How to make the move to pay transparency

Effective November 1, 2022, New York City employers will be required to include salary ranges on job advertisements. The law joins similar mandates in Colorado, as well as a law that will take effect in January 2023 in California, and signals a major shift in the pay transparency movement from something happening in pockets of the US to a movement that is currently affecting employers from coast to coast.

With the major economic hub of New York City and the most populous state of California requiring transparency, employers have no choice but to get on board if they are to consider any form of national employment.

While this significant change to hiring practices may be frustrating for organizations, there are upsides. Pay transparency can be part of your employee value proposition (EVP) strategy that helps you attract and retain top talent.

Here are some ways to get started making the transition no matter where you are on your journey. 

If your organization is not already prepared to offer full pay transparency on all job postings, don’t panic. According to WorldatWork’s 2020 Pay Transparency Study, only 14% of organizations were giving pay transparency more than a “moderate” level of attention. That means that most haven’t achieved full transparency today—and some may never. Different organizations have different philosophies on how far they want to go toward pay transparency.

The pay transparency spectrum

Companies start at different points on this spectrum, and company leadership involvement at each step is important to ensure understanding and buy-in of how far the company will go and by when.

As you move forward in this spectrum, think beyond just pay. Organizations first need the infrastructure in place to move toward the level of transparency they’re seeking: an organization structure and job levels that make sense with your salary structures. 

The majority of leaders think of pay transparency as a legal and compliance issue. But employers will want to think beyond just meeting the bare-minimum legal requirements in terms of pay transparency. HR, training and development, and compensation departments will all be under pressure.

These departments should work together in concert to:

• Help achieve the workplace diversity needed for businesses to thrive in today’s economy
• Create a long-lasting competitive advantage for talent
• Strengthen relationships with employees and improve employee engagement and retention
• Increase people manager effectiveness and autonomy
• Hold fair pay accountable through transparency
• Prevent damaging loss of credibility, and take credit for paying fairly
• Craft a narrative about your EVP that resonates both internally and externally

The employee value proposition is all about what it means to work at your company. Today’s employees have increasingly high expectations around pay transparency, even in states where it’s not (yet) legislated. Companies who don’t actively engage in a dialogue on pay transparency could risk losing the trust of their employees.

This means that prospective employees aren’t your only stakeholders in the pay transparency journey; current employees are going to see the salary ranges too and have questions. The other audiences you need to address include candidates, recruiters, managers, HR, and more.

Perhaps greater than the risks to avoiding pay transparency are the benefits to embracing it. A recent PayScale study reported in Fast Company shows that reassuring employees that they are being treated fairly in comparison to their peers can have a positive effect on job satisfaction, employee engagement and productivity.

Exactly how you frame pay transparency in terms of the EVP will depend on the organization and industry, but every company should be able to explain to employees why they’re paid the way they are. Set the narrative proactively and share it in a transparent manner so employees and prospective hires don’t rely on secondary information to draw conclusions. Positioning the story within your employment brand will help employees understand the big picture.

Survey your employees at every step of the pay transparency journey and splice the results by levels and demographics to understand the impact of the changes you're making.

Pay transparency touches so many levels of the business strategy that these changes will become quite complex. A divide-and-conquer approach won’t help you come up with a cohesive response. Mercer has a playbook to help demystify the interconnected challenges brought about by the move to pay transparency.