The clock’s ticking for HR teams that have yet to embrace pay transparency—and it’s ticking fast. Governor Gavin Newsom signed pay transparency bill SB 1162 into law last month, requiring businesses with 15 or more employees in California to disclose hourly or annual salary ranges in all job postings no later than January 1, 2023.
And yet, just 35% of US HR professionals who responded to a survey by pay equity software firm Syndio reported that they feel ready to advertise (or are already advertising) pay ranges in job postings. Another 21% reported feeling “almost prepared,” while 34% feel “somewhat prepared,” and 10% feel straight-up unprepared to tackle the task.
Unless these respondents are like our college classmates who were always complaining that they were going to fail, yet still pulled off straight As—we’re kind of concerned.
Fortunately, there is a roadmap to guide HR professionals on the pathway to pay transparency. Christine Hendrickson, VP of strategic initiatives at Syndio, told HR Brew that there should be a focus on answering two questions.
“Are we paying people fairly? Are people that are performing equal work receiving equal pay? We also need to be able to [explain] why you are paid where you are in the range,” Hendrickson said.
Achieve equity. Hendrickson’s first question isn’t philosophical: It’s legal. Federally, pay is considered equal if “similarly situated” employees receive equal pay.
Similarly situa-what?
Michelle Strowhiro, employment partner at McDermott Will & Emery, said it’s about what you do at work: If employees are “performing the same or very similar roles with similar experiences [and] skills,” they should be making the same pay—even if they have slightly different job titles. Each expert interviewed for this piece recommended that HR ensure existing employees are being fairly compensated before considering compensation for new jobs.
To achieve this, Strowhiro recommended that HR review job descriptions with strategic business leaders and legal counsel (preferably, she said, under legal privilege). The goal: Identify and resolve overlap between roles, regroup titles, and adjust salary bands accordingly.
Sometimes, balancing the books isn’t cheap.
“Most companies, they have got their 3 or 4% salary budget for the year. And then you go ahead and this [law] passes,” Jesse Meschuk, HR consultant at Exequity, said. “You do an analysis of your internal existing population, and you realize…I need to spend 6%–8% this year trying to make [pay] equitable.”
Keep up and communicate. Once HR feels confident in its pay structure, Meschuk said, it’s time to revisit the pay itself and ensure it’s competitive.
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“Have I done a study to establish what the market rate is? Where do I want to pay against that market range?” Meshuk said. “Do I want to target the median or the 75th percentile or 25th percentile?”
Answering these questions, and formalizing a compensation philosophy, such as paying for years of experience, educational background, or unique skills, can help update salary ranges and answer Hendrickson’s second question: Why are employees being paid what they are being paid within the range?
As companies prepare to publish salary bands, Nancy Romanyshyn, director at Syndio and former head of pay at WTW, said HR should educate employees about their compensation philosophy, and the market data and factors that informed it, to help them understand where they fall in the range and how they can move up.
Melanie Naranjo, VP of people at compliance training startup Ethena, suspects leaders may be reluctant to share this information with employees for fear of making a mistake. In her experience after instituting pay transparency last year, she believes employees just want a good faith effort.
“Sometimes, you’re gonna get a little bit wrong. The important thing is to be open and honest with your employees and say, ‘Hey, we did a bunch of research. This is the number we came up with. We’re gonna keep monitoring data and adjust as necessary,’” Naranjo said.
Looking ahead. Right now, Hendrickson said, there’s a “laser focus” on the January 1 deadline—and for good reason. As Meschuk reminded us, there’s “a lot of work to get done and basically one quarter” to do it.
Even after HR teams get over the initial disclosure hurdle, they’ll still have to comply with additional requirements, including ensuring all California residents are equally aware of and being considered for internal promotions and opportunities.
Strowhiro is interested to see how pay transparency laws expand. She sees a future in which HR is asked to disclose not just salaries, but the range for benefits, equity, or bonuses, all in the name of equity.
“I wouldn’t be surprised if that’s the next frontier for these types of laws,” she said.—SV
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