Companies need to increase salary transparency, otherwise employees will quit

Mascot | Digitalvision | Getty Images

Salary transparency laws are proliferating in the US, requiring companies to list salary ranges on job applications. While that’s good news for job seekers, it also increases the chance that current employees will be shocked as they quickly learn how much their colleagues are getting paid.

According to a November 2022 survey of 1,200 American workers, nearly 1 in 20 workers would quit if they knew they were making less than their co-workers.

“As more people understand how much their positions are paid for by their organizations, it will have consequences for people who are already employed by the company,” said Stacie Haller, career expert at “Our survey also found that 63% of those people would ask for an increase for equal pay, and I think many employers will take that into account.”

As these laws push companies and leaders to reframe how they talk about compensation, experts are recommending increased pay transparency for current and potential employees to retain and attract top talent.

Create payment experiences that work for your business

Earlier this month, New York City joined Colorado in job application salary ranges, and California will soon follow in early 2023.

Cheryl Fields is the owner and CEO of Blue Beyond Consulting, a Tyler, Calif.-based firm that will begin adding salary ranges to job postings on Jan. 1 after the government transparency bill passes in September.

Fields Tyler said he already requires payment transparency for his company. Before the law, he said, it was difficult to tell when and how much a particular position paid. If required, then it is easier for companies not to have fragmented payment policies.

“It’s good for business, it’s good for people to have a good, solid rationale for what we’re paying people for and the factors that change any individual situation,” Fields Tyler said.

He advises his clients, including some Fortune 500 companies, to clearly communicate their pay and reward philosophies and practices to employees so they can have straight and fair conversations.

“Pay transparency isn’t just going out on a limb and putting salary ranges in a job posting, because there are many more steps companies need to take internally before they get to that point,” said Lulu Seikaly of employment law at Payscale, a compensation software and data company.

Seikaly recommends that companies establish standard salary ranges for positions across the organization along with new job postings.

“Organizations should objectively establish a salary range before talking to any candidate,” Seikaly said. “So it’s an objective assessment and they’re comparing salaries to competitors, looking at what the market is asking for and internal capital.”

Seikaly said companies can use tier levels to set salary ranges, where exact salaries are based on experience, education, length of time with the company and level of management, but generally employees in comparable positions know they’re all doing the same job. covers like peers.

“For example, what does a level one engineer do? What’s the range for that job?” Seykali said. “What does internal regulation look like in your company?”

Increased transparency attracts and retains top talent

The survey also found that 85% of workers are more likely to apply for a job where their salary is displayed, and the battle for talent can be driven by companies being transparent about their pay structures, especially among younger generations. workers.

“This is the next step in workers and labor gaining more power in the marketplace,” Haller said. “First of all, we had job flexibility, and now wage transparency is getting stronger, it’s starting to spread, and that’s great for everyone.”

As more companies share salary ranges, it will create a competitive challenge for companies that don’t increase pay transparency, says Aaronde Creighton, chief diversity officer at Leadership Circle, a business leadership development firm.

“In the long run, organizations that are more resistant to pay transparency will begin to see a decline in the number of applicants and a decline in the quality of candidates applying for their roles,” Creighton said. And he added that companies seeking the best talent in a tight labor market may need to increase pay transparency, even if not required by law.

Another component of increasing pay transparency is for companies to invest in manager and supervisor training on how to talk to employees about compensation.

“Front-line managers in most organizations are the ones who need to talk to their employees about pay,” Fields Tyler said. “Even if they can’t share that information, employees go to their managers to understand when and why they’re getting paid a certain amount.”

If companies don’t prioritize pay transparency and equip managers to have those conversations, employees are more likely to turn to companies that offer those benefits.

Don’t stop with pay transparency in entry-level roles

Pay transparency will increase overall morale and trust within the organization as it becomes a cultural change, starting with front-line and entry-level employees.

“The most personal and private thing we have in our employment environment is our compensation packages,” Creighton said. “If 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 must also disclose salaries at the management and senior executive level.

“You can see it in a public organization [pay] Information for the C-suite,” he said. “But how transformative would it be for the workplace environment if people at the director, CEO, and vice president level knew what pay looked like in these arenas?”

According to Creighton, inequality within the company is at an all-time high, and increasing pay transparency not only attracts and retains the best employees, but has the power to transform the entire workforce in every industry.

“When a company has pay transparency at all levels, it becomes a driver and a motivator for people to stay with that employer because employees won’t feel like their company is holding anything back from them,” he said.

Apply to join the CNBC Workforce Executive Board

Source link