How your nonprofit can promote pay transparancy
Pay transparency is the policy of openly sharing an organization’s compensation philosophy, rules and procedures with job candidates, current staffers and the public. It may mean disclosing pay ranges or salaries for specific positions and explaining how raises, bonuses and benefit offerings are determined.
Promoting transparency can help your nonprofit attract qualified job seekers, ensure fairness in your employment practices and maintain an environment of trust. So if you don’t already practice pay transparency, you might want to take steps to introduce it.
Need is now
In its 2024 Global Pay Transparency Report, consulting firm Mercer reported that only about one-fifth of U.S. employers have a pay transparency strategy. But some states and municipalities (for example, California, Colorado, Illinois, Minnesota and Vermont, as well as Kansas City, Mo., and Cleveland, Ohio) have added pay transparency laws to their books. As this trend gains momentum, the need to adopt compliant compensation practices becomes more urgent. You may also encounter grant makers or donors who stipulate that your nonprofit practices pay transparency.
To get the process rolling, conduct a payroll audit. By meticulously identifying and evaluating all compensation expenditures during an audit, you can determine which information to share and which data points to keep confidential. You may also catch inconsistencies and disparities that need to be addressed. Ultimately, the audit can provide the raw data you need to determine whether and how your company’s compensation aligns with each position’s roles and responsibilities.
Your organization needs clear and consistent criteria for making compensation-related decisions. If such criteria are already in place, you may need to refine the language used to describe them. Again, your objective is to reduce or eliminate any perception of bias by clearly explaining to job candidates and employees how your company makes pay decisions.
Communication plan
Of course, you also need a communication plan to manage perceptions. Ideally, your plan should include written guidelines explaining your compensation philosophy and structure, an internal FAQs document, organization-wide or department-specific Q&A sessions, and website or email updates for stakeholders.
Your human resources department and managers of other departments must be the frontline champions and communicators of your pay transparency philosophy, policies, procedures and decisions. It’s critical that their messaging be accurate and consistent to prevent misunderstandings and misinformation. Once you’ve defined or refined your compensation criteria and developed a communication plan, invest time and resources in educating supervisors and executives.
Consult experts
Before you roll out a formal pay transparency strategy, seek input and approval from your board of directors. You should also get advice from your attorney to ensure your plan complies with all federal, state and local laws and to limit any potential exposure to litigation. Finally, contact us. We can assist you in conducting a payroll audit, identifying compensation-related expenses and aligning your strategy with your mission and strategic objectives.
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