Pay Transparency – A Tool for Pay Equity & Employee Retention
Deciding what to pay employees is one of the most critical questions you must answer in your efforts to attract and retain top talent. "Should I post the wage range for a position when I source candidates?" is a question we hear often. Surprisingly, the answer may not be as simple as a philosophical choice, because some states legislate pay transparency requirements (more on that in a moment). The concept of pay transparency refers to companies being open about the compensation provided for current and prospective employees, as a step toward pay equity. Pay transparency is becoming an increasingly hot button, in an effort to close wage gaps and inequities that may still exist in underrepresented populations.
Pay transparency is starting to become less of “what should my philosophy be” and more “what does the law require?" Currently, ~20 states have some form of pay transparency provisions including Illinois, Minnesota, Colorado, and California. Some of these state requirements include mandating that employers post a pay scale for any open position; prohibit employers from inquiring candidates about salary history during the application/interview process; and require employers to provide employees, upon request, a pay scale for their current position. In 2023, it’s estimated that 25% of all private employers will be required to post pay ranges with their job ads, and that number is certain to grow in the coming years.
Pay transparency is on the mind of employees as well. Sites like Glassdoor, Monster, and Salary.com make it easy for employees to find information on their market worth. What was once a taboo practice to share wage information amongst coworkers is now more commonplace–especially amongst Gen Z workers. According to SHRM, nearly 90% of Gen Z (age 25 and younger) say they are comfortable discussing their salaries, compared with 53% of Baby Boomers (those between ages 58-76).
If you’re not talking to your employees about their pay–they’re likely talking to each other! One important piece of advice is to never expressly prohibit employees from discussing their salaries. In fact, doing so would violate the National Labor Relations Act (NLRA). Per the NLRA, all employees have a right to discuss their “terms and conditions of employment” including wages. If you have such language in your employee handbook today, you’d be well served to review and remove it.
Mandates and legislation aside, ensuring fair and equitable pay practices is an extremely valuable tool in your employee retention toolkit. One reason employees look for a new job is the desire for more pay. When clear communication and information around pay practices are absent, employees are likely to turn to other (likely unreliable) sources for validation. According to Willis Towers Watson, fair and competitive base pay is the leading driver of employee attraction and retention globally. When employees know the “why” behind their payrate and know their pay is fair and competitive, they are more likely to stay. Of course, this is not the only reason they stay–but it is considered table stakes and a bare minimum practice for retention.
If you feel overwhelmed at the prospect of pay equity and pay transparency, here are some simple tips to get started on your journey of ensuring fair and equitable pay:
- Review job descriptions for accuracy. Pay rates and ranges should align with a specific job description.
- Utilize data to determine the market value of a particular job (Salary.com, BLS, industry specific publications/data), and create pay ranges.
- Analyze the pay among employees performing the same job. Identify differences and dig into the reason employees with the same job title or job description receive different compensation.
- Ensure that differences in pay between two employees in the same position or at the same level can be fully and reasonably explained by bona fide job-related factors (i.e., tenure, experience, performance, and difficulty of role)
- Familiarize yourself with any state-specific mandate regarding pay transparency, especially if you are a multi-state operation and have remote workers over several states/localities.
- Consider the best way to communicate your company pay practices to potential and current employees. What level of transparency is appropriate–and required–for your business?
- Revisit your pay ranges and scales on a consistent basis such as annually or semi-annually.
Your human resource professionals at Connectify HR are happy to help in your journey towards pay transparency and pay equity. Ask us how we can help today!
Sarah Ogbourne, HR & Client Experience Partner