What We Learned From Implementing an Open Salary Model
Over the past couple of years, there has been significant progress in removing the stigma around pay transparency. It’s no longer a taboo topic, instead we’re hearing lots of buzz as more and more states pass pay transparency laws for employers.
The specifics vary from state to state, but the trend is clear – increasingly, employers must disclose pay ranges within job postings as well as during the interview process. This is truly a step in the right direction for pay equity and closing the gender pay gap!
But beyond government requirements, many forward-thinking companies are taking a more transparent approach to compensation and employee development, recognizing that today’s employees want to better understand how their compensation is determined and how they get a raise.
The Benefits of an Open Salary Model
Managers want to give their people the tools they need to drive their own development so that their organizations can thrive. Those tools should include salary and promotion guidelines and a clear understanding of what skills mastery means for them. Gemma Boulton, Chief People Office at Cuvva, recently spoke about the benefits of an open salary model in a podcast with Lattice.
“It helps people drive their own development. And if they’re driving their development, then they’re driving their performance. And if they’re driving their performance and productivity, they’re driving your business, and everyone succeeds.” - Gemma Boulton, Chief People Officer at Cuvva
The data supports this too! According to iHire, over 90% of employees report that if their company is transparent about salary decisions, they trust their organization not to have pay disparities. Not to mention, Glassdoor’s Global Salary Transparency Survey found that 70% of employees across believe salary transparency is good for employee satisfaction and 72% believe salary transparency is good for business.
Sounds like a no-brainer, right?
Why and How We Built Our Open Salary Model
But implementing an open salary model and more transparent promotion process is no easy task. At Brilliant Ink, we recently underwent a complete overhaul of our pay and title structure and gleaned insights that can be helpful for organizations of all sizes.
While we work in a small, nimble agency where everyone has the opportunity to develop beyond their current level, there were shades of grey in our salary bands and the lack of clarity didn’t feel good for everyone. To create greater equity across the organization, we created a new agency-wide job family structure, job levels and salary bands to empower our people to have clear, meaningful career paths at Brilliant Ink.
We believe moving to a skills-based model will allow us to formalize our performance expectations and create even more transparency and possibility. It will make developmental conversations more productive and empower our people in their career journeys. While the new structure clarifies expectations, we still embrace the size and agility of our company and our people have joined us for the ride.
Are you intrigued yet? Here are five steps you can take:
1. Benchmark Compensation
First things first - take the time upfront to conduct comprehensive compensation benchmarking. Don’t simply rely on your current pay structure – develop a deep understanding of industry standards and what fair pay looks like for each role in your organization. Doing this work upfront pays off big in the long run! If you need help getting started, download Lattice’s free Compensation Benchmarking workbook.
💡 PRO TIP: Put your futuristic hat on and think about your hiring needs 18 – 24 months from now. Consider what annual raises will look like for all employees and how promotions will impact your company's finances. You wouldn’t want to roll out a new pay structure that results in layoffs down the road due to a lack of financial forecasting.
2. Put It in Writing
Get everything related to job roles within your company down on paper – we’re looking at you, HR pros! This should include job descriptions and job evaluations that outline both the technical skills for each role and behavioral standards for your organization. You’ll likely need to partner with both department leads and Talent Acquisition for the technical aspects, though your friends in Internal Communications can also help you tell your organization’s story.
💡 PRO TIP: While you’re at it and applying your equity lens, take the opportunity to also update your job descriptions to use inclusive language.
3. Define Mastering Skills
Once you have a comprehensive list of skills, define what it means to master a skill. How long does an employee need to perform a particular skill for it to be considered mastered? How many times do they have to demonstrate it with success? These are questions you need to be able to answer!
💡 PRO TIP: Some organizations may consider a skill mastered if someone is able to coach others on how to perform that skill. At Brilliant Ink, we defined skills mastery on a continuum. Job levels like specialist are expected to "coordinate while receiving a lot of guidance." Senior managers will "partner and collaborate while receiving little guidance.” Taking the time now to figure out what this means for your people will have a big impact later!
4. Evaluate Employees
Once you have defined skills for each role, it’s time to evaluate your employees in their current roles. This step in the process is crucial, it involves participation from both the individual employee and their manager.
Individuals rate themselves and managers rate the employee based on where they are currently performing against skills required for their current job and at future levels. The key here is keeping results private until the individual and manager can come together for an alignment meeting where they’ll decide on skills mastery together.
💡 PRO TIP: Depending on the size of your organization, it can be helpful to get a neutral third-party involved to review evaluations and help facilitate this step of the process. They can provide guidance to managers who likely haven't been through this process before, and they can also give an objective perspective to employees.
Once your managers and employees have met, it’s time to communicate! Your new job levels, competencies and salary bands for your departments and the job levels should all be easily accessible, frequently referenced and serve as your foundation for career development and promotions at your organization.
💡 PRO TIP: We recommend waiting until you’ve evaluated your employees’ job levels and met with them before publishing your salary bands for the different levels. The idea here is you want your managers and employees mapped to their roles based on their competencies – not a dollar number.
If some of this feels out of your reach, there are many other ways to increase transparency so employees are more connected to the bigger picture.
Ask for more openness from your Leadership Team – perhaps they could start conducting open-door meetings and/or sharing key financial decisions with the broader organization. Draw a connection for your team between their day-to-day work and company goals to help them understand how growth and development tie back into the organization’s success. And consider starting with sharing broad salary bands for key roles in your organization, as a step in the right direction.
Still trying to wrap your head around the specifics of pay transparency? Check out this cheat sheet from Syndio that helps break it down into digestible language. Or give us a call, we’re here to help!