While employers are increasingly fielding questions from their employees about pay equity, many companies are still struggling to develop an effective approach to compensation communication, the findings of a survey conducted by executive compensation consultancy Pearl Meyer indicate.

The survey of 244 directors and senior executives at U.S. companies was carried out in June 2018. The results showed that 62% of respondents currently are or expect to be fielding questions from their employees on gender pay equity. Of these respondents, a majority indicated that they have clear and detailed information ready to share (30%) or are currently drafting their responses (48%). By contrast, 91% of the executives surveyed reported that they are not getting questions from their employees about the highly publicized CEO Pay Ratio disclosure.

The survey also found that most of the respondents think the quality of their organization’s compensation communication is mediocre, with just 8% of respondents saying they believe the quality is excellent. Although almost half of the executives surveyed (48%) reported that their organization has increased compensation communication in the last two years, slightly more than half (52%) said they are not sharing information about base salary ranges with all employees.

The findings further revealed that while about two-thirds of managers are trained to have formal compensation conversations with their direct reports, the majority (70%) of the executives surveyed believe those conversations are not effective. The survey also showed that less than one-quarter of respondents think employees can appropriately compare their compensation to that of colleagues (21%) or of workers in similar positions in other organizations (22%).

When asked to rate their employees’ understanding of the company’s compensation philosophy, just 8% of respondents said it is very good, while 43% said it is generally okay, and 41% acknowledged it is not good. However, most of the executives surveyed said they believe their employees’ understanding of how their own pay is calculated is either fair (47%) or good (41%). Moreover, when asked how they think their employees would rate the overall value of their organization’s compensation package, only 16% said they believe the rating would be high, while 70% said they think it would be medium.

From Benefit Trends Newsletter, Volume 61, Issue 10

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