence (e.g., your personal log).
Once you get into the habit of reviewing your paycheck, you will notice that it gets easier over time.
Fortunately, employers are starting to understand how much is at stake. Modern payroll tech guides workers to check their pay for errors before payroll runs. These insights help prevent mistakes and form a better relationship between you and your employer.
So what can your employer do to make this easier?
For employers
The most important way for employers to contribute to financial health is by ensuring employees are paid on time and correctly. Not only is this a legal obligation, but it also helps foster trust and a positive work environment. When employees receive the right amount, they can avoid payroll consequences like:
- not paying their bills
- cutting back on necessities
- putting off financial goals
Morning Consult research commissioned by Paycom found 58% of Americans would have trouble paying bills and making necessary purchases if a payroll mistake shorted them just $100. In a 2021 survey conducted by The Harris Poll on behalf of Paycom, 51% of American employees said payroll errors would cause them to look for a new job.
Considering the tight labor market, it’s crucial for every employer to deliver a flawless pay experience.
Here are steps you can take:
- Develop clear pay policies — Create and maintain clear, written pay policies that outline your company’s compensation structure, including hourly rates, overtime rules and any additional compensation. These policies should be easily accessible. Be up front about changes and offer guidance and education.
- Train managers and supervisors — Leaders should be well educated on the company’s pay policies and equipped to address any employee questions or concerns. Regular training sessions help ensure a consistent application of these policies so employees feel treated fairly and equally.
- Implement accurate time tracking — A reliable time-tracking tool helps minimize errors and discrepancies in employee hours. This software should be easy to use and accessible for everyone. And remember, even if you don’t employ hourly workers, you still need to track leave and absences.
- Conduct regular audits — Periodically review and audit payroll records to identify and correct errors or discrepancies. This process ensures employees are paid correctly and helps your company avoid legal issues. It also identifies areas of improvement. You should also share the audit results with employees to build trust in your payroll process.
- Communicate with employees — Encourage open communication between employees and management around pay-related concerns. You should document and share the steps to raise pay issues. It’s also important to ensure employees can raise issues without fear of retaliation.
The role of technology in pay transparency
Employers often see a paycheck as the end of a process. Once you deliver it, you have fulfilled your obligations and a new pay period starts. But for employees, that same paycheck is the start of their financial journey. It provides:
- food
- housing
- education
- transportation
- and so much more
Do your employees know the amount they’ll receive before pay day? For their financial well-being, it’s crucial that they are in control and can plan for expenses.
New tech allows you to run a seamless pay process that makes handling finances easier for everyone. At a minimum, you need tightly integrated HR, payroll and time-tracking tools. And self-service HR apps offer employees clear, real-time insight into their compensation, allowing them to easily manage their finances.
Here are five considerations to ensure the HR tech you purchase addresses employee needs:
- Off-site and automated payroll processing — Employee-guided payroll tech calculates pay the moment changes occur. Consider Paycom’s Beti®, which guides employees to check payroll data and resolve mistakes before they happen.
- Digital paychecks — Digital paychecks let employees easily review pay information. Usually, these options give employees an overview of total rewards broken down into individual pay elements and include periodic and cumulative pay.
- Financial wellness apps — These mobile apps help employees track their hours and manage finances. They can be great for hourly workers, providing them with instant access to payment information and helping them closely monitor any fluctuations in their paychecks.
- Payroll cards — Another option to make pay accessible early. Some employers issue payroll cards to workers. This convenient tool sets the groundwork for greater financial flexibility.
- Compensation analytics — Dashboards can reveal a wealth of information about your compensation and reward policies. You can use these reports to understand how you pay people and answer questions like:
- What are the decision criteria for pay increases?
- Does every worker have the same opportunity to receive a raise?
- Do you pay your workers equally for equal jobs?
Some functions may come in stand-alone apps, but you’ll miss the tight integration with payroll that only a truly single software can offer. Ask what a payroll and HR tech provider offers so you’ll have a holistic picture of your finances.
Read this blog post to learn more about pay transparency and how it supports employees.
DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.
