Last Friday I joined a group of friends and peers in the compensation space, graciously hosted by the very talented Justin Hampton, to discuss some of the challenges around pay transparency. The first thing I want to say is a big “thank you” to everyone that attended and posted many kind, thoughtful, and appreciative messages.
If you missed it, you can find a recording here.
I found myself reflecting on some of the topics raised over the past few days so wanted to jot down some of my thoughts here on, what I thought, were the main takeaways.
What range should I post?
On LinkedIn and on polls there has been a lot of discussion as to what range, or part of the range, should be including on job postings. The two main approaches are – the full range, or a subset.
I would say that practice is fairly divided on this one. I ran a quick poll on LinkedIn earlier this year and had the following responses:
Which I would say represents fairly well what I am seeing with companies given that there is no real “best practice” as yet.
Among those that post a subset of the range, there are a handful of companies that post the minimum to the mid-point of the range. Two issues arise from this, the first being that you might never hear from the candidate that had higher salary expectations, the second depends on your level of internal transparency.
Most companies that are shifting to pay transparency accept that before we disclose ranges externally, we need to communicate ranges internally. That being the case, if there is one range posted publicly that doesn’t agree to the range posted internally, how does an employee reconcile that difference? At best this is confusing, at worst it feels duplicitous.
One argument we discussed in favor of not posting the maximum is that candidates will immediately ask for the maximum of the range. To me, this is exactly the point of pay transparency – the legislation is specifically designed to allow candidates to advocate for fair pay from a consistent starting point. I accept, this does result in a change of training for managers and recruiters however what we are essentially talking about is negotiation skills – they should be able to handle a candidate asking for more pay.
We also discussed the appropriate range to post if a role is national and agreed that unless different jobs by location are being posted, the range will likely be wider, accommodate all possible locations and include wording to mention (among other things) that final salary offer will impacted by candidate location.
How do I convince business leaders that we should be doing this?
I thought this was a very interesting discussion and I did write a bit about this in a previous post.
First of all we discussed the link between transparency and equity. In summary, transparency alone will not solve pay equity issues, it is part of a suite of initiatives being explored by governments around the world to close pay gaps. The most commonly cited research comes from a study by Michael Baker et al. in 2019. This demonstrated that pay transparency closes the gender pay gap by 20-40%, however it is specific to University faculties in Canada.
The simple fact is we simply don’t know what the impact of pay transparency legislation will be. The research tells us that it will help close pay gaps, but we have never tested it on this scale before. This is uncharted territory and pay transparency legislation also coincides with greater public awareness around pay equity, as well as other initiatives such as prohibiting requests for historical pay, and pay gap reporting meaning we may never know the precise impact.
Even with that knowledge, there are still plenty of arguments to make in favor of adopting pay transparency. Take, for example, this research by SHRM that suggests 70% of organizations adopting pay transparency found an increase in applicant numbers. This research also found that 66% of companies agreed the quality of applicants improved.
There is also the simple reality that, effective or not, many companies are embracing pay transparency and companies that do so, are perceived as caring about fair pay. In this study by resumebuilder.com, 85% of candidates are more likely to apply for a job that lists a salary range.
If we then start thinking about the reputational damage to companies that aren’t perceived to be taking pay equity seriously, given the relatively low cost of adherence, pay transparency compliance becomes the obvious choice, if nothing else but to access the full pool of available talent.
My main takeaway from this discussion was that it doesn’t matter whether leaders agree or disagree with either solving pay equity or embracing pay transparency – even with idealogical misalignment, there are plenty of studies and arguments to suggest that it is in the best interests of their business to embrace it.
Pay transparency should be looked at as essential investment to minimize the very real business risks associated with non-compliance.
How do we train people to be ready for pay transparency?
I wrote recently about the importance of enabling successful people managers and pay equity and transparency preparedness is no exception.
One thing we discussed on our call was the idea of everyone immediately taking out their pitchforks and closing in on the HR team once pay ranges are disclosed. The panel agreed, this doesn’t tend to happen. We might see one or two pitchforks however those people probably have good reason to be holding said pitchforks which is exactly the intended objective of pay transparency. In reality the feedback is positive and employees appreciate the additional clarity in determining their pay.
Pay transparency preparedness should focus on training people managers to have informed conversations about pay ranges, merit/promotional processes, performance, and careers. Well-crafted materials, presentations, FAQs, and role play sessions will go a long way to closing this knowledge gap. With managers more confident about these conversations, they can address employee questions and turn them into meaningful conversations about long-term career opportunities and wealth creation.
Should pay equity extend to equity (stock) awards?
No one on the panel could really see this happening any time soon. The legislation in both the US and EU only applies to salary. Extending transparency to equity is far more complicated and impacted by vesting profiles, strike prices, company valuations etc. While I would certainly advocate for pay equity analysis on equity awards behind the scenes, I don’t think any of us would suggest extending transparency to cover equity grants.
As I reflected on our pay transparency discussions, the main takeaway for me is that we are part of a social experiment and it will take years to full understand the impact. However many of our initial fears around greater transparency appear unfounded or at least exaggerated. From what I have seen with my clients, improved transparency has had a positive impact on culture, pay satisfaction, empowered candidates to be more comfortable with their offers, and enabled people managers to learn a new set of skills.