In our last post, we discussed laws that prohibit asking applicants about prior pay and new legislation that requires employers reveal salary ranges in postings or at specific stages in the hiring process. Salary history and pay transparency laws aim to reduce gender and racial pay discrimination. Although the laws vary by state, employers should not ignore this growing trend.
Pay transparency (being upfront about compensation) demands salary accountability, and that comes with a variety of benefits and challenges. Smart employers are addressing compensation strategies now since pay transparency laws influence compliance, recruiting, candidate pools, hiring processes, and current employees.
For employers, it may seem that pay transparency will negatively impact their bottom line as they post and pay competitive wages to all new hires rather than simply those who know how to negotiate for more (typically not women or people of color). While businesses may balk at salary transparency, when candidates know the pay range for a role, they are more likely to apply. Pay transparency helps new hires earn competitive wages rather than those tied to previous compensation, and it reduces pay gaps as evidenced by government and union jobs that historically include ranges and have less salary discrimination.
Paying all employees fairly is a win on many levels. In addition to reducing wage inequities, pay transparency improves recruiting and hiring efficiency by managing applicant expectations. Also, candidates are more likely to respond to job postings that list competitive pay ranges than ones that don’t include salary information.
To make wage transparency work, however, companies must know the market for their roles as well as the impact salary transparency will have on current employees. Consistent and fair pay scales with current staff are essential, or companies risk alienating employees. This may seem to be another negative that impacts the bottom line, but the reality is the opposite: Fair, competitive, and transparent salaries improve employee culture and retention.
As staffing shortages continue across many industries, keeping valued employees is more important than ever. Salary and benefits are the main reasons people seek new jobs, and according to Payscale, perception is a powerful motivator. When employees perceive salary discrepancies or think they’re being paid below market, they’re more likely to seek employment outside the organization. Pay transparency coupled with a comprehensive and fair compensation strategy reduces these perception problems.
Like so much that has changed since the pandemic, to remain competitive in the search for top talent, employers must consider systematic, cultural adjustments that take strategic planning, and information. The new salary laws demand changes in compensation strategies, as well as knowledge about the talent market for your industry and roles.
Fortunately, employers don’t need to go it alone. Mj3 is an experienced partner who understands your market. Contact us for professional assistance in meeting your talent needs.