The Employer Guide to Preparing for Pay Transparency Laws – Part 4: Sustaining an Equitable Approach to Compensation

This article is the final installment in a four-part series designed to help HR leaders get ready for pay transparency, whether legislation is active, pending, or simply on its way. You can also read the series in full by downloading the guide we created in partnership with Charter.

If you’ve read the previous articles in this series, you now know the foundational steps for data-driven compensation plan design and how to talk about that plan with employees and job candidates. But pay transparency – and the pay equity it’s designed to support – isn’t a one and done task. That’s why in this article, you’ll learn how to sustain the processes you’ve built.

If you need to review previous parts of this series, find them here:

• Part 1: What does compensation look like at your company?
• Part 2: Communicating your compensation philosophy and compensation plan
• Part 3: Talking about compensation during the recruiting process
• Part 4: Sustaining an equitable approach to compensation

Or download the pay transparency guide we created with Charter.

How do you sustain an equitable approach to compensation?

Pay transparency doesn’t always lead to true pay equity. Systemic change only happens when company leaders champion change from the top down, so create a plan to maintain your compensation philosophy even as your organization changes, grows, and responds to external forces like inflation or a recession.

Bring leaders on board

OpenComp’s 2022 State of Startups Pay Equity report revealed that 78% of CEOs say pay equity is important, and 73% say it influences recruiting and retaining top talent—but several common roadblocks prevent employers from solving pay inequality within their organizations.

For one thing, many CEOs aren’t in tune with the reality that most of their teams lack adequate resources to address pay equity. In fact, CEOs are 15% more likely to be unaware of this fact than HR leaders. Access to compensation data (19%), leadership buy-in (15%), and time (13%) are the other largest barriers to solving pay inequality.

Maintaining a sustainable infrastructure for pay equity means addressing these challenges head-on, maintaining clear communication with the top of your organization along with the rest of your workforce. From the resources in this playbook, you now have the information needed to make the case for the below best practices—some already covered earlier, some new—that your organization can implement today and carry into the future.

Best practice #1: Share salary bands in job postings and interviews.

Not only is sharing salary bands or pay ranges in job postings legally required in a growing number of states and cities, it’s also one of the simplest and most effective ways an employer can make progress toward pay equity.

Best practice #2: Document and communicate the criteria for bonuses and promotions with employees.

Documented processes and criteria give your managers and other decision-makers an objective framework for determining employee pay. Employees get a clear picture of how they can progress, allowing better career decisions.

Best practice #3: Don’t ask candidates for salary history.

When you base compensation on someone’s previous salary, you risk continuing unfair or inequitable pay practices (not to mention breaking the law). That leaves workers— especially women and minorities — perpetually underpaid. For women, this wage gap could mean up to $2 million in lost wages over a lifetime.

Instead, craft an offer based on relevant market data and your compensation philosophy.

Best practice #4: Conduct pay audits and equity analyses to spot pay gaps.

In a 2021 study from the Society for Human Resource Management, nearly half of HR managers surveyed said their organizations don’t conduct pay equity reviews because it’s not a priority for senior leadership. The same SHRM study also revealed that only 35% of organizations provide training on how to properly document pay decisions.

Periodically assessing pay equity at your company is important to reveal what’s working and what changes need to be made.

To conduct a pay equity audit:

1. Start with maintaining data on compensation against demographic factors like race, ethnicity, gender, education, and experience. Also draw on managers’ experience during the data review to add context about individual employees’ leveling
2. Map employees against your chosen data set. Compare each employee to reputable market data and your salary bands. Look for differences by gender, race, ethnicity, role, and level. If there are gaps, can you determine the causes? Were they discriminatory or due to lack of planning or strategy?
3. If you’ve identified a pay gap, take action right away.
4. Share the results. There’s no single best practice for what information you share with employees about your pay equity analysis. Some companies share the results at the end of the process. Others just make adjustments without announcing the process to the company. What’s important is to also provide context around your findings and to give managers the training and tools they need to talk about it.

Best practice #5: Proactively budget to correct for pay discrepancies.

During merit cycles (also referred to as annual reviews or focal reviews) employees are commonly rewarded with raises, promotions or bonuses — and salary adjustments that correct pay inequities are also made. When preparing for merit cycles, budget for any adjustments to sustain fair and equitable pay practices.

Best practice #6: Have informal internal discussions.

Extend compensation conversations beyond the hiring process and annual reviews. Ongoing discussions about pay are core to a culture of trust. Here are the pillars of meaningful compensation conversations:

• Consistency: Make sure everyone receives the same message and understands how compensation is handled.
• Pay transparency and education: Don’t just share compensation information. Help people understand what it means for them. The conversation shouldn’t be finished until you’re confident that they do.
• Open-door policy: Executives, managers, and employees should feel empowered to talk to each other about compensation at all times.
  
  

Best practice #7: Update your compensation strategy with pay-equity analysis data.

• Develop a compensation philosophy that describes your commitment to pay equity and how you plan to achieve it.
• Use reliable compensation data to understand the competitive landscape for company positions.
• Compare employee compensation in similar jobs, including relevant parameters such as job function, level, responsibilities, years of experience, and geographic location.
• Develop a clear policy and define the repeatable practices your company uses to address and correct pay inequities.

While it is becoming increasingly clear that posting salary ranges is good for recruitment —in a Glassdoor survey earlier this year, 63% of U.S. employees said they prefer to work at a company that discloses pay information — it can also cause problems if pay ranges aren’t communicated throughout the organization. If you haven’t made it a practice of routinely talking about compensation with your team members, there is no time like the present to start.

Ready to take action?

For more tips, or if you want to connect with other HR leaders intent on eliminating pay gaps, join OPEN Imperative. Members get a free pay equity analysis.