State and local pay transparency mandates swept across the U.S. like a legislative wave in 2022, creating dramatic shifts in the way job candidates, workers and employers talk about compensation.
A total of eight U.S. jurisdictions require at least some employers to include pay or pay ranges in certain job postings, with half of them affecting New York alone. In some cases, these requirements have spurred employers to more intentionally address pay equity. Advocates of transparency laws, meanwhile, point to statistical evidence that the laws are chipping away at persistent gender pay gaps.
But employers face a variety of challenges due to the transparency trend, according to panelists at an April 26 virtual event hosted by Salary.com. That list not only includes the cultural effects of knowing what co-workers make, but also the need for additional communication about pay practices, training, monitoring of pay equity and negotiation of individual compensation packages.
“You can’t just be good at talking about it,” said IBEJesus Prince, senior consultant at Salary.com. “You’ve got to put your money where your mouth is.”
To do that work, HR departments will need managers’ help, panelists said. Managers, in turn, need the right data to have pay conversations.
“That information needs to be shared more broadly,” said Garry Straker, VP of compensation consulting at Salary.com. “Gone are the days when HR were the compensation police. Managers, and whoever is hiring people, need to be more comfortable dealing with pay.”
Panelists pointed to performance evaluation as a key component in pay policies. Evaluations depend on managers to know not only how a given employee is performing — and which metrics are to be considered when assessing performance to begin with — but also how different employees want to receive feedback, said Diane Mulhall, director of client experience and talent solutions at ADP.
For example, there may be generational differences in terms of feedback preference. Younger workers may prefer more frequent, instantaneous feedback than their older co-workers, according to Mulhall.
“You have to have those conversations,” she added. “From a manager’s perspective, you don’t want to be making [pay] decisions without showing them this information. They should know what they’re doing wrong and what they’re doing right. Analytics is the key.”
HR, meanwhile, needs to ensure that performance is telling an accurate story, Prince said. Otherwise, the organization’s justification for certain pay discrepancies could become discredited.
“Pay transparency has as its core pay equity,” Straker said “It’s the degree to which pay differences will be permitted. We need to explain those differences and support them.”