“2023 is the year of salary band transparency,” Axios has declared. New pay transparency laws went into effect at the turn of the year in California and Washington, following similar legislation enacted in New York City, Rhode Island, and Colorado.
These laws — which require employers to include salary information in job postings — are setting a new standard and will only continue to catch on widely in the new year.
As business leaders and HR professionals anticipate this trend, they can take several steps to make sure their compensation programs are ready. At a recent Equity Matters Chat, a monthly discussion about all things pay equity, attendees discussed how they’re preparing for pay transparency — and the most meaningful practices they’re building along the way. The event was hosted by the OPEN Imperative (Organizations for Pay Equity Now), a coalition of businesses committed to ending gender pay disparities in their organizations.
OPEN Imperative members’ plans and practices fell into three categories of actionable steps any employer can take to establish pay transparency.
1. Check in with your compensation plan
The first step to pay transparency? Building a foolproof compensation plan. This plan will serve as the foundation of your entire compensation program, so it’s important to make sure it starts strong — and stays that way.
A compensation plan brings together three core elements:
- Benchmarks: How your organization’s compensation compares to that of your peers and competitors.
- Pay philosophy: How market position, pay mix, segmentation, and geographic strategy factor into your compensation decisions. Not sure what these are? Check out our Compensation Glossary.
- Salary bands: The minimum, midpoint, and maximum pay points for roles within your organization.
This step requires a lot of homework, but it’s worth it. Here’s why: A solid compensation foundation positions companies to make pay decisions worth sharing. You’ll present salary bands based on credible, relevant data that correspond with your organization’s compensation philosophy. With a comprehensive compensation strategy, pay transparency will no longer be a dreaded, daunting topic.
Learn more about benchmarking and setting salary bands in OpenComp’s Compensation Academy courses.
2. Communicate intentionally — internally and externally
While emerging pay transparency laws focus on salary bands in job posts, pay transparency is about much more than that. At the same time, pay transparency is not so drastic that companies must publicly broadcast employees’ exact earnings.
Pay transparency is accomplished in the everyday conversations you have with candidates and employees who have questions about compensation. You’ll want to discuss how the company sets pay: the data you used, the variables you considered, and the resulting salary bands. Have these conversations frequently and in different settings so employees feel more confident and comfortable.
And don't forget to train your managers on how to have conversations about pay with their team. This is top of mind for many HR and people professionals right now.
Dive deeper into communicating with candidates in OpenComp’s Compensation Academy course on offer letters.
3. Follow pay equity best practices
Pay transparency laws are intended to boost pay equity and reduce discriminatory wage gaps. But the laws can’t establish pay equity unless leaders champion the cause.
To make sure your compensation practices are equitable and sustainable, consider implementing the following best practices:
- Conduct pay audits: Perform equity analyses to spot pay gaps within your workforce.
- Correct pay discrepancies: If you find gaps, work to correct them as quickly as possible.
- Keep your compensation strategy current: Use pay-equity analysis data to keep your compensation strategy up to date. Include relevant parameters like job function, level, responsibilities, experience, and location.
Read up on the future of pay equity in OpenComp’s Compensation Academy.
If 2023 is the year of salary transparency, as Axios predicted, employers can’t procrastinate on developing the habits, plans, and strategies that will allow them to share compensation information with confidence.
If the thought of a pay transparency-focused year fills you with dread, know that you don’t have to face the coming months alone. Join OPEN Imperative to find know-how, accountability, and community. Our monthly Equity Matters chats will also help propel your pay equity efforts and connect you with leaders who share in your challenges and commitment to closing the gender pay gap once and for all.
Emily Sweet is VP of Social Impact and OPEN Imperative Lead at OpenComp. She writes about topics including pay equity and diversity, equity & inclusion (DEI). A board member of the National Council of Jewish Women, Emily is a veteran philanthropic leader and policy advisor with more than 20 years experience advancing bold solutions to big problems that drive impact and inspire collective action. Connect with her on LinkedIn here.