Building a Business Case for Pay Transparency: 6 Steps to Follow

June 24, 2024
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At Figures, we’ve talked a lot about the benefits of pay transparency for both employers and employees. Opening up about your pay practices can boost employee morale, promote trust and even improve productivity. Plus, with the implementation of the EU pay transparency directive just around the corner, it’s no longer just a nice-to-have. 

But for HR teams, convincing company leaders that pay transparency is a good idea can sometimes be a challenge. Leaders are often resistant to change — especially when we’re talking about something as radical as pay transparency.

In this article, we’ll share six steps you can take to get your company leadership just as excited about pay transparency as you are — and make sure you’re ready for compliance when the directive comes into play. 

Building a business case for pay transparency: 6 steps to follow

Want to get your company’s leadership on board with your pay transparency goals? Here are the steps to follow.  

1. Know your legal obligations

Like it or not, a wave of pay transparency legislation is sweeping across the world. For European companies, the biggest change on the horizon is the EU pay transparency directive, which will come into effect across member states by June 2026. 

Once the new rules are in force, companies will have to be much more open about their criteria for determining pay, and employees will have the right to request certain info about how their pay compares to others. The directive will also introduce extensive gender pay gap reporting requirements for companies with over 150 employees, extending to those with 100+ employees by 2031.

The first step in building your business case for pay transparency is finding out exactly what your legal obligations will be when the directive comes into effect. After all, complying with the law is a pretty compelling reason for leadership to get on board… and it can also be a springboard for further transparency. 

2. Determine the right level of transparency

The EU pay transparency directive provides the minimum requirements you’ll need to meet to be compliant with the law. But the directive coming into effect is also a good opportunity to revisit your pay practices more generally and decide if you want to go further. 

It’s worth highlighting that pay transparency isn’t all or nothing. Even after the directive is in effect, some companies will be more transparent than others. At this stage, it’s all about finding the level that feels comfortable for your organisation in its current form. 

Remember, when it comes to pay transparency, it’s very difficult to put the cat back in the bag. That means it may be better to go slowly for now, and increase your level of transparency down the line if you want to. 

3. Assess your current situation 

The next step is to conduct a thorough analysis of your current level of pay transparency, and how it compares to where you ultimately want to be. You should also consider any problems your current approach is causing. For example, if your salary bands aren’t transparent, do employees have a clear understanding of the progression paths available to them? 

You should also consider whether certain aspects of your compensation strategy are actually ready for transparency. For example, if you want to make your salary ranges transparent but those ranges are not consistently applied, you’re going to run into problems. Spending a bit of time getting your processes and systems cleaned up before launching into full transparency is probably a good idea. 

4. Identify and cost up the tools you’ll need

You don’t necessarily need fancy tech tools to achieve full (or partial) pay transparency. For a small organisation, it could just be a case of emailing each employee with details about their salary band and where they sit within it (if that’s the level of transparency you decide to go for). 

However, having the right tools in place makes managing compensation much easier — and lays the groundwork for pay transparency too. For example, a tool like Figures can help you to:

  • Benchmark your salaries against the external market 
  • Quickly generate salary bands for your entire organisation 
  • Spot and correct pay inequities quickly 
  • Keep an eye on your gender pay gap 
  • Run smooth and compliant compensation reviews 

Doing your homework at this stage is crucial if you want to convince leaders to get on board with your plans. When you present your case, you should be able to tell them exactly what tools you’ll need, what they’ll cost and the ROI they’ll generate. 

5. Highlight the benefits for employees and the business 

Next, you’ll need to present the benefits of pay transparency to your company’s leadership team (and, ultimately, the organisation as a whole). There are many benefits, but you should focus on the ones that are most relevant to your business. 

First, you can build the fairness case for pay transparency by emphasising how it can help businesses to build fair and equitable compensation structures. Highlighting how this aligns with your core mission and values can help convince leaders that pay transparency makes sense for your business. 

You should also talk about the tangible business benefits pay transparency can bring, like improved productivity and retention. And of course, it’s important to emphasise that pay transparency is no longer a nice-to-have, and will be necessary when the EU directive comes into force. 

6. Develop an implementation plan

It’s all well and good preaching the benefits of transparent pay practices, but you’ll also need a solid plan for implementing them in your organisation. While revolutionising your entire compensation strategy can seem overwhelming, you can make the process easier by breaking it down into key achievements and setting a deadline for each one. 

For example, many companies begin by revising their salary structures to ensure they’re fair and consistent. Only once that’s achieved do they begin making those structures more transparent. Or, you might start by giving each employee access to their own salary band and the one above it, and then iterate from there. 

It’s OK to be ambitious with your plans — and with the pay transparency directive looming on the horizon, you can’t afford to kick the can down the road too much. However, you should also be realistic about what you can achieve within a particular timeframe.

What next? 

You did it! Your leadership team is fully on board with your dreams of pay transparency, and you’ve been given the green light to start making them a reality. So… what now? Well, it’s time to start putting your plans into action! Here are a few steps you can take to kickstart the process.

Update your compensation philosophy 

Your compensation philosophy should reflect your organisation’s core beliefs about compensation. And if you’re serious about driving pay transparency, you might need to update it to make sure it incorporates that goal. You should include details about the level of transparency you strive for as an organisation, as well as why you’ve taken that approach. And if you don’t yet have a compensation philosophy? Now is the perfect time to formalise your approach to pay by putting one together. 

Create a pay transparency taskforce

Pay transparency requires the input of a whole bunch of different stakeholders. That’s why one of the early tasks on your list should be putting together a cross-functional team to work on putting your plan into action. This team might be made up of people from HR, payroll, finance, comp&ben and IT — and anyone else whose views would be valuable.  

Develop your compensation communication plan 

Employees are sometimes uncomfortable with the idea of pay transparency — but how you communicate about it can make a big difference. Before you make any significant changes, you should think carefully about how you’ll explain them to employees. Putting together a compensation communication plan that outlines your approach to pay transparency can help keep everyone on the same page.

Monitor progress and adapt 

We’ve said it before, and we’ll say it again: pay transparency is not a one-and-done situation. If you want it to be effective, it requires continuous evaluation and refinement. Setting concrete goals and keeping an eye on them as your plan progresses can help you test what’s working — and what needs to change. For example, you should assess any changes to your gender pay gap, as well as stats related to talent attraction, retention, productivity and engagement.  

Get ready for pay transparency with Figures 

If you want to get more open about your pay practices, you need to be sure they’ll stand up to scrutiny. And that means you need a powerful, user-friendly tool to help you develop robust and consistent pay structures. 

Figures is an all-in-one compensation management platform that can help you to prepare for pay transparency by getting your structures and processes in order. 

You can use our tool to benchmark salaries, automatically generate salary bands based on your requirements, and even run smooth, efficient and compliant compensation reviews. Want to learn more? Sign up for a free demo to see Figures in action. 

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