Pay Transparency – Say What Now?
By VICKY BROWN
Pay Transparency. If you haven’t heard the term before, you will soon. At the time of this episode, 7 states have some type of pay transparency laws on the books. California, Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington are all part of this first wave. But you can bet that more and more states are moving to require employers to give candidates (and in some cases, employees) salary information.
And it’s not just states, cities like Cincinnati and Toledo have hopped on the bandwagon too.
And no, these laws weren’t put in place to make your job harder – they’re actually in response to pay disparities for women and people of color. But I think it is fair to say this is part of an overall shift of information from employer to employee.
Come on, you know how it used to go – you would interview someone, and the first (or near the first) question they had was – well, ‘how much does the job pay’. And I’ll tell you, any HR or staffing professional worth their salt would come right back with ‘what range are you looking for’. Well, that question has gone the way of the dodo bird – in fact, from 2017 onward, states began to either curtail, or outright ban an employer’s ability to ask about prior salary history.
The thinking on this went, that if you simply used someone’s prior salary as a factor in how much you offered them for the current job, then they could never override a prior pay inequity. For example: a woman is hired for a job in 2003, she’s paid less than the going rate for a man in the same job, only to later realize that she’s carrying the burden of that initial inequity into every future job opportunity.
Honestly, when you think about it – it really isn’t fair. So poof! That question went away.
And that brings us to the current regulations around pay.
Undoubtedly, the current labor market, coupled with the pay transparency laws, will mean that companies that aren’t legally required to disclose salary ranges (because perhaps they’re too small to meet the guidelines) – well, they will find themselves forced to give up the ranges in order to be competitive in the market. After all, CBS sited a Monster.com survey saying that more than half of those surveyed said they wouldn’t apply for a job that didn’t disclose how much it pays.
So, how in the world are you supposed to manage through all this? Well some ‘not quite in the spirit of the law’ solutions that companies are coming up with, are simply not advertising open positions. They’re moving to more of a ‘word of mouth’ model.
Others are focusing on the ‘headhunting’ model. Contracting with staffing professionals, and asking that they exclusively mine candidates from other companies. As you might guess, that can have it’s own, rather large, set of drawbacks.
So what can you do?
Well, there’s no way around it – you’re going to need to develop a pay scale if you don’t already have one. And if you do, you should review it – right away. So, what is this pay scale of which I speak? Well, we HR folks like to call it a compensation structure. And here’s how you develop one.
“..when you‘re discussing compensation, don’t relegate yourself to simply talking about salary. After all, an employer spends a lot more on employees than their base salaries.“
First, find out what you have now – run a report of all your current jobs and their salaries
Next, do some market research – actually with all the pay data that’s available today, that’s easier than ever. And you’re not just relegated to salary.com (although that’s a good place to start). Since pay transparency laws are all the rage, you can actually get great, just in time, information by looking at current postings – after all, they are posting the range for the job.
Now, the next part will feel a bit more complex, but it’s vital to the overall structure. You need to figure out your compensation strategy. For instance, will you always put candidates with less than x number of years’ experience at the bottom of the salary range.
What triggers an increase for existing employees?
What do you want to do when someone hits the top of the salary range for the job?
Or, maybe your company might adopt a strategy to attract and retain the top managerial and professional talent to help you overcome competitors. With that you may want to lead the market in the total cash or total compensation package you offer.
By the way, did you notice that last thing I mentioned – total compensation package. That’s actually a pro tip – when you are discussing compensation, don’t relegate yourself to simply talking about salary. After all, an employer spends a lot more on employees than their base salaries.
There’s the cost of employee benefits and perk programs – those should definitely get factored in. After all, you’re paying for them – at least part of them. I’m a big fan of total compensation statements, and I think you should give them to employees every year. That way, everyone is keeping the full cost of compensation top of mind.
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Don’t forget job descriptions – you’ll need job descriptions, good ones, because they’ll help support the decisions you make around how much you’re willing to pay for a particular job. Also consider the impact of location – after all a receptionist position in North Dakota probably has a lower salary range than that same job in New York. And because your budget also has some impact here – have some discussions with your numbers people – your accountant or finance person.
Once you have all the data, and you’ve figured out your comp strategy, then you’ll set about creating a low, mid and high salary point for each position.
OK, before you pass out – #1) that’s a really general overview of how to develop a compensation structure. And #2) keep in mind you shouldn’t tackle this all by yourself. Get some help, this is really the right time to enlist the support of a good HR consultant, if you don’t already have someone on your team with HR chops.
Figuring all this out goes a lot faster when you have an expert on hand – and as an extra added benefit, they can give you valuable insight into what’s happening in your market.
But, no matter if you hire a consultant, or gather all the information and just start eyeballing everything (which I don’t recommend) – make sure you have some sort of structure in place. Because the most popular question during salary discussions is – why? And you need to have an answer, supported by a structure.