How Your Nonprofit Can Improve Compensation Transparency

Pay transparency laws, which typically require employers to share the pay range for a role in the job posting, are designed to encourage employers to be more open with employees and job seekers about compensation. And they’re becoming the norm.

As of September 2023, nine states have passed pay transparency laws, with 15 states considering similar legislation. There are also cities and counties across the country that have already enacted pay transparency laws.

But even if your nonprofit doesn’t yet have to comply with a pay transparency law, it’s still best practice to strive for honesty and openness around compensation. Let’s explore what you need to know so you can adopt pay transparency at your nonprofit.

Why Transparency About Compensation Matters

At the heart of pay transparency is a push for employers to be more open and honest with their employees (and potential employees) in order to make the workplace more fair and equitable.

Here are some clear benefits to practicing pay transparency.

Makes it possible to close wage gaps. For instance, the National Women’s Law Center explains that jobs held by women and people of color are consistently devalued, with pay secrecy allowing bias and wage gaps to grow. But with pay transparency, employees have more information on their side and organizations must own up to (and hopefully make positive changes to) their compensation practices.

Increases trust. Specifically, pay transparency can increase trust between employers and employees as employees feel confident that they’re being treated fairly. Pay transparency also can promote more trust between organizations and the public, as a majority of people want to support organizations that they can trust to do the right thing.

Empowers job candidates. When a job candidate can see the pay range for the position they’re applying for, they are empowered to seek pay that fits their specific qualifications and level of experience.

Connects your nonprofit with better job candidates. The Society for Human Resource Management (SHRM) asserts that 66% of organizations practicing pay transparency have seen more qualified candidates apply to their jobs.

Encourages organizations to make positive changes. When your organization prioritizes being open about compensation, you set yourself up to consistently make positive changes that drive fairness and equity in your own workplace.

So, if you’re hoping to do your part to make the working world a better place and strengthen your brand as an employer and an organization that serves the community, being more transparent about how you compensate your employees is a great place to start.

Be Aware of Compensation Transparency Challenges

Of course, compensation transparency also presents challenges. Your organization should be aware of a few potential obstacles to providing pay transparency.

May raise concerns about invasions of privacy. If individual salaries are disclosed, for example, employees may feel their privacy has been violated.

May create recruitment and retention difficulties. If job candidates see that your nonprofit offers a less desirable compensation package than, say, a for-profit company, they may be more inclined to seek employment with the for-profit organization.

May lead to more complicated negotiations with job candidates. When job candidates have access to the pay range for a job, they may proactively seek a salary on the higher end of the range, leading to more complicated conversations.

May negatively impact employee morale and productivity. Harvard Business Review reports that more equitable pay is pay that is sometimes flatter and less performance-based. A weakened relationship between pay and performance may lead to lower morale and productivity among your nonprofit’s team.

Clearly, pay transparency isn’t a silver bullet that will solve all the problems in the workplace. It may end up creating other issues your organization needs to address, but it’s certainly a step in the right direction.

4 Steps to Improve Compensation Transparency

So, how can your organization be more transparent about compensation? Here are four steps you can follow.

1. Define your organization’s compensation philosophy. Many nonprofits choose to take a total rewards approach to compensation. Make sure you prepare to communicate your approach to your team.
2. Share pay ranges in your job descriptions. This is what most pay transparency laws require, but your organization can take further steps. For instance, encourage employees and managers to have regular conversations about compensation.
3. Look for any disparities. If you learn that your compensation strategy is intentionally or inadvertently perpetuating biases or disparities, make a plan to address them. Communicate your plan to your team and provide regular updates on your progress.
4. Maintain clear and open communication. Ensure that your employees know that they can come to you with any questions or concerns about your compensation approach.

As you work to be more transparent about compensation, whether you need to comply with a pay transparency law or not, monitor how well your strategies are working and adjust your approach, getting help from a compensation consultant as needed.

The preceding blog was provided by an individual unaffiliated with NonProfit PRO. The views expressed within do not directly reflect the thoughts or opinions of NonProfit PRO.