Sharing salary data: Empowering HR with compensation insight
For Stacey Klimek, vice president of people at PayScale, eliminating surprises, articulating compensation philosophy and providing context for pay decisions is all in a day’s work. And it’s easier to do when you have home-grown comp data and analytical tools at your fingertips. Employee Benefit News recently spoke to Klimek about how a pay data and compensation analytical tool provider can help executives meet corporate goals. Edited excerpts of that conversation follow.
Employee Benefit News: What’s at the top of your agenda as it relates to pay practices?
Klimek: One of our big priorities is making sure that HR departments and line managers get on the same page when it comes to pay.
EBN: Has that been a problem in the past?
Klimek: I remember the day, years ago, I was talking to a manager about the pay conversation he should be having with his employees. And I realized that I, and other members of the executive team, had been using our PayScale tools for years, working with the data, setting the pay ranges and making decisions. We had just been sending them out to managers saying, like, “Here are your raises for your employees, now go tell them.” And this manager looked at me and said, “How did you come up with the budget?” We had not taken the final step in using the data by providing the context so managers would understand the budget themselves, and be able to explain it to employees.
EBN: Besides setting salary ranges and explaining where the numbers came from, how else is the data used?
Klimek: We use our own solution not only for our twice-a-year compensation review, but to evaluate our gender pay equity. And we share that type of information with our employees. We also make and distribute total compensation statements. They show employees at a glance their salary, benefits, 401(k), paid time off and where they are in the market. It’s a really powerful tool to open the door to engage in a broader conversation with our employees.
EBN: What does the broader conversation typically cover?
Klimek: We talk with our employees about what we are trying to accomplish with our pay practices. We have employees in 24 states, and the labor markets are different in each one. So with our system we’re able to use relevant benchmarks and tell employees what labor market we’re using, why we chose that labor market, how we benchmarked their position.
EBN: Is the conversation only about numbers?
Klimek: Not at all. We also talk to employees about things they can do if they want to progress within their salary range. But it’s important for them to understand why they’re in the range that they’re in. For so long, employees were told you get a 3% raise, and that was it. There was no conversation. Today they might still get a 3% raise, but if they do, it’s for the right reasons, and they walk away understanding that.
EBN: Is the pay conversation concurrent with a performance conversation?
Klimek: We break those apart. We evaluate comp twice a year, and we have conversations with employees on a monthly basis. We do have quarterly OKR [objectives and key results] discussions.
EBN: When you have access to such granular market compensation data, what happens in your conversations with employees if your organization just can’t keep up with compensation norms for your labor market?
Klimek: Sure, that happens. If your compensation philosophy includes sharing data with employees, you can’t get around that. You just need to clearly articulate why they’re getting the raise that they’re getting, any changes in the company’s overall compensation budget, and the constraints we face. When we were a small start-up, it was really tough competing against employers like Amazon, Microsoft, Google and Facebook; they’re all in our backyard. But as I mentioned, we look at comp holistically. Intangibles, like having interesting work or an opportunity for career progression, are also important, and part of the conversation.
EBN: How do you collect your compensation data?
Klimek: In the past we relied heavily on our own crowd-sourced data, but as the markets got more competitive, we would pull in other outside surveys. And now we use multiple surveys, and in our own case, especially when we’re looking at software engineering and executive positions. Our customers can use our platform and incorporate data from sources that they subscribe to.
EBN: Does having access to so much data change the dynamics within a company between HR and the finance department?
Klimek: In some companies, the CFO will throw out a budget number for compensation each year, and then HR is left having to make that number work. I go to our CFO, usually in the fall, and — based on data or the markets moving — I can recommend what I believe we should be budgeting for comp, and have a very strategic conversation, and that’s very helpful to everyone.
EBN: Of course having all that data doesn’t guarantee your recommendations will always be accepted.
Klimek: Sure, it’s never easy, right? And the CFO is doing his job, and I’m looking at it from a talent perspective. But the more data you have, the smarter you can be with regard to how to allocate the resources that are made available to you. You can do a much better job of prioritizing where the budgeted dollars go, based on having that granular view of the pay market for particular jobs.
EBN: Do you find that having a strong grasp of prevailing salaries for specific jobs in specific markets makes it unnecessary for you to seek salary history information from job candidates?
Klimek: We don’t ask for salary history and we haven’t for quite a while. Our philosophy here is we price a position, and when we’re hiring a candidate, we figure out where they fall in that range based on their experience and what they’re bringing to the position. We don’t need to know their salary history.
EBN: Of course it’s becoming illegal in some places to ask for salary history, even if you wanted to. But it’s not just about trying to take advantage of people whose current salary is below market. Isn’t it mainly to avoid offering too little and losing a strong candidate?
Klimek: PayScale was originally created for people who wanted to know how their pay compares to the market, and we still have a lot of people who use us for that. Those users have to give us their pay information to get the market data, and that’s a big source of our information. And so job candidates often will look at that resource to guide them on what they can reasonably expect. That way they are less likely to turn down a reasonable offer that’s based on the same market data. But compensation is an important conversation to have early on with a candidate, so that there isn’t a big disconnect.