Talking About Pay Transparency With Your Team

On October 13^th, our Elevated Thinking blog was about pay transparency and we explained the topic, discussed the coming changes, and suggested strategies to plan for the new requirements. Since then, pay transparency has become an even hotter topic for managers.

Today’s blog digs deeper into pay transparency and offers suggestions for how to prepare and talk about pay transparency with your team. If you’re an HR pro, share these ideas with your line managers. If you’re a line manager, share this with your HR team and ask for their help. If you’re a team member, not a supervisor, read this post with the knowledge that pay transparency is a complex topic and managers will be working hard to come up to speed on these ideas.

Look at the list of states below. Each has a law that requires some level of salary range disclosure. The disclosure ranges from requiring salary range data in a job posting to sharing salary ranges as part of the job offer process, to requiring firms to share salary range data if requested by an employee. For your state’s specific requirements, ask your HR team. But know this: this trend is not going away. If anything, it is spreading.

• California
• Colorado
• Connecticut
• Ohio
• Pennsylvania
• New York
• Maryland
• Nevada
• Rhode Island
• Washington
• Illinois
• Georgia

More than one-third of the U.S. workforce is included in the states listed above. In 2023, supervisors in those states need to be prepared to have conversations around compensation and salary ranges. Deferring the conversation is not realistic; eventually, the conversation needs to happen and your participation in the conversation is important to your credibility as a leader.

What does that mean? Since supervisors have input into workplace topics ranging from arranging work assignments, scheduling, conflict resolution all the way to hiring, firing, and performance evaluations, pay topics are part of the supervisor’s scope of responsibility. Supervisors need to know the salary context for members of their team and be able to talk about the pay information properly. At a minimum, supervisors need the same information the employee is getting.

Can you imagine the conversations you might have with your employees once salary range data is shared? These are some of the questions that will be coming your way:

• What is the salary range for your employee’s job?
• Where in the range is your employee’s pay?
• How did your employee’s job get placed in that range?
• What options exist for an employee to move within a range and to move to a different (higher) range?
• What if an employee makes less (more) than the salary range in which their job is included?
• What parts of compensation are part of the salary range? Commissions, shift differentials, tips, bonuses, overtime, vacation/leave time, 401(k) employer contributions?
• Are new employees being paid more than incumbents (a very common issue)? How can I explain that?
• Knowing that many employees will discover how their peers are paid in the range, why does one employee make more or less than a co-worker in the same salary range?
• Knowing that employees will discover the facts around other salary ranges, how do salary ranges get set and why does a particular job get included in one salary range versus another job being grouped in higher (lower) salary range?

Responding to that list of questions above is daunting, even for experienced supervisors. Compensation is such a personal topic. As a supervisor, our team members have an expectation that they are paid fairly. As an employee you have the same expectation. So as a supervisor, you have the responsibility to be prepared for pay questions and help your team and the firm navigate this process.

Preparing For Conversations

With good preparation, supervisors can positively influence how their teams feel about the company and their job. Here are suggestions:

1. Know the basics of the pay transparency law in your state and your firm’s policies.
2. Set the tone for a pay discussion with appropriate privacy. Find a conference room or borrow an office to have these conversations. Consider adding the salary range topic to the agenda of your one-on-one meetings with your staff (Side bar: Individual meetings may feel like a burden but meeting 30 minutes every 1-2 weeks adds no more than 12.5 – 25 hours annually. That seems like a reasonable investment in improving performance, supporting retention, increasing engagement, and building trust.).
3. Know the basics of salary range operations: multiple jobs are grouped into salary ranges. Salary ranges define the lower, middle and upper limits of pay for those jobs. Employees can expect movement inside a range to occur as job performance improves, but there is generally a policy that the upper limit is strictly enforced, with only few exceptions.
4. Salary ranges are occasionally moved upward in response to inflation or changing market conditions. Sometimes certain jobs are reevaluated and moved from one salary range to another.
5. Know the basics of salary range construction. Your HR team will be able to explain their method for constructing pay ranges. Typically, job descriptions are gathered and analyzed. Common job characteristics like required skills, work environments, certifications required, years of experience, education levels, etc., are analyzed and grouped with current firm pay data and market pay data. Ranges are constructed from this analysis. Sometimes outliers below the pay range are adjusted upward. Sometimes outliers above the pay range are highlighted and incumbents are made aware that their pay is above the range. Special care is needed to discuss this type of situation.
6. Know the facts around your firm’s development of salary ranges. Did the firm use a compensation firm that has access to a broad range of salary data? How do the firm’s salary ranges match up with salary data in public sites like Payscale or salary.com?
7. Make sure your team knows your firm’s job posting resources and how promotions are made. Movement to new salary ranges is often a function of a new job. Pay transparency is grounded in a desire to be fair. Knowing what opportunities exist is part of the fairness context.
8. Have a good answer to the common question as to why, on occasion, new hires (with less experience) are hired at pay rates higher than incumbents. More often than not, if starting salaries for new hires are above incumbent pay rates, firms have responded with pay rate adjustments for incumbents. Alternatively, the pay differentials for new hires can be paid as a hiring/retention bonus to the new employee which can allow the salary range to be sustained.
9. Be prepared to talk about your firm’s financial/competitive situation if need be. Pay levels are sometimes impacted by external issues at firm that can temporarily slow pay increases or even reduce pay.
10. Share with your team that many big and small firms have been managing in this transparent pay world for years. Most public sector employees and union workers have had transparent pay rates/ranges for 50 years. These teams learn to function with pay transparency. While your firm is new at it, you’ll get it right.
11. Share some personal perspectives. Acknowledge the illusory superiority bias that all of us have. This bias is more commonly called “the Lake Wobegon effect,” made famous by the phrase associated with a mythical town, “Lake Wobegon, where all the children are above average.” In fact, studies show 65% of people think they are above average. Similar studies reveal that less than 2% see themselves as below average. But of course, we know that mathematically, half of us are below average! Sobering thought. When your staff express the view that they are above average and should be paid accordingly, help them see that the label ‘above average’ may be part of a written performance review, but when it comes to pay, unless everyone is paid the exactly the same, there will always be half above and half below the average.
12. Pay transparency is a key factor in reducing discriminatory pay practices relative to gender and race. Help your team see the benefits from pay transparency in building a better and fairer workplace.
13. Acknowledge that pay variation within a range for a given job is not consistently related to measures of performance. Remind your team that performance evaluations are often variable. While firms try to establish a fair and level playing field, very few jobs lend themselves to completely unbiased measures of performance. With variation in performance evaluations, pay variation will follow. One of the functions of salary ranges is to help manage pay variation – helping managers avoid underpaying or overpaying for the same work.
14. Be prepared to talk about your team’s jobs and their pay ranges, assuming you have several different jobs in different ranges, as well as the jobs in other teams. Transparency creates an expectation that supervisors actually know what the firm is doing in adjacent departments and regions or can find out.
15. Remind your team that pay transparency carries with it an expectation that sharing pay data will improve fairness. Therefore, it is fair to assume that managers are authentically trying to make decisions that hold up to scrutiny.
16. Supervisors are part of the pay practices at a firm, not the sole authority. That means that supervisors can authentically say, ‘I am not sure about that. I’ll have to get back to you.’ Supervisors should not be reluctant to take the time to confirm and verify information. Better to get it right, than to make it up and repair bad information later.
17. Not every pay conversation will be easy. Few work topics are as personal as pay. For years, pay discussions were taboo, but that taboo is fading away. The key for supervisors is to listen more than talk and be open and honest. Ask why questions. The goal is raising trust between staff and management. That means helping your staff see the pay transparency as a process. It is not a ‘one and done’. Follow up on open questions when there are open issues.

Pay transparency is an important workplace trend that is moving from state to state. As supervisors, the more we know about the topic and how it is practiced, the better we serve our team and our firm.

Let us know what you think!