Employees Expect More Pay Transparency

Compensation1

Employee demand for pay transparency, including how much everyone in the company is paid, combined with moves by 17 states to implement pay transparency laws, could indicate a broad shift toward openness around pay. If that happens, life is about to become more complicated for organizations who’ve stayed away from practice.

According to engagement platform Lattice’s State of the Employee Experience Report, 67% of workers want to see increased pay transparency from their employers. More than half, 51%, said companies should share how much everyone in the organization makes. Ask that question of Millennials and the number rises to 58%.

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As U.S. inflation remains high and markets indicate looming economic uncertainty, the report offers insight into employee expectations and perspectives around upcoming compensation cycles — and highlights growing demand for more transparency and understanding around how pay decisions are made.

In terms of individual compensation decisions, more than 30% of employees said they don’t have a clear understanding of how their pay was adjusted around promotions and raises. Men were over 10% more likely than women to say they had a clear understanding of how their salaries were determined. They were also more likely to be satisfied with their organization’s level of pay transparency.

Bias in Compensation

Employees believe bias is at play in making pay decisions, and that organizations don’t take action to deal with it. More than half, 51%, agree that bias exists around gender, age, race or other factors that impact compensation decisions at their organization. Of these, 31% strongly agreed.

In addition, some employees believe their companies must do more to proactively address bias. About 31% said their organization wasn’t taking adequate steps to address the biases that exist in compensation review processes, for example. Sixty-one percent either said they weren’t sure whether their company used any tools to measure pay equity, or knew their company wasn’t using anything at all. With recent research indicating that 66% of organizations plan pay equity initiatives for 2022, these results suggest a gap between employee expectations and company actions, Lattice said.

In a year of economic volatility and skyrocketing costs of living, employees want more frequent pay adjustments and specific percent increases in order to feel that their work is being adequately valued.

More than 30% expect to be considered for compensation increases every 3-6 months if they meet or exceed expectations in their current role. Nearly twice that, 58%, are looking for potential increases to happen more frequently than once a year.

Finally, assuming that performance is meeting or exceeding expectations, 32% of employees said they’d want a 4-5% increase in compensation. About 23% are looking for a 6-10% increase. These expectations could outpace compensation budgets and create additional challenges for HR leaders who need to keep talent engaged while keeping their business steady in the face of economic headwinds. The planned salary increase budgets of many organizations are hovering below 4%, Lattice said.

Image: iStock

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