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The Employer Guide to Preparing for Pay Transparency Laws – Part 3: Talking to Candidates About Compensation

, , | Oct 25, 2022 6:00:00 AM | By

 

This story is Part 3 in a four-part series to help HR leaders get ready for pay transparency, whether legislation is active, pending, or simply on its way. Want all the tips at once? Download the guide we created with Charter.

This series is designed to help you create a transparent and equitable compensation program with step-by-step tips and best practices. In Part 3, you’ll learn how to have conversations about compensation with job candidates and replace awkwardness and ambiguity with confidence and clarity.

Find the rest of the series here:

 

How do you talk about compensation with candidates throughout the recruiting process?

Be prepared to create new job posting templates and to update existing postings. Of course, this process can be as straightforward as making simple additions to existing language, but now is a good time to consider a larger overhaul of the way open roles are promoted.

The anatomy of a job posting that’s transparent about pay

The job posting is often a candidate’s first impression of a company’s culture. As such, it’s a powerful way to communicate your compensation philosophy, your source for compensation data, and how you value equity and transparency.

Below is a guide to the different parts of a job post. For each section, we’ve included best practices to help you not only comply with new and existing laws, but put your best foot forward with potential applicants.

Job Title
Make the job title clear, succinct, and searchable—for example, “Level 1 Engineer” or “Head of People Operations.”

Description of role and responsibilities
Include both the high-level purpose of the role, explaining how it connects to the organization’s mission and vision, and the specific responsibilities that will comprise the day-to-day work. Also state whether the position is a people manager role and which role it reports to.

Compensation
To comply with the strictest pay transparency laws, the job posting should include a specific salary band, with a minimum and maximum that reflects actual compensation to your best knowledge. To comply with laws in Colorado and Washington (but not in NYC), it should also include a description of other perks and benefits, including stipends, bonuses, 401(k) programs, and insurance offerings.

Compensation philosophy
To help contextualize salary band information, outline the most important factors that determine salary bands, such as experience, responsibilities, and key competencies, and where individuals fall within a band. If an open position could fall in multiple levels, mention that the listed band combines pay ranges for more than one level and explain how applicants will be assessed during the interview process to be placed in the appropriate level.

Applicant qualifications
Limit the qualifications to only the most necessary competencies required to succeed in the role. Avoid language that creates unnecessary hurdles for otherwise qualified candidates, such as specifying a minimum number of years of experience or listing skills that can be learned on the job.

Equal employment opportunity (EEO) statement
Although not explicitly required by law for all employers, EEO statements have become commonplace to communicate a commitment to diversity of experience, background, and identity.

Company intro
Help the candidate understand the organization’s work, culture, and values. What is the most important thing about your organization for candidates to know?

 

Best practices: Should my organization allow negotiation?

Maintaining consistent salary bands and leveling becomes more complicated when new hires negotiate pay upwards, stretching pay bands and introducing discrepancies between new and existing employees. Research has demonstrated how traditional negotiation processes may also exacerbate racial and gender pay gaps, with women and people of color less likely to negotiate and hiring managers less likely to give concessions to those candidates even when they do.

Many companies, including Charter and OpenComp, have a no-negotiation policy — meaning, OpenComp makes its best offer first. In 2015, then-CEO of Reddit Ellen Pao led the push to eliminate negotiation in the hiring process, telling The Wall Street Journal, “Men negotiate harder than women do and sometimes women get penalized when they do negotiate. So as part of our recruiting process we don't negotiate with candidates. We come up with an offer that we think is fair.” (The company has since reinstated negotiations.)

Other companies put guardrails in place to maintain parity among employees of the same level, like adjusting compensation for peers if a new hire negotiates a higher base pay, or only allowing new hires to negotiate their job level, not compensation within a salary band.

Whether or not you decide to allow negotiations, there are a few principles to follow while designing your policy:

  • Be consistent. Maintain your negotiation policy across all positions and all candidates in the pipeline—including internal hires and promotions.
  • Be clear. Explicitly tell candidates what your policy is, and explain the reasoning behind it. Clarity is especially important for organizations that do allow negotiation, as researchers have found that clearly stating that candidates can negotiate reduces the gender pay gap for women, making them both more likely to apply and more likely to negotiate.
  • Update bands regularly. For organizations that do allow negotiation, updating bands at least once a year ensures that salaries within a job level remain comparable to one another. For those that don’t, updating compensation based on market rates and cost of living increases allows employers to maintain competitive pay.

 

Candidate compensation FAQs

Hiring managers are often applicants’ most important point of contact in answering questions about culture, responsibilities, and pay. For managers who have never recruited new team members with pay transparency policies in place, it’s important to get up to speed about how compensation works to give candidates clarity as they move through the hiring process.

Here are some of the most common questions about compensation that managers should be able to answer. The answers will depend on each organization’s specific policies, but these can serve as a guide as you prepare to integrate pay transparency into your recruiting process.

Q: How are the bands determined?
Applicants might ask this question in a number of ways, including framing it in terms of adjustments for location, performance, education levels, or previous work experience. Your answer should explain how each of these factors influence compensation.

Q: Can I negotiate past the stated salary range?
Explain the company’s negotiation policy, which should be standard from position to position. If your organization does allow negotiation, also explain the guardrails in place to maintain pay equity among employees within the same salary band.

Q: On Glassdoor, I’ve seen higher salaries for this same title. Can you increase my compensation to reflect that difference?
The best way to answer this question is to give details about how your organization determines pay bands. Bring up your process for benchmarking salaries, including the tools you use for understanding compensation for similar positions and where your organization falls within the typical range.

Q: How often are the bands updated? Are there regular cost of living adjustments?
In addition to answering these questions straightforwardly, it’s worth mentioning any one-time bonuses, stipends, or other benefits that the organization has provided employees to offset rising costs of living.

Q: What is the compensation trajectory for this position?
Lean on the compensation philosophy and how bands are determined to answer this question. Explain the factors that determine salary increases, including the role performance plays, and make it clear whether promotions or pay raises are within the posted band or into the next level.

Q: How does compensation outside of base salary work? How are those disclosed?
In some jurisdictions, descriptions of benefits and other compensation must be included along with salary ranges. Even when that information isn’t required, you should be prepared to describe the organization’s benefits and explain how bonuses are determined.

Q: How can I be sure that other people are not getting a special deal?
People want to know that nothing is being left on the table. Reassure them by reaffirming your policy on negotiation, leveling, and salary bands, and remind them of the opportunities to grow and advance within the organization through regular performance-review and merit cycles. Finally, tie your policy back to the organization’s culture and values.