So, what is the next thing to do?

As I touched upon in the first part of this article series, the new EU legislation on pay transparency is underway - though likely a bit further out than initially projected. But that’s no reason to delay getting started on building the infrastructure for fair and equitable pay practices in your company. Because the Candidate Movement (see Article I) will arrive before the compliance requirements—and the impact on your company will be much greater. People voting with their feet will hurt more than missing a deadline. Not being the employer of choice among job seekers—or becoming the company where “the last person out turns off the lights”—is a far worse situation than simply starting late.

But what to do once the job architecture and salary ranges have been built and the first equality reporting done?

I suggest starting by addressing these 4 themes of pay fairness to get closer to fair Play in your company’s pay proposition to current and future employees.

4 fairness themes to explore:

As the cliffhanger message states in article 1, how to build a competitive and yet fair and equitable pay philosophy. So, when asking yourself “What does fair look like in our organization?” A good starting point would be to assess the tradeoff between market differences vs. internal alignment. This is one of the all-time dilemmas in paying people right. How can you be competitive in the external market and at the same time ensure fair and aligned pay for jobs of the same value to the company. The labor market works by supply and demand and in many cases individuals career history and negotiating skills. And add to that, that the indications of what the market level is, are mostly reflected by poor (in many cases) statistics which only reflect only 10–20% of the comparable labor market. So, the labor market is not right or fair – it’s just what it is!

When defining your pay philosophy, you need to decide how your attractiveness is balanced between competitiveness, observed fairness and equality should apply for your company. It is not easy, but it is what you need to do to gain a reward philosophy engaging the future employees of you company.

1) Salary Ranges:

The 1st question to investigate is how many pay ranges you should have to be both competitive and fair at the same time? The simple answer is – 1 should be enough per country or region (in large countries with significant geographical pay differentials). Looking at large market data samples that reflect comparable jobs and functions of equal value typically show very little horizontal pay difference across job functions. The typical difference is vertical reflecting variations in job value by level (which is also why we are typically promoting people vertically and not sideways…)

An effective way to clarify whether one salary range per geography is enough for your company is to:

a. Look at the salaries you have offered to the candidate you have hired the past 12 months – do they correlate with job levels, or do they differ significantly across horizontal job functions for the same job level?

b. How does your overall pay distribution look for all employees – does salary correlate primarily with overall job levels or do you in fact pay significantly different across horizontal job functions for the same value of job?

c. And finally take a step back to consider how fairness should be defined in your pay philosophy? If people are truly equal worth to your business for contributions on the same job level – will it then be fair and accepted to systematically differentiate pay for two colleagues contributing equally to the value creation of the company – in other words, make up your mind on how you want to treat your people.

Remember market differences are not fair and therefore not right seen from the perspective of your people. Looking into the intentions and the current wording of the EU pay transparency directive – jobs should be compared based on their equal value to the company – not how any labor market statistics sees it. My experience is that in most cases functional as well as skill-based differences can in most cases be managed inside on salary range within a standard salary range bandwidth. Same as most companies already do when it comes to differences in job tenure and performance. And as the less complexity of fewer salary ranges will lead to more clarity it will improve your perceived fairness of pay and therefore foster greater employee engagement. 3] (PayScale 2025)

Once you have fixed the design of your salary range structure of your pay philosophy, don’t forget the rest and maybe the most important part of your reward value proposition – the part where people are truly different in their contribution to your company. The way you define and assess people’s contribution to value creation in your company.

What we normally refer to as performance. Performance in a company comes in many forms and shapes. Vertically, companies often define performance as overall financial performance cascaded down through levels of divisions, departments, and teams to the individual leader or single contributor. Or just the people on the floor. Calibrating financial or non-financial (e.g. ESG or strategy targets) on aggregated levels in the company seems straightforward in many companies. When it is the whole division that is performing either exceptional or poorly, it seems apparent that it’s everybody’s fault (and the VP is responsible). But when it comes to ensuring a transparent and fair evaluation of the performance of individuals, it quickly becomes more difficult. But why is performance evaluation important to address considering pay equality?

Because performance is the main indirect factor determining pay in most companies. The person’s performance will get them hired, be the criteria for promotion, be the personal differentiation of the size of the bonus payments. And in the end be the determining factor when cost-cutting leads to layoffs and the lowest performing 10% needs to be identified.

Over time all pay is variable, and your average yearly income is not just increasing as it used to!

Obviously, your short- and long-term variable pay is fluctuating YoY with company and personal performance, but with increasing demands for transparency and fairness in pay, companies will have to reconsider the “old” manifestness that employees moving (or getting demoted) to another job on a lower level gets to keep his/her current remuneration intact. These times are running out, as companies will have to ensure internal fairness in pay, not only to ensure that no one is paid too low, but also to ensure that no one is paid too high, compared to the pay range for jobs of similar value. So, change IS coming and the (too) highest paid people will have to pay for getting the (too) lowest paid into the range of fair and equal pay. That’s how economics work!

But what’s more interesting, is how the determination of personal performance will develop towards a more objective and clear evaluation?

To ensure a transparent and fair allocation of company rewards to all people, employers will have to ensure that variable pay and the reasons for increases in salaries and promotions are done in a fair and transparent way. So, ensuring that the salary is right and people on the same job level have the same expected pay mix (target bonus%) will not cut it alone. Employers will have to re-evaluate how they are conducting their performance evaluations in a lucid and unbiased way to ensure that all employees as a minimum can recognize that the process is fair and equal for all. They may still be dissatisfied with the outcome, but at least they should acknowledge that it is a fair game. Perceived fairness drives engagement!

So, employers must ask themselves how an unbiased and objective approach for appraisals and evaluation of individual results and contribution to company success should look like?

Several aspects of designing a performance evaluation process need to be assessed. The main topics are.

1. Are objectivity and transparency enough to ensure fairness?

So, if everybody knows what the company’s goals are, how these will be measured and that the measuring is on an objective scale, then all should be fine – right? Not necessarily, as it could be that the circumstances are different for people depending on their job – both across levels but not least the horizontal difference in type of work. Should a salesperson and an operations planner be measured on the same KPI’s and target scales? Companies need to ensure the right translation of goals both vertically and especially horizontally, so people are measured on their contribution to the overall results of the company - they being as team members or individuals. Line-of-sight and circle of influence are key!

2. Should goals and measures be defined in different ways to accommodate all diversities?

The ability to see how to best contribute to company success is not only the structural approach to goal translation (cascading) to all, but it might also depend on the demographic’s composition of the workforce. A global team of multi-culture members might need different and more holistic goal definitions for all individuals to relate to the same objective, but in each their different way, so that the team goals become common goals where all understands how they each contributed to mutual success. Not an easy task, but a necessity!

3. Are those conducting performance evaluation and calibration equipped to make fair and unbiased evaluation?

Companies (at least my personal observation), spend more time setting goals and targets than helping their people and leaders with how to understand what to do with them and not least understand when they have succeeded (or failed). Putting arms and legs to the goals and targets are key, and leaders and employees need to practice how to make forward leading actions that they believe will bring them closer to success. And when this does not work, how to make corrective plans and new actions that then works. Lead measures are key to good performance planning and not least the foundation to understand a good performance evaluation and how to provide appraisal to people (see 4DX). If each person, regardless of their diverse background, knows what to do and how to be successful, then performance evaluation and appraisal become much more pertinent to the individual. And relevant and factual feedback tends to increase perceived fairness and engagement (CIPD, 2021)

4. Are the leadership teams conducting the performance evaluations and calibration diverse enough to be unbiased?

What happens when everything is planned to perfection, but the people showing up to carry out the task turn out to be wrong for the job? Just like equal representation is the key to equal pay, the right diversity in the team evaluating performance is key to a good outcome. Understanding performance requires understanding of the person’s context, actions, and behaviors in order to understand the ability given to the person to perform. Those evaluating performance should resample those taken under the loupe and judged upon. Many companies understand this prerequisite, but few have the diversity representation needed on all leadership levels to conduct a good organizational performance evaluation process. And just to be clear, forced ranking or forced distribution will not solve this dilemma!

So, what can you do to improve (if not solve) perceived fairness in your performance appraisal process?

For starters, look at your current incentive structures and practice. Clean up your bonus levels so these resemble jobs of equal value to the company. Most companies can do the same bonus levels for the same job level in the same region of the world. Bonus levels do not differ as much as leaders’ perception of this do!

2) Incentives:

Clean up your bonus practice. Get rid of individual bonus levels and legacy entitlement from previous job levels etc. (see argument above). And then finally, discretionary bonus allocation or worse, backwards calculation of ”Total Compensation” entitlements is a thing of the past. These are non-fair and non-transparent practices. Think about the printer-test, when all bonus payouts are discussed openly amongst employees on Viva Engage.

3) Performance:

And finally make the incentive opportunity fair and equal to all. Open the books and show the formulars behind the variable pay opportunities. Not just the mathematical equation behind the scorecard based STI model, but how the pay-mix is based on job levels and location of employment. AND how each person can participate in the play through their own skills and efforts to achieve success, not only in the yearly bonus payout, but on the longer career path in salary increases and promotions.

So equal pay, when it comes to performance on company, team, and individual level, is about equal relative opportunity. Employees do not share the same personal baseline to be successful in nominal terms, so the trick is to find the company “formula” to ensure they have the same relative opportunity for success. The same goes for the context of the individual or the team. Some operate in a mature market with tailwind on sales and others are asked to engage in a new immature market with strong headwind. Typically, an immature reality has less probability of success and high volatility from low to high performance – this needs to be included in the target setting as well. Too many companies operate with one-size-fits-all performance models, irrespective of huge contextual differences amongst those people covered by the approach. This is a dilution of perceived fairness and engagements (at least from those not getting a free ride by the approach.)

A way to understand equal relative opportunity to be successful is the visualization of unequal people’s arms reaching in the air:

Picture: Microsoft CoPilot AI generated

Now we have looked at what to do to improve the pay ranges, incentive programs and performance evaluation in your company. In the next and final article in this series we are exploring: How to get further ahead on the pay fairness curve to gain a leading competitive position in attracting and retaining the talent you need.

Read the final chapter by exploring how a pay fairness Promise to your people will take you forward in the war for scarce talents.

Part III: And finally, where will this take you?

By Morten Broekner, Executive Reward Advisor, The Reward Firm

References:

1] 4 in 10 Job Candidates Would Lose Interest in a Job That Doesn’t List a Salary Range, SHRM, July 26, 2024

    This Is Why You Should Include Salary Ranges in Your Job Posts, LinkedIn, February 13, 2023

    Gartner HR Survey Finds Within 12-Month Period, Half of Candidates Have Accepted a Job Offer – and Then Backed Out Before Starting, Gartner, August 23, 2023

2] “EU Pay Transparency Directive: which countries have implemented?”, Ius Laboris, 18. July 2025

3]  2025 Compensation Best Practices Report, PayScale, 2025

4]  “Today Novo Nordisk launched yet another stage of the pay transparency rocket”. Keld Nielsen, Keld Nielsen, Sr Director Total Rewards Europe & Canada, LinkedIn

5]  Generations (MS CoPilot):

1. Silent Generation (born 1928-1945).

• Key Traits: Known for their discipline, respect for authority, and strong work ethic.

• Historical Context: Grew up during the Great Depression and World War II, which shaped their values of frugality and resilience.

2. Baby Boomers (born 1946-1964):

• Key Traits: Often characterized by their optimism, competitiveness, and strong work ethic.

• Historical Context: Experienced post-World War II economic growth, the civil rights movement, and the Vietnam War.

3. Generation X (born 1965-1980):

• Key Traits: Known for their independence, resourcefulness, and skepticism.

• Historical Context: Grew up during a time of shifting societal values, economic uncertainty, and the rise of technology.

4. Millennials (born 1981-1996):

• Key Traits: Often described as tech-savvy, value-driven, and team-oriented.

• Historical Context: Came of age during the internet boom, 9/11, and the Great Recession.

5. Generation Z (born 1997-2012)

• Key Traits: Known for being digital natives, socially conscious, and entrepreneurial.

• Historical Context: Grew up with smartphones, social media, and significant global events like climate change awareness.

6. Generation Alpha (born 2013-present)

• Key Traits: Still emerging, but expected to be highly connected, tech-dependent, and diverse.

• Historical Context: Growing up in a world dominated by technology and rapid change.

Each generation has been shaped by the unique events and cultural shifts of their formative years, influencing their values, behaviors, and perspectives.

Background Readings:

* “Fair Pay to Heaven” – or “High Pay to Hell” – by Morten Broekner, Executive Reward Advisor, The Reward Firm

** The 4 Disciplines of Execution: Achieving Your Wildly Important Goals, Free Press, 2012

*** https://www.cipd.org, Employee engagement: definitions, measures and outcomes, 2021Part III: “Fair Pay to Heaven” – or “High Pay to Hell”?