SHRM: Lecture 12 - Compensation II

Pay Transparency and Case Study Viivi

What are alternatives to Pay for Performance? What is this new movement called?

→ New Pay

• Rewards with time off:

• Reward throuhg flexibility:

• Peer bonuses:

• Common good investment:

What is Pay transparency?

• extent to which an organization

• allows employees to

Three diemnsions of pay transparency and to which types they belong

• Pay outcome transparency

• Pay process transparency

• Pay communication transparency

Key aspects of pay outcome transparency

Key aspects of pay process transparency

• Transparency about decision-making

• Transparency about what gets measured

• Transparency about feedback mechanisms

• Transparency about the communication channels

Do organizations in Switzerland practice the three dimensions of pay transparency?

In general they are reluctant.

• pay outcome transparency

• pay process → usually it is base pay level in Switzerland, therefore it is only 40% of companies that are transparent about their process (i.e. individual-level variable pay, amount of fixed pay)

• Pay communication transparency

Why are companies reluctant to be transparent? What are the firm-related issues?

• If you make the information public your competition can hire your employees away

• If you have ppl from the same team with same position, but htey have huge range between their incomes, then there could be conflicts between employees and if this information leaves the company it could seriously damage its image.

• Processing a lot of personal and inter-personal data → difficult to use data, so it is understood in the “right way”.

What are employee-oriented issues?

• Reduction of pay inequities (gender, ethicity), yet loss of bargaining power.

• Top performers leaving the organization bc they think they are not getting paid enough.

• Productivity losses. Pay in equity goes down if you enter the company and you loose bargaining power. When organizations are transparent about their pay then employees loose their bargaining power.

• Experience of envy → decreases willingness to help those who receive a higher pay.