Companies must increase pay transparency or workers will quit

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Salary transparency laws are spreading across the United States, requiring companies to list salary ranges on job applications. While this is good news for job seekers, it also increases the risk of upset as existing employees quickly find out what their co-workers are paid.

About 1 in 20 workers will quit if they find they are earning less than their colleagues, according to a November 2022 ResumeBuilder.com survey of 1,200 American workers.

“As more and more people understand what their positions are compensated by their organizations, this will have ramifications for people already working in the company,” said Stacie Haller, career expert at ResumeBuilder.com. “Our survey also revealed that 63% of these people will demand a raise for equal pay, and I think many employers will take notice.”

As these laws prompt companies and executives to revamp their compensation discourse, experts recommend increasing the pay transparency offered to current and potential employees in order to retain and attract top talent.

Create compensation practices that fit your business

Earlier this month, New York City joined Colorado in mandating salary ranges on job applications, with California soon to follow in early 2023.

Cheryl Fields Tyler is the owner and CEO of California-based Blue Beyond Consulting, which will begin adding pay scales to job postings on January 1, after a state transparency bill passes. in September.

Fields Tyler said she was relieved that pay transparency was now required for her company. Before the law, she said it was difficult to know when and how to talk about what a particular position paid. If necessary, then it is easier for companies not to have fragmented remuneration policies.

“Having a good, solid rationale for why we pay people what we pay them and what factors change any individual situation is good for business and honestly good for people,” Fields Tyler said.

She advises her clients, including some Fortune 500 companies, to clarify their philosophy and practice around employee compensation and rewards, so they can have direct and fair conversations.

Here's what the new pay transparency laws mean for your job search

“Pay transparency is not just about displaying salary ranges on a job posting, because there are more steps companies need to take internally before they can get there,” said Lulu Seikaly, a lawyer. corporate executive focusing on employment law at Payscale, a compensation data and software company.

Seikaly recommends companies set standard salary ranges for positions across the organization, in addition to new job postings.

“Organizations need to objectively establish salary ranges before even talking to candidates,” Seikaly said. “That way it’s an objective assessment, and they compare salaries to competitors, what the market is asking for, and look at internal equity.”

Companies can use grade levels to decide salary ranges, Seikaly said, where exact salaries are based on experience, education, time at the company and level of management, for example, but on the whole, employees in comparable positions know that they all earn the same. range than their peers.

“For example, what does a level 1 engineer earn? What is the range for this job? said Seikaly. “What does internal leveling look like in your company?”

Increased transparency attracts and retains top talent

The ResumeBuilder.com survey also found that 85% of workers say they are more likely to apply for a job that lists a salary, and the war for talent could be based on how transparent companies are with their salary structure, in particularly among the younger generations of workers.

“This is the next step in how employees and the workforce gain more power in the marketplace,” Haller said. “First we had labor flexibility, and now pay transparency is setting in, starting to spread, and that’s great for everyone.”

As more companies share pay scales, it’s going to create a competitive issue for companies that don’t increase pay transparency, says Aaronde Creighton, director of diversity at Leadership Circle, a leadership development firm of business.

“Over the long term, organizations that are more reluctant to pay transparency will begin to see a decline in the number of applicants and a decline in the quality of candidates applying to their roles,” Creighton said. And he added that in a tight labor market, companies looking for top talent may need to increase pay transparency, even if it’s not required by law.

Another element of increasing pay transparency is for companies to invest in training managers and supervisors on how to discuss compensation with employees.

“Front-line managers in most organizations are the ones who have to talk compensation with their employees,” Fields Tyler said. “Even if they are unable to share this information, employees are reaching out to their managers to understand when and why they are receiving a certain amount.”

If companies don’t prioritize pay transparency and equip managers for these conversations, workers are more likely to apply to companies that offer these benefits.

Don’t Stop at Pay Transparency at Entry-Level Positions

Pay transparency, as it becomes a cultural shift beginning with frontline and entry-level employees, will increase overall morale and trust within an organization.

“The most personal and private thing we have in our work environments are our salary compensation programs,” Creighton said. “When we can be transparent about it, we have fewer questions and less uncertainty among our employees.”

But it shouldn’t stop at the lower levels of the organization, Creighton said. Companies should also disclose salaries at executive and senior management levels.

“In a publicly traded organization, you can see [pay] information for the C-suite,” he said. “But how transformative would it be for the work environment for people at the director, senior director and vice president level to know what the salary looks like in those areas?

According to Creighton, inequality within a company is most prevalent at the executive level, and increasing pay transparency not only attracts and retains the best employees, but also has the power to transform the entire workforce. -work in all sectors.

“When a company has pay transparency across the board, it becomes a driver and motivation for people to stay with those employers because workers won’t feel like their company is hiding anything from them” , did he declare.

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