New laws requiring employers to list pay ranges in job postings are creating pressure for more transparency in earnings across the country. A handful of states and localities have some form of pay disclosure law on the books, forcing companies to look internally and evaluate their compensation strategies.
While in the past, pay “was extremely taboo to talk about,” that sentiment has been changing, said Tanya Jansen, co-founder of Beqom, a compensation management software firm. “It’s driving the conversation to forced transparency, which causes equality.”
For some companies, opening up conversations about pay can be scary, she said.
“I still think companies are afraid to see where they are, because they know there's a gap,” Jansen said.
At the same time, other organizations are leading the charge and rebranding themselves through pay transparency, she said. From the top down, they’re implementing procedures to ensure pay parity — being paid fairly for performing the same job, taking factors like geography and performance into account — among workers.
“Pay is the end result that you see,” Jansen said. “How do you set the right goals and initiatives at the top level?”
Steps toward achieving pay parity include setting up policies that clearly demonstrate how raises are earned, setting salary ranges and providing checks and balances, said Liz Washko, chair of the pay equity practice group at law firm Ogletree Deakins. That involves being transparent with employees about what goes into their compensation and how they can get promoted or earn more money, she said.
When there are variations in pay, you need to have documentation explaining why, from a legal standpoint, said Washko.
“At the end of the day, it is permissible to pay people differently as long as there are legitimate reasons,” she said.
It’s not enough to put policies in place; employers need to make sure they’re enforcing them, Washko said. For example, if a company has set pay ranges for a position, it needs to make sure managers aren’t making exceptions or ignoring the minimums and maximums for a role.
She characterized pay equity and parity as a “continuous improvement process.”
“You’re always trying to get better,” Washko said.
One of the ways companies can hold themselves accountable is by conducting regular pay audits, said Quenton Wright, principal in the labor and employment practice at consulting firm Charles River Associates. These are a snapshot in time of employees’ earnings.
A pay audit will compare the wages of workers in the same position and can differentiate by location, experience and other productivity measures, Wright said. It can also control for gender and race.
“A pay audit helps to evaluate whether pay within a comparable population is out of alignment and bring people back into alignment,” Wright said.
For example, when there is high demand for talent, companies might offer workers higher starting salaries. This can create wage compression, because new workers are potentially earning more than longtime employees with more experience.
Wright said companies most often conduct pay audits annually with reviews and merit increases.
Some employers have gone beyond pay audits and are auditing promotion equity within their organizations, Wright said. That can address whether women or other groups often subject to pay gaps are advancing at the same rate as their peers.
“I think there is going to be more of a focus on auditing internal equity advancement,” Wright said.