Three steps to pay transparency readiness: a guide to 2018 and beyond

With pay transparency laws now in effect for California, organizations are making changes to well-established but now antiquated hiring and pay management processes.

Not to be confused with bans on asking salary history in the hiring process, pay transparency is about communicating the pay range for a job position to applicants and employees. Specifically in the case of California Assembly Bill 168, “an employer, upon reasonable request, shall provide the pay scale for a position to an applicant applying for employment.” Accordingly, organizations will need to ensure that they deliver their employee value proposition in a consistent manner, delivering the same message to candidates and employees on pay (in addition to benefits, careers, etc.).

Three Steps To Pay Transparency Readiness

Employers will need to take an integrated approach to responding to pay transparency requirements alongside salary history bans to comply with both effectively. Here are three steps they can take to prepare:

1. Ensure Pay Range Alignment in Recruiting: It is essential to ensure that the candidate, recruiter, hiring manager, and peer interviewers are all aligned on what the pay range is for a position. Organizations can do so by equipping recruiters with the right data and tools. This includes the pay range for the job and current incumbent information, enabling recruiters to think about internal pay equity. If your company conducts an annual pay equity study using predictive models, you can also build "starting pay calculators" to determine the pay range for a candidate based on relevant factors from these models. 
2. Be Pay Transparent with Employees: Educate employees about their own pay ranges, especially if they are involved in the recruiting process and interviewing candidates. Organizations will need to train managers and employees on what the pay range is for certain jobs and how to think about them. According to WorldatWork’s 2016 survey on Compensation Programs and Practices, many organizations are already doing this – 37% of organizations reported sharing the base salary range for employees' pay grade, 15% share base salary ranges for all pay grades or jobs, and 4% even share actual pay levels for all employees.
3. Build and Maintain Pay Ranges: If you don’t have pay ranges, start with broad bands. If you use market reference points, establish some percentage range on either side of what you're targeting. Set them in a way that meets your organization's objectives, and remember that you can reset ranges just as easily as you set them. Just do so in a methodical manner. Lastly, but perhaps most importantly, pay employees within range. 

2018 and Beyond

Just as fair pay and salary history ban laws have now been enacted across the United States, some expect that pay transparency laws will likely be legislated beyond California. Accordingly, employers are implementing changes nationally – and even internationally – to prepare.

In addition to the three immediate steps we’ve outlined here, every HR function needs to make sure they are able to manage and maintain their organization's employee value proposition. With factors such as the introduction of artificial intelligence in recruiting and use of predictive analytics in workforce management, it is time for pay management to catch up.

Has your company taken any steps toward pay transparency yet? Join the conversation on LinkedIn.