New Era of Pay Transparency is Here
By Hebba Youssef
For far too long pay has been a mystery for employees and jobseekers and it’s by design. But, certain states are passing laws challenging everything we know.
With a distributed workforce and remote hiring, People teams need to be aware of laws that could impact their hiring efforts in certain states.
Here’s what you need to know: 17 states have passed laws that aim to increase pay transparency such as requiring ranges on all posted open jobs to providing ranges upon request from candidates in the hiring process. PRAISE.
Employers based in or hiring in:
- CO must have pay ranges posted on open roles
- NYC, CA or WA should be preparing to post ranges on open roles within the next 1- 3 months
- CT, DL, IL, LA, MD, MA, MS, MI, MN, NH, NJ, OR, VT, and VA should be preparing as laws are being drafted
You’re looking at the start of a very big movement and it doesn’t stop at pay transparency. Legislators in CA have passed a law that also requires companies based in CA with employees > 100 to report on median gender and racial pay gaps.
Should this law be signed on 9/30 it could have a massive effect on some big names in CA like Facebook/Meta, Disney and Alphabet (Google). What those companies do, others tend to follow to remain competitive.
The bottom line: You can commit to as many DEI initiatives as you want but the numbers won’t lie. Companies will be held responsible for ensuring that employees are paid fairly regardless of gender or race.
AS THEY SHOULD.
The hard part of this is People teams will be held accountable for pay decisions that might ultimately be out of their control. I have been there!
For every People Ops person refusing to break salary bands there is a Founder or Executive asking for an exception. Those situations are incredibly tricky but those exceptions will end up costing a lot more than it’s worth.
How did we get here?
It’s not an accident…
If I asked you how much money you made, would you tell me? My guess is no. That question makes most folks uncomfortable. Talking about money has been considered taboo for as long as I can remember. It’s like talking about sex, drugs or politics at work. You just don’t do it.
But we should.
Here’s why: To date, companies have capitalized on that taboo despite it being illegal to retaliate against employees who share salaries. BTW that law was passed in 1935! I’ll let that settle in, 1935! Yet, I’ve heard so many horror stories from employees AND People teams about situations where salaries are shared.
Pay secrecy allows discriminatory practices to flourish and equity among men, women and underrepresented groups continues to be impossible. Not okay.
Fact: Women earn 83 cents for every dollar men earn and the racial wealth gap is even harder to close.
The states that are passing laws are trying to combat the pay inequity that the secrecy creates.
The thought is: pay transparency + accountability = equity.
The reality isn’t as simple as that.
How to prepare?
Four things People Ops teams can do:
Make moves: preparing for this next era of pay transparency can be daunting. Here are 4 things you can do to make sure you aren’t caught unprepared.
1. Write a compensation philosophy. Define WHY are you paying your employees the way you are, this will drive how you make all your decisions.
Bonus points if you make it public OR at least share it with your employees.
2. Build a leveling structure. This is one of the most important things to do if your org is in scale mode. Make sure your jobs are leveled and titled correctly. When leveling your roles, think about the scope and impact of each role.
A common leveling structure: individual contributors (IC or L), management (M), executives (E). Within each of those groups can be levels 1-7. After defining your leveling system assess and level your current employees AND any open roles. Assign each employee an open role a level.
P.S. A leveling structure will come in handy when you build growth plans for your employees.
3. Build pay bands. Market data can be pricey to get your hands on but it’s worth it. You want to be sure you’re paying competitively to be able to attract talent. Consult your market data and levels, build your range and assign them for all open roles.
Ex: Recruiter, IC2, $95,000 – $115,000
Tip: Check out Levels.fyi for more info on levels/salary.
4. Conduct an internal compensation analysis. Using that same market data compare your current employees to the market. This will help you identify anyone who is underpaid and any pay inequities you may have. Make your plan to address them! Anyone underpaid is a flight risk.
Cross check your open roles with your current employees. Are any open roles assigned higher salaries than your current employees? Make a plan to address that.
5. Update job postings with salary ranges. JUST DO IT! Prospective employees will consider a job posting without a range a red flag. You want top talent? Be honest about their pay or don’t waste their time.
What’s next: I could probably take each of these items and do a full newsletter on them… and I might! There is so much more to be said. I wanted to give you some easily digestible next steps to get you on the right path.
For the People leaders: Stop making exceptions when it comes to compensation. Every exception you make will cost your company down the road. You will end up spending more money raising salaries to create equity than if you just followed your set rules.
For job seekers: Always ask for the salary range!