Pay Transparency 101

Happy New Year! Pay transparency laws are not new. However, this year marks an uptick in transparency laws across the states. Governments and related agencies enacted pay transparency laws to aid employees and job seekers while pushing corporations to accountability for their compensation practices.

Employees/Job Seekers will use the information to scope out the next job, compare their worth internally, and validate pay equity across similar jobs. As a result, employers have been rushing to get their pay ranges in place. That’s all fine and good, but do you know where companies should really be focusing their efforts? Shoring up their entire compensation infrastructure.

Why is that so important?

Now, managers will need to defend why they pay their employees higher or lower within a certain pay range. This position is uncharted territory for many leaders, who often struggle to have meaningful conversations with employees. Additionally, title inflation, promotions without significant job responsibility changes, and scope creep will all be front and center. Companies try so hard to retain talent, but this is what will have employees leave. At the end of the day, the internal compensation infrastructure transparency will be the tipping point.

So how did companies get here?

There are a variety of possible reasons. One reason is complacency. Human Resources has lost a seat at the table when it comes to oversight of the company employees. More often, business leaders make siloed decisions despite the impact across the organization. A solid compensation infrastructure, with governance, allows for fact-based decisions and the rigor for exceptions.

Another is a need for a compensation philosophy. A compensation philosophy provides the opportunity to “test” decisions against alignment with the company’s beliefs. Employees will be able to understand how your organization will structure pay decisions and decide if this aligns with what they believe. It allows for a “no surprises” environment and helps to manage expectations.

Another may be a job structure without discipline. The hierarchy of jobs in an organization is the basis for a solid job structure. It defines the internal alignment of jobs across the organization so an employee or leader can see progression and opportunity. The job structure provides the platform for a job table, and you won’t find the “title of the week” on a job table. You may have heard of the struggle between internal and external titles. Fundamentally, the use of two job titles is okay. Where it falls apart is when the employee doesn’t know they are really a level 4 professional individual contributor internally, not the Director externally facing title. The internal title determines where the job falls on the hierarchy and how the company will compensate employees holding the job. The employee needs to know where they align internally. While titles are cheap, they can ruin the retention of your workforce.

Pay Transparency Requirements

Meeting the mandated requirements is essential but remember the impact on other processes. Getting your internal house in order is necessary to demonstrate that you are an employer of choice.

An article written by Shari Nornes.

About the Author: Shari Nornes

In her role as principal consultant with MorganHR, Inc., Shari Nornes embodies the principle that one-size solutions do not fit all. With over 30 years of diverse professional experience, Shari strives to provide clients with customized compensation infrastructure solutions aligned with regulatory requirements and organizational objectives. She listens, learns, and adapts to each client’s needs and offers observations that provide a basis for sustainability and growth.