3/11/22 

Are you ready for Pay Transparency?

New York City is now one of ten jurisdictions considering or enacting a new law that requires employers to include salary ranges in job postings.   

If you are a small business, or even medium sized, you are probably concerned that this will prompt your existing employees to request a raise to the top of those ranges if they are not already there.   

How will you handle this?

The bigger question is how can you avoid an employee uprising?

Companies who are transparent internally and can proudly state that their pay practices are equitable are not worried at all.  So how can you do what they are doing?    

Over the last 30+ years working in HR with a focus on compensation, I’ve found that pay equity lets me sleep at night.  Employees should be paid fairly for their contribution, regardless of race, gender, ethnicity, national origin, sexual orientation or any other subjective or discriminatory factor.   But New York City is going one step further, and recognizing that women are less likely to negotiate as aggressively as men and that women are already coming from an 18% disadvantage.     That means that on average, women are earning 18% less than men in the same job.   We should all be losing sleep over that!

Start by evaluating your current salary levels.  Perhaps create ranges for each position based on the scope of the job.   Job evaluation has been around for many years and the best models consider the following factors: 

Accountability:

Every job exists to add organizational value by delivering some set of results (or outputs). Accountability measures the type and level of value a job can add. In this sense, it is the job’s measured effect on an organization’s value chain.

Know how:

To achieve the accountabilities of a job requires ‘know-how’ (or inputs), which is the sum total of every capability or skill, however acquired, needed for fully competent job performance. 

Problem solving:

The value of know-how is in its application to achieve results. ‘Problem solving’ (or throughputs) refers to the use of know-how to identify, delineate, and resolve problems. We ‘think with what we know,’ so problem solving is viewed as the utilization of know-how required to achieve results.    [source]

Once you have evaluated those factors, you can begin to level the playing field.  Any role includes Accountability, Know-How and Problem Solving even before you look at the technical or specialized skills needed to do the job.   Job evaluation also considers geographical factors and years of experience but not performance - that comes later.

There are many sources to benchmark compensation so that you can understand how you stack up vs. the market.   [This is the part where a consultant is most helpful…shameless plug.]  You also need to decide where you want to be vs. the market - perhaps the average, perhaps above, but whatever that is, you must be equitable and consistent.   That fuels transparency.   

When you have completed the creation/update of salary ranges (or salary levels), you can begin to plug the individual employees into those ranges and then ensure you are being equitable internally.   Analyze pay equality for gender and race to start and make any salary adjustments necessary.

Then educate your managers and all employees on how you reached those salary decisions.  What were the factors that went into the job evaluations and what is your overall philosophy.   Teach the managers how to have those conversations directly with their employees so that you can preempt any concerns that may arise from compliance with pay transparency laws and ultimately sleep well at night.