Enacting Pay Transparency In The Right Way

Ensuring transparency in pay will help employers set themselves up for success amid a difficult labor market

Pay transparency continues to gain traction across the country, as regulations in Washington State and California took effect on January 1. California and Washington join a cast of states and municipalities that require the majority of businesses to disclose salary information up front, including New York City, Colorado and Rhode Island. However, the new regulations have proved difficult for employers to enact properly. For example, some NYC employers responded to a municipal transparency mandate by providing wide, unrealistic salary ranges.
 

A likely reason behind many NYC employers opting for wide ranges is the fear that candidates will typically ask for the high end of a given range. Research supports this tendency, as a recent survey from Resume Builder found that if they knew the salary range for their role, 68% of candidates were likely to demand the top end.

As transparency regulations continue to sweep the nation, employers will be forced to contend with candidates likely asking for top dollar. However, with a solid pay transparency strategy under their belt, they can enact transparency effectively, attracting preferred candidates and retaining top talent while remaining within budget.

Leveraging Transparency to Attract Talent

The recent string of pay transparency legislation reflects the will of job seekers, who’ve long hoped for salary ranges to be included in job listings to drive an overall more ethical hiring process. In fact, our 2022 Compensation and Culture Report found nearly 80% of candidates were more likely to apply to roles that included salary ranges.

Additionally, organizations that don’t provide salary ranges raise suspicion among candidates, with an Adzuna survey finding that nearly a third of job seekers believe those who don’t include ranges are either “hiding something” or will underpay them. Not only should organizations provide a pay range, but sharing an accurate range is just as important.

Organizations that choose to enact pay transparency by adding wide, unrealistic ranges to their listings are likely making it more challenging to attract talent by increasing the level of uncertainty within the hiring process. For example, if a candidate applies to a role with a wide range, they may expect an offer near the top end of that range.

Should the candidate make it through the entire interview process and receive an offer, it is likely to fall well below what they had in mind, and the candidate may ultimately decline, wasting time for both the candidate and the interviewers. Providing accurate ranges will save hiring teams time, and help get desired candidates to sign on to offers. However, transparency goes beyond just an accurate salary range.

Explaining Total Compensation, Benefits, and Job Functions

As any HR expert will tell you, an employee’s paycheck or yearly salary does not comprise their total compensation, and many employees aren’t fully aware of the true value of their compensation. In fact, 48% of employees don’t know their total compensation, which comprises the value of their salary and their selected benefits and perks.

For starters, job listings should include a detailed overview of the full menu of benefits and perks an organization has to offer. Additionally, the interview process should include a discussion of these benefits, where candidates can ask questions and gather a better sense of whether the company's benefits fit their financial, health, and lifestyle preferences.

According to our report, the number one reason why the vast majority (87%) of job seekers applied to a given role was the position itself and its tasks. To attract the right candidates, a job listing should include a comprehensive description of the role’s functions. This, combined with an accurate salary range and a detailed description of benefits and perks will paint a clear picture of what life is like for the given role, and help ensure employees are happy at the company over time.

Transparency for Retention

While employees may decide to resign for a myriad of reasons, 60% said they’d consider leaving for an employer that provides more pay transparency than their current workplace. A lack of clarity around compensation contributes to employee suspicion and lower morale, even if companies do pay fairly. For example, one in 10 employees doesn’t believe they’re paid fairly because their employer provides no insight into how salaries are determined. To help alleviate suspicion, employers should look to foster a more open culture around pay.

Employers can boost internal transparency by explaining to employees how their tenure, skillset, prior experience, performance, and education level came together to determine their current salary. Additionally, employers can provide clarity around the performance metrics an employee needs to meet to earn a promotion, pay raise, or a larger bonus.

Employees want to know where they stand (79% of employees want greater internal pay transparency), and what they need to do to earn more money. If the economic climate or the company’s financial situation makes salary increases unlikely for employees, this should be communicated to them. While some organizations choose to accomplish this at a company-wide meeting or open memo, a better approach is to convey this information individually, to each employee during their annual reviews or regular check-ins with managers or HR.

Pay transparency is here to stay, and employers who embrace it accordingly will set themselves up for success amid a difficult labor market. By ensuring salary ranges are accurate, providing a comprehensive picture of what life is like at a given company, and instilling a more open culture around compensation internally, organizations can attract and retain more talent. Enacting transparency in the right way not only resonates well with prospective and current employees, but it can also help organizations do so within their budget.

Author Bio

Tanya Jansen is the Co-Founder of Beqom.