New U.S. state laws combined with proposed legislation in the U.S. House of Representatives are compelling employers to take a more transparent approach to salaries.
If passed, the Salary Transparency Act would compel US employers to be open about salary ranges with employees for their current jobs. In addition, it would further force employers to disclose salary ranges on all job postings. Subsequently, if an employee/candidate believes an employer is breaking this law, the employee could take out a lawsuit against the employer.
With that said, it’s no wonder that more and more companies want to get ahead of the curve by leaning toward pay transparency. In fact, according to one study, 17% of US firms already disclose pay range information, 33% openly outline how they manage pay equity, and 53% anticipate they’ll do so in the future.
So, for employers wanting to take a proactive and systematic approach to pay transparency, let’s look at how this can be done without causing turmoil amidst your workforce:
What Issues?
It’s evident that despite looming legislation, not everyone is ready for the shift toward pay transparency.
In fact, one study found that 31% of companies aren’t prepared for pay transparency because of:
- Administrative complications (30%)
- Unclear job architecture (25%)
- Fear of possible employee reactions (46%)
Let’s explore the latter point in greater detail:
Employees may react negatively if they’re paid less than colleagues who do the same job. This could result in resentment, and possibly higher attrition rates, with one in 20 saying they’d quit if they found out they’re paid less than coworkers.
On a slightly separate note, hiring managers may have to negotiate harder over salaries if pay ranges are published, with 68% of employees stating they’d expect to be paid at the top of a pay range.
It’s also worth noting that
But, despite these issues, pay transparency isn’t going away. Some US states are already there. For example, Colorado’s Equal Pay for Equal Work Act demands employers include salary ranges and benefits in all job listings. Similarly, in New York City, employers must list a maximum salary on all job ads, transfers, and promotions.
So, with pay transparency blazing the trail, here’s how to implement it without causing the aforementioned turmoil in your workplace:
Plan Your Approach
First, you’ll need to set a clear job architecture and framework to benchmark your salaries for employees and entire departments against market pay rates.
Use this as an opportunity to identify employees doing comparable work and ensure their salaries are equal. Of course, it goes without saying that before making your company’s wages public, you’ll need to address any pay discrepancies (where there’s no rationale behind them).
The ultimate goal is to have a consistent and equal pay process and one that’s followed to the letter where all pay-related decisions are concerned.
Then with your compensation framework in hand, ensure your HR team applies it to existing and new employees across the board during recruitment, promotions, and pay reviews.
Communicate With Existing Employees
It’s wise to tell your workforce in advance that you’re implementing pay transparency, why, and how you intend to roll it out company-wide.
You’ll also need to ensure that all managers are up to speed on your plans and fully supported throughout. When everyone’s on the same page, it massively increases the likelihood of consistency. After all, they’re the ones tasked with answering employee questions, so be sure to provide the information and resources they might need to answer any queries they may have to field.
For example, what will happen if employees learn they’re paid less than a colleague doing the same job? Will those employees receive increases? You and your management team have to be prepared to address potential inequalities and discrepancies.
Use Pay Transparency to Address Inequality
It’s a fact that women and, in particular, minority women are paid less than men. For example, the US Government Accountability Office statistics show that women earn about $0.82 for every dollar men earn, with Hispanic or Latina women making just $0.58c and Black women $0.63c for every dollar white men earn.
As we’ve already hinted, Therefore, it’s the perfect chance to double-check employees are paid fairly regardless of gender, nationality, orientation, etc.
Use Data to Inform Your Decisions Around Pay Transparency
Suppose your company is looking to be more transparent about their salaries. In that case, you’ll want to demonstrate to stakeholders and employees that you’re delivering fair wages as well as how you arrived at your compensation packages.
Using reputable compensation software to fuel your salary strategy is the best way to do this. LaborIQ can help you plan and monitor your compensation packages, including pay equity.
Needless to say, by relying on data to power your compensation plans, you’re less likely to fall foul of unintentional bias. This goes a long way to ensure you’re offering fair, equitable pay across the board. When companies can be sure of that, it’s way less likely pay transparency will result in uproar in your workplace.
Final Thoughts
As alluded to throughout this blog post, pay transparency is already mandatory in some US states, and new legislation is in the works that may compel employers to introduce pay transparency countrywide.
In light of that, rather than taking a responsive and fire-fighting approach to pay transparency, it’s recommended that employers take a strategic and systematic approach to introduce it into their workplace culture.
