Building Transparency Around Benefits and Compensation

Compensation Transparency

When it comes to benefits and compensation, transparency is an important – but challenging – goal to aim for. Conversations on this topic can at times be uncomfortable for employees and managers alike.

A better way to think about this issue is to focus on better and more strategic communication. Good communication often leads to greater transparency, but also gives companies better tools for cases when transparency isn’t as viable.

How can you begin working to create a culture of communication around benefits and compensation? Here are some key recommendations.

Educate Your Workforce About Their Benefits

In general, information about benefits should always be available to every employee as soon as they’re brought on to a company. But just because those benefits are available doesn’t necessarily mean employees will sign up for them. In this case, communication and education are more important than transparency.

For a small business, providing access to employee benefits is a big investment. The more people that enroll in those benefits, the more value you get out of the investment you’re making. It’s up to you to be proactive in your communication in order to motivate people to want to sign up.

So how can you convince people to care?

Consider what matters to people at each stage of their lives or careers. For example, healthcare and 401(k)s may not be top priorities for young, healthy employees. You might need to develop a campaign to change people’s minds on a fundamental level. If this sounds like a lot of work – it can be!

In a small or growing company, it’s helpful to have some one-on-one conversations. Try saying to people, “Since you just had a baby, I’d like to tell you about dependent care.” Or, “I hear your complaints about the dental plan being too expensive. Have you looked at flexible spending?”

You can also communicate the value of employee benefits in a monetary sense. Throughout my career in HR, I’ve seen people leave money on the table when it comes to benefits. They continually push for even small increases in salary without realizing they can get a better increase by taking advantage of benefits.

Benefits like 401(k), commuter benefits, and flexible spending accounts (FSA) provide pre-tax savings that really add up. For instance, employees with young children who enroll in a dependent care FSA can save an average of 30% on preschool or other qualified expenses. offer a huge savings. Also, being very smart about what medical insurance plans they sign up for can save employees money. If you look at the the numbers, those benefits savings may equal more than a raise.

Being Transparent About Compensation

Transparency around benefits will likely look very different from the transparency you create around compensation. People care about this issue very much, and could get unhappy if you can’t tell them everything they want to know.

Many employees assume that transparency around compensation means they get to know how much the person next to them is making. From the perspective of an HR professional, the matter is more nuanced than that. Employers need to consider transparency around compensation on several levels.

First, you should absolutely be transparent with your employees about the compensation system. You need to explain to people how your organization determines compensation and defines salary grades, and how that system was used to arrive at their individual salary. This helps people feel adequately informed, and feel that they’re being treated and paid fairly.

It’s also good to share the details about company-wide compensation. This includes information like who gets bonuses, commissions, stock options, etc. and when. You can think of this as the company’s overall philosophy around compensation. Again, knowledge of this structure will make employees feel informed and have trust in the business.

Lastly, there’s individual compensation, or that idea of knowing how much the person next to you is making. In this area, I don’t advise full transparency. Why? Simply put, you can’t provide the level of knowledge everyone would need to have for that transparency to be valuable. People don’t have enough information to understand a full picture of why each person is paid the way they are, and it can lead to low morale.

Ultimately, communicating the compensation system and company-wide compensation, and striving for transparency in these areas, will lead people to trust that individual compensation is fair.

When Employees Can’t Get a Raise

Sometimes, you may have to deal with tough situations brought on by the job market that make it hard for employees to get the raises they want. For example, there may be a certain skill that’s really hot in the market for a while, like C++ developers. When the bubble pops, the result is employees who are overpaid according to market value.

This is difficult because you can no longer justify giving these employees significant raises from a business perspective, even if they’re doing excellent work. In this situation, I recommend complete transparency about the problem. These are difficult conversations to have, but it’s important to be honest.

One thing we did at at a previous employers, after the C++ bubble was to give these developers spot bonuses instead of increasing their base salary. Then, we talked to them about what they needed to do to start getting salary increases again, such as learning additional skills or moving onto a management track.

These situations are never easy, but as an HR professional, you can help your employees through the adjustment by being honest and making sure they still feel valued. You don’t want an employee to feel stuck at your company because they can’t get a job elsewhere, as this can put a strain on team morale. Being transparent and helping that employee to grow in other ways are some good first steps.

The Importance of Transparency + Open Communication

For a growing business, there is a big difference between what people need to know to do their jobs, and what they want to know to feel they’re informed. Reaching the right balance is no simple task. Give people too much information, and they could become overwhelmed and tune out. Don’t give people enough information, and they begin to feel less motivated, less valued, and less in control.

For these reasons, it’s important to find that happy medium and be as transparent as you can when explaining benefits and compensation. Employees increasingly expect this level of transparency from their employers, and it’s key to building trust between staff and leadership.

Kirsten is currently the VP of People and Talent at Justworks, a comprehensive platform that automates benefits, payroll, HR and government paperwork. Previously she was an EVP Chief Human Resources Officer at Reval.