Whether it’s required by law, or demanded by workers, pay transparency is no longer an option for U.S. employers.
Colorado and New York have the most sweeping legislation, requiring salary bands with job postings. Similar laws in California and Washington take effect on January 1, with required pay data reporting starting in May 2022. There are also a number of localities with less comprehensive laws. (Keep up with OpenComp’s Pay Transparency Legislation Tracker.)
Even if pay transparency laws don’t apply to your company (yet), HR leaders must prepare now. It’s not just a matter of fairness and closing wage gaps for women and people of color, it’s about keeping employees who are tired of the mysteries around compensation.
A recent survey found that 68% of employees would switch to a more transparent employer—even for the same pay. And because 1 in 3 workers are considering quitting, HR leaders who are focused on retention have added incentive to help their organizations prioritize pay transparency now.
So how can you ensure that your company is able to meet the moment? In this article, you’ll learn five best practices to get you started. When you’re done here, check out how to boost retention through career paths and merit cycles.
|Watch and learn
Get all these retention tips and more from our on-demand webinar, “3 Things HR Leaders Must Know About Retention in 2023,” featuring Jamy Conrad, senior director of people, TrustRadius; Ashley Brounstein, head of people, OpenComp; Matt Toeller, VP global total rewards, Harness.
5 pay transparency best practices that boost retention
#1. Document and share compensation policies and procedures
Put in writing all the information that explains how your company makes pay decisions and share it with employees and candidates. This information includes your salary bands and compensation philosophy, the formal statement that explains how you pay and reward employees.
#2. Review salary bands annually
Make sure your pay ranges are aligned to the current market data by benchmarking salary data and reviewing your salary bands (aka pay ranges) at least once a year. Adjust your bands as needed.
#3. Conduct a pay equity analysis before posting salary bands
If you’re posting salary bands for the first time, conduct a pay equity analysis to identify people who are being paid below a range and work at your company already.
If you identify people below range, figure out why. Are those employees mapped to the right job level? Were there biases in your permanence review? Are the pay bands wrong? As with merit cycles, make necessary adjustments as soon as possible.
A pay equity audit can be a time-consuming process, especially if a spreadsheet is your tool of choice. If you can, enlist a third party, or get a pay equity audit for free when you join OPEN Imperative.
#4. Add context to posted salary bands
Go a step beyond posting salary bands. Include a summary of your compensation philosophy so candidates understand your pay strategy. And include information about how candidates will be assessed during the interview process to determine their place in the salary band.
#5. Prepare managers for tough conversations
Inevitably, posting pay ranges will lead some employees to question their own pay. That’s why manager training and education is key.
Prepare managers to have challenging conversations by training them on how salary bands were created, how people are placed within a band, and how to explain it all in a way that’s relatable to employees. Otherwise, you risk losing employees because of misunderstandings and lack of information.
If you need more help, check out these pay transparency resources:
- On-demand webinar: The HR Leader’s Playbook: 4 Steps to Prepare for Pay Transparency
- Guide: How to use OpenComp to comply with pay transparency legislation
- On-demand webinar: The State of Startups' Pay Equity in 2022
- Article: What Employers Need to Know About Pay Transparency
Simplify merit cycles: Add OpenComp Merit Cycles to your tech stack
Organizing merit cycles through spreadsheets is tedious and prone to errors and biases that drive up attrition. OpenComp Merit Cycles helps HR leaders surface critical insights, facilitate easy collaboration, and streamlight workflows, so you can confidently deliver adjustments that retain your team, while staying on budget.