Megan Nail
VP, Total Rewards Practice
NFP
Episode 361
The Compensation Conundrum: Building Trust Through Pay Transparency
Current chapter: Built by People podcast features insights from world's top HR leaders
Built By PeopleJanuary 2, 2025 · 10:13
Thesis
“Effective compensation strategies, built on clear frameworks, market data, and transparent communication, are crucial for fostering employee trust, engagement, and retention, despite the common challenges of budget constraints and discomfort around discussing pay.”
Show notes
Compensation is the most poorly communicated thing in our work lives—and yet it's the primary reason most of us show up every day. That disconnect, between how central pay is to employees and how little organizations explain it, is exactly the problem Megan Nail has spent her career solving.
As VP of Total Rewards Practice at NFP, Megan brings a practitioner's rigor to pay equity: build the framework first (market data, salary ranges, decision guidelines), then use data to audit it continuously. She argues that data alone isn't enough—without consistent guidelines for how managers apply that data, you'll still end up with disparate pay decisions across the organization. The fix isn't just statistical analysis; it's equipping every manager to answer the question their employees are already asking.
She's also candid about the hardest part of this work: budget. Most organizations can't close pay gaps overnight. Megan's advice is to be honest with employees about a multi-year remediation plan rather than staying silent—because the silence itself becomes the problem, filling a void that employees quickly fill with their own assumptions about headlines on union negotiations and inflation spikes.
- Why a structured framework is the prerequisite for pay equity—not just good intentions or good data
- How to communicate the "why" behind pay decisions in a way that builds trust rather than anxiety
- The manager credibility trap: what happens when employees ask pay questions their managers can't answer
- Budget constraints as a feature, not a bug: phasing pay equity corrections over 2–3 years while keeping employees informed
- Using data at both ends: market data to build ranges, regression analysis to audit outcomes—including free tools like Excel
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What you'll take away
- 1Establish a robust framework with market data and pay ranges as a 'central source of truth' for objective pay equity decisions.
- 2Communicate pay transparency openly and honestly, explaining the 'why' behind pay decisions to build trust and confidence among employees.
- 3Address budget challenges for pay equity initiatives in steps over a 2-3 year timeframe, maintaining transparency with employees about the long-term plan.
- 4Equip managers with sufficient information about compensation to answer employee questions, thereby maintaining their credibility and fostering trust.
- 5Utilize data for both initial framework building (market data) and ongoing verification (statistical analysis, regression) to proactively ensure and retrospectively audit pay equity.
What most organizations get wrong
In Megan's words
“I often say that even though compensation is not probably the only reason why we work, it's, you know, got to be right up there as a primary reason for most of us, even though we love what we do. I think unless we're in a volunteer capacity, none of us are working for free, but it is the most poorly communicated thing that I have seen in our work lives.”
Highlights the critical importance of compensation and the widespread failure in communicating it effectively within organizations.
“And pay is no exception. I mean, again, it's a big part. You're looking at your pay stub every week or every other week or whatever it is for you. And really trying to understand why it is. When you see things on the news about, you know, unions negotiating 46% increases or inflation at an all-time high, we as employers really need to kind of step in and fill that void of knowledge so that our employees can at least be engaged.”
Emphasizes the employer's responsibility to proactively educate employees about pay to counter external influences and maintain engagement.
“Another thing that I often see that I think is really detrimental to engagement, it really brings down managers' credibility, is if we don't equip our managers with any information about pay or very limited information, and employees come to them, the person they trust most, their supervisor or their manager, and that person can't answer any questions...”
Points out a critical internal communication failure that erodes trust and manager credibility, directly impacting employee engagement.
“So data is important. I think it's starting with market data around pay, building that framework, building those ranges. But then beyond that, really thinking about the guidelines for how decisions are made, because we can have a great plan and great data, but if we have a bunch of different leaders and managers who are using that data differently and making different decisions...”
Stresses that data alone isn't sufficient; clear guidelines for its application by managers are essential to prevent pay inequities.
“And there's real easy statistical things you can look up. You can do a regression in Excel. Excel can do a lot of the work. All the way to there's great computer assistant, you know, softwares that are out there and HRIS systems that have things built in that can help with that as well.”
Provides practical, accessible advice for conducting pay equity analysis, from simple tools like Excel to specialized software.
The problems this episode addresses
- •Organizations lack a structured framework, market data, or pay ranges, making it difficult to objectively assess and ensure pay equity across different roles and demographics.
- •Poor or absent communication of compensation leads to employee distrust, disengagement, and causes managers to lose credibility when they cannot answer pay-related questions.
- •Budget constraints are a significant challenge, making it costly for companies to immediately address all pay inequities, often requiring multi-year implementation strategies.
- •Inconsistent application of pay data and guidelines by different leaders and managers can inadvertently create pay disparities, even with good initial data.
- •Employees form their own conclusions and anxieties about pay due to a 'void of knowledge' from employers, especially concerning external factors like inflation or union negotiations.
In this episode
Built by People podcast features insights from world's top HR leaders
Built by People
Your career started in HR and then moved into compensation consulting
Career Paths for Compensation Experts
What steps do you take to ensure pay equity across different roles and demographics
WSJDLive: Pay Transparency and Equity
What challenges have you faced implementing pay equity initiatives and how have you overcome those challenges
What challenges have you faced in implementing pay equity initiatives
How does pay transparency influence employee engagement and retention
How Does Pay Transparency Influence Employee Engagement and Retention?
Megan, what role does data play in driving decisions around pay equity
Do Data Play an Important Role in Pay Equity?
Megan says education around compensation is really important
Megan O'Brien on Compensation
Topics covered
Organizations and entities mentioned
Full transcript
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