Understanding Pay Transparency

If you love comp as much as we do, you are no doubt tuned in to all the news and legislation surrounding pay transparency. We continue to hear about more states contemplating changes on this front. So, what does it all mean and how do comp professionals and organizations navigate these waters? Let’s dive in together.

In the most simplistic terms pay transparency refers to openly communicating pay data. Whether that is to your employees or to your candidates, you are sharing some level of detail on pay that others will see and inevitably, react to. An organization’s internal approach to pay transparency (and pay communication) can vary widely. Practices range from posting everyone’s salary for all to see to keeping all salaries, ranges, and market data under lock and key. However, the new pay transparency legislation being passed now is attempting to put standards around organizations’ external  adoption of pay transparency – primarily around what hiring companies can and cannot ask applicants, as well as what information needs to be included in job postings for candidates (and internal employees) to see.  

The new legislation guidelines refer to including ‘good-faith’ salary ranges in job postings – but what “good faith” means is still left for companies to interpret. We’ve seen some wide ranges on postings since these laws began, and we’ve seen candidates get extremely frustrated by these wide swags – as well as existing employees being upset when they see a range higher than their current salary. To be able to include ranges that actually represent what the company is willing to pay a new hire, is in line with existing internal salary structures and actual employee pay rates – requires having a firm grip on external market activity and internal pay practices.  

Using timely data in this process is key, meaning you cannot rely on old market data to drive your posting ranges nor your internal pay grades. It is more important than ever that you have updated market data to serve as a baseline, as well as a strategic pay philosophy that aligns with your organization’s goals. The size, industry and location of a company typically influences how they pay their employees so its important you take these into account when looking at market data. In addition to how companies are paying their employees, you also need to understand other contextual aspects of the market in which you’re hiring – labor market metrics like the cost of living, unemployment rate, and the supply and demand for candidates in the areas you are hiring.

At Greatpoint HR, we are the pioneers of delivering compensation in context. We understand that having current salary data is critical, but if you are using it in isolation you’re not seeing the whole picture. By layering in other market activity data for your jobs and hiring markets you can make better decisions around pay.  

How many companies are also seeking this talent? How long are positions taking to fill? Which companies am I competing with for talent? All these questions are answered in-line as you market price your jobs in Greatpoint HR, ensuring that you have all the facts, supporting evidence, and market context you need to determine your job ranges. Only with this breadth of data can you feel confident in sharing salary data and knowing you offer a fair and competitive opportunity.

The graphic above shows which states currently have signed legislation or proposed legislation. The Greatpoint HR team is here to support you on your journey towards pay transparency – whatever that looks like for your company.