Pay Transparency And Equity: The Changing Realities

Approaches to building pay transparency that employers and employees can get behind

In the U.S., there are currently 11.3 million open jobs, yet unemployment is at its lowest level in more than 50 years. As companies nationwide navigate these ongoing labor shortages and fierce talent competition, how can they stand out? More than half (58%) of employees would consider a new job if it came with more pay transparency, exemplifying that the need for increased transparency has become a greater expectation for employees and candidates. 

Now, legislation is catching up with these expectations. States, all the way from California to Massachusetts, have put laws and regulations in motion to promote pay transparency and equity, creating an open space that’s necessary for dialogue around employee wages. 
 

Conversations around pay ratios are often tricky. However, employers can take steps to avoid questions or hearsay around salary ranges and ensure that their employees are being fairly compensated. Working to eliminate unconscious bias in hiring through diverse interview panels, analyzing pay data to look for potential pay gaps or bias and re-evaluating their pay practices and level of transparency are all steps employers must take to build pay transparency.

Prioritizing Transparency and Equity to Establish Fair Pay in the Workplace

Many workplaces are making strides to address pay transparency concerns and build a greater sense of it within their organization. For example, last month Adobe’s Chief Talent Officer announced the company is creating pay transparency by listing salary ranges for its open job positions, ranging from engineering to customer service roles. 

By providing these pay ranges, applicants can be sure their salary expectations are in line with their potential employer, and employees are receiving equitable compensation.

However, employees must do more than share salary information to create a true sense of pay transparency, and gain employee trust. Employers must also work to help break down the negative stigma around employees discussing pay at work. 

Historically, employers have shut down conversations around compensation in the workplace. In fact, 55 percent of Americans say that they have been pressured by their employer to avoid sharing their pay with co-workers. However, times are changing quickly, and today’s employees are breaking down the stigma surrounding those conversations. Now, employers must work to educate managers and leaders on how to communicate with their employees about pay and be prepared to explain their compensation strategies.

Not only is transparency critical to attracting and retaining talent, but there will soon be legal ramifications for companies that don’t provide certain levels of transparency. Several places have introduced legislation to demand employers share more information about pay practices. For example, in New York City, employers will be required to list salary ranges in all job postings, starting in May. Meanwhile, in Colorado, employers are required to include compensation ranges in job postings as well as notify employees of opportunities for promotion.

Best Practices for Determining Appropriate Levels of Pay Transparency 

It’s clear that pay transparency will only grow stronger in the months and years to come. To better prepare for increased communication with staff, there are a number of factors for employers to keep in mind. 

The first step to building a sense of pay security is to help employees understand why they earn the amount they do, and how other details (like the organization’s budget, or employee’s performance or tenure) can impact wages. Employers should also be prepared to share more information on total compensation, such as how paid time off (PTO), work structure, location, and other benefits affect annual pay.

The second step is for employers to make employees aware of salary benchmarks. Considering over two-thirds (68%) of Americans might take a lower salary as long as there was transparency about salary benchmarks at the organization, employers need a vital tactic to create a sense of fairness in pay

Using Technology to Foster Pay Transparency and Reduce Inequities

To keep up with changing salary benchmarks amid today’s competitive job market, employers should establish their own pay ranges that make sense for their industry, roles and the current labor market. Companies can provide employees with a transparent picture of the salary ranges they provide for each role – as well as the attributes that may lead to one person's salary being higher or lower in that range – by using technology to collect and analyze pay data (such as tenure or location).

Once those ranges are established, companies are able to automate compensation decisions to ensure pay is equitable and any potential human bias is removed from the equation. Maintaining a level of transparency that keeps employees informed of major changes, and explaining why they are paid the way they are will result in a workforce that feels cared for and valued by their employer. 

In today's world, if employees don't receive some level of pay transparency from their employers, they'll find it elsewhere - whether through social media, apps like Fishbowl or Glassdoor, or through industry peers. Using technology to ensure employees are paid their worth (and that they know it) will continue to be a competitive differentiator this year. 

While discomfort around discussions of pay may still impact many employers, the days of hushed conversations about salary and benefits must come to an end. To increase retention and attraction in this market, employers must reevaluate their pay strategies and ensure that their level of pay transparency will provide employees with the needed information to feel they are valued at the company, and paid fairly for their work.

Tanya Jansen is Co-Founder of beqom. Connect Tanya Jansen