Since November 1, 2022, New York City employers have been required to include pay ranges in job postings. The new citywide pay transparency rules have reignited a national conversation around whether such legislation truly helps companies keep and attract talent. While pay transparency laws will also go into effect in Colorado, California, and Washington state starting on January 1, 2023, the New York City labor market has drawn particular attention as a center of global commerce.
The term “pay transparency” refers to an employer’s obligation to disclose the expected range of pay and benefits for an open position. Since legislation went into effect in New York City, news media have questioned the accuracy of these pay ranges, some of which have been spotted with wide ranges exceeding $100,000. From an employer’s perspective, of course, it makes sense to be conservative and list a purposely broad pay range in order to accommodate the breadth of potential skills and experience an individual might bring. Indeed, if the overarching goal of pay transparency is to enable pay equity and parity—to ensure colleagues are paid equitably for the value they bring to an organization—an employer must factor in a range of experience and value when determining pay packages. The truth is, pay disclosures are simply a starting point for discussions that enable both jobseeker and employer to explore what constitutes “equitable” pay.
Employers can be reluctant to disclose this sensitive information both because of competitive reasons and because it can cause confusion among existing employees. Pay packages are individually tailored based on many factors, including highly variable career choices. Furthermore, pay is but one element of an overall employer value proposition, which, unlike pay, can be difficult to convey in a job posting.
Public backlash to companies “skirting” the salary range rules is just the tip of the iceberg; we’re still in the infancy of pay transparency. In the months and years ahead, we’ll bear witness to how HR departments troubleshoot conversations on compensation with the external and internal workforce, we’ll learn whether a culture of transparency can influence better pay equity, and we’ll gather more use cases to answer the question of whether pay transparency really can generate any change in pay inequities.
Organizations revisiting their pay philosophy and strategy on the heels of pay transparency, with a view to pay equity and parity, can help lay the foundation for future fairness now by gaining a deep understanding of what motivates their employees and by holding their people leaders accountable not just for open discussion of pay topics but also for fair and consistent hiring practices.
Pay Is Not Your Employee’s Only Motivator
As mentioned above, pay is one reason people join and stay with an employer, but it’s far from the only reason (or always the first). As the long tail of the COVID-19 pandemic has illustrated, flexibility both in work location and in schedule remains high on the list of value propositions that are most attractive to job candidates.
Furthermore, a rich portfolio of health and other benefits, the ability to grow in one’s career, and organizational culture remain key jobseeker considerations. If you’re wondering whether companies that boast a great overall package but lack flashy pay will still be a draw in the age of pay transparency, the answer is yes.
One of the most important implications of pay transparency is as much on existing internal workforce as it is on external workforce. If employees approaching their third year with an organization see a job listing with their same title posted externally and specifying a salary range above their current pay, the organization may find itself having to promote its whole value proposition beyond just pay. Knowing your individual employees well enough to know what motivates them is key to navigating this scenario because your employees’ commitment to the organization is unlikely solely about money. Who better to engage with your employees at this level than your people leaders?
People Leaders Can Be Empowered to Discuss Pay Topics
Pay is always a sensitive topic: Few people believe they’re paid enough, and many perceive that everyone else is paid more than they are. It’s a set of assumptions people bring to what should be an objective conversation, resulting in the need for people leaders to facilitate a complex discussion about individual compensation.
One of HR’s responsibilities is to equip people leaders with the skills and messaging to conduct thoughtful conversations with both internal and external candidates about the whole value proposition. What pay transparency can encourage HR departments to enable is more sophisticated people leaders who can talk about pay with their teams in a transparent way.
At the same time, these people leaders must be held accountable for making fair job offers and adjustments for promotions so that equitable pay results.
What pay transparency really does, besides serving as a litmus test for keen jobseekers and a negotiation tool for existing internal workers, is encourage organizations to know what their pay philosophy is and how best to communicate it in the contest of a broader value proposition.
David Reed is Sedgwick’s global head of talent acquisition, overseeing the strategy and operations to hire more than 10,000 new colleagues each year. He brings 35 years of experience to this position, including past leadership roles at Accenture and Vail Resorts.
Katey Bey is Sedgwick’s global head of total rewards, overseeing the strategic leadership of Sedgwick’s global benefit, compensation, and reward programs to best support their colleague experience. Bey brings 15 years of experience in designing, implementing, and managing global total reward programs.