By 2023, 20% of U.S. workers will live in states with pay transparency laws.
by Roberta Matuson
November 28, 2022 - Harvard Business Review
By the beginning of 2023, a fifth of all U.S. workers will be covered under pay transparency laws, a trend that experts predict will continue to grow. These new laws will likely result in more employees discussing their compensation with co-workers, and more requests to managers and supervisors for pay adjustments to correct differences that employees do not readily understand or accept. Managers need to do four things to prepare for these conversations. First, guard your own emotions. Don’t get defensive when an employee asks about pay. Second, learn about what specifically is required by your state and/or company in regards to pay transparency. Third, when you discuss salary with an employee, make sure you both are in the right time and place to have the conversation. Finally, be prepared to answer common questions like how someone’s pay is determined, or why they don’t make as much as a colleague.
***************************Maybe one of your team members came to you wanting to know why her salary is at the low end of the pay range. Or another employee is claiming he’s being underpaid. It seems like suddenly, no one is happy with their wages. Welcome to the world of pay transparency.
At the beginning of 2023, a fifth of all U.S. workers will be covered under pay transparency laws, as California and Washington state join a long list of populous jurisdictions that have enacted similar laws. Experts predict the pay transparency trend will continue to grow.
These new laws will likely result in more employees discussing their compensation with co-workers, and more requests to managers and supervisors for pay adjustments to correct differences that employees do not readily understand or accept. This is not necessarily a bad thing, as a culture of transparency can result in people less likely to quit.
It’s important to understand that as a front-line manager, you may not have the final say over what your people are paid. However, with proper preparation and the willingness to have an open conversation about pay, you can positively influence how your employees feel about the company, their job, and their compensation. Here’s how to navigate the conversation to get the best possible result for everyone involved.
Remember, this is relatively new territory for everyone. Your first instinct might be to quickly dismiss this employee’s request by saying something like, “Now’s not the time to discuss your pay. We’ll do so at year-end when we meet to discuss your performance review.” Nor should you pass the buck by saying, “I’m not the person in charge of pay.” Instead, remain calm and say something like, “Hey, I can see why this subject would be important to you. Let’s get a meeting on the calendar.” This approach will give you time to prepare for this important discussion.
In the past, it wasn’t necessary for front-line managers to concern themselves with the company’s philosophy and practices when determining employees’ pay, rewards, and benefits. Given the new pay transparency laws, this is no longer the case, as you’ll want to come across as credible when answering questions about pay.
Many factors are used to determine an organization’s overall compensation strategy, including a company’s financial position, industry, available labor pool, and size of the company. It’s worth meeting with a member of your HR team to discuss how pay works in your organization so that you’re prepared to answer pay questions. Your HR team can also help you understand what laws pertain to the positions they manage. For example, some state pay transparency laws require employers with a minimum number of employees to list salary ranges for all posted job ads, promotions, and transfer opportunities. In other states, employers are only obligated to reveal this data when a candidate requests this information.
Where you discuss a highly sensitive matter like pay could very well determine how the other person reacts and could directly impact the outcome you hope to achieve. If you’re working in an open office environment, then it’s best to book a conference room. If you’re planning on discussing pay with a remote employee, ask them to log onto the call from a place where they’ll have some privacy.
By following the guidelines above, you’ll have set the stage for an important conversation. But what should you expect in the conversation itself? Here are a few of the more common questions and some suggested responses:
How is my pay determined? There is a salary range for this position which is determined by factors such as skills, level of experience required, title, and location (if applicable). Your pay is based on the position you’ve been hired for and the education and experience you bring to the table.
Why don’t I make as much money as my colleagues? Direct comparisons regarding pay aren’t always accurate, as people are hired with diverse levels of skill and education and perform at different levels. If you’d like, we can discuss ways you can increase your earning potential.
Why are recent hires making more money than me? There are many factors that go into determining pay, including education, experience, and level of skills. Remind me again of your background. If there’s something we may have overlooked, then I’m happy to discuss this with our boss and HR.
What is meant by a salary range and how does the company decide where my pay fits into this range? A salary range is the span between the minimum and maximum base salary an organization is willing to pay for a specific job or group of jobs. Where your pay fits in the range is determined by various factors including supply and demand, your experience and education, sometimes location, company budget, and in-demand skill sets.
How does the company determine if my pay is competitive and what’s done if you discover it’s not? We monitor our pay practices, in a number of ways, including participating in salary surveys to ensure we’re keeping up with the market. If necessary, market adjustments are made on an individual basis. (Note: Check with your HR department to confirm this is how things are done in your company before communicating this to an employee.)
Talking about salary and the value an individual brings to an organization is not easy. But having open and honest conversations about it can help employees trust their managers, and can even help managers identify opportunities for employees’ growth. Remembering this can help set the stage for not just a single conversation, but instead a continuing one. And the conversation should continue. Encourage your employees to take the time needed to reflect on the conversation and do their own research. Be sure to schedule a follow-up meeting to discuss any unresolved issues. Finally, keep in mind that additional questions are a good thing, as this shows the employee is as interested in working things out as you are.