Employers should stop being so secretive about salary scales | Mint
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Business News/ Opinion / Columns/  Employers should stop being so secretive about salary scales

Employers should stop being so secretive about salary scales

Pay transparency could serve the cause of equitable remuneration

Minority groups in the US are found to be underpaid much too often mint (Photo: Mint)Premium
Minority groups in the US are found to be underpaid much too often mint (Photo: Mint)

Recently, my friend’s manager asked what would stop her from leaving the organization. “Higher pay," she responded. Her manager was reluctant to discuss compensation as it was “HR’s domain" and admitted that he hoped my friend would ask for more vacation days. She told me: “Why would I ask for more days off when I’m sure the White man next to me is making more money?" She quit promptly after to join a competitor for more pay. Like other highly educated and ambitious women of colour I know, she has more options than ever to work at a place that recognizes her worth.

How did she know she was getting paid less than the man next to her? She didn’t, not for sure—her former manager refused to tell her. But women of colour are paid less on average, and for her as a Latina woman, the pay gap could be as much as 54% of her Caucasian male counterpart’s salary. The issue, she tells me, isn’t only about making more money, but the lack of pay transparency, which to her felt outdated and exclusionary. She’s not alone: PayScale research has found that even when there isn’t a gender pay gap, the perception of its existence could reduce trust in an employer.

Pay transparency laws could smoothen such salary conversations for managers and employees. Such laws are becoming the norm around the US; a law to disclose salary ranges in all job postings in New York City takes effect in May and California’s Senate has announced a pioneering new pay equity bill. If it becomes law, would require the most detailed pay transparency of any US state. The public report would require employers with 100 or more employees to disclose the median and average hourly rate by demographics (race, ethnicity and gender) within each job category. And employees could ask for the pay scale of their current jobs, which an employer would be legally required to provide from May 2023.

Pay transparency reduces pay inequality. One study estimates that the gender pay gap could fall by 40%. Researchers at HEC Paris studied the pay of 100,000 US academics over two decades and found that pay transparency could improve pay equity (people getting paid equally for equal work, regardless of identities such as gender and race) and pay equality (how that pay compares with other roles and organizations). The gender pay gap has reduced significantly in institutions where salaries are publicly available, as in US federal government jobs.

So why has it taken legislation to make this data available? Because pay secrecy has been institutionalized in our work culture.

Here’s what’s realistic. Managers should offer at least a range when offering salaries and raises, with clear criteria on what it takes to be at either end of the range. To ensure fairness, the criteria and the salary ranges need to be set by upper management and HR rather than on a case-by-case basis. Managers should have pay conversations regularly with team members. Ask how each person feels about their compensation. Talk honestly about why they’re making and actionable steps they could take to get to the next level. It can look like this: ‘The range for your role is $100,000-$150,000. You are at $120,000 for this reason and to get to $150,000, let’s work on these measurable outcomes within this span of time.’ An employee, especially one from a historically underestimated background, would walk away feeling like she has fair access to information. And in a tight labour market like today’s, workers have options and prefer regular communication.

Managers should offer specific criteria on how to move up the salary range. One team I worked with did a detailed review of what each job required at the ‘entry’ point and specified the output required to get to promotion to the next level. That way, when having salary conversations with employees, managers could point to objective criteria rather than subjective reasons for promotion and higher pay–or lack thereof. Being intentional in this manner also increased the number of women that were promoted from then on.

Most of all, regular pay audits should be required at every organization. And every manager should evaluate how pay is distributed among their team on a quarterly basis. In smaller companies, this could be as basic as compiling a spreadsheet. Of course, larger organizations can and should use software that lets them spot patterns in who gets access to the highest-paying jobs and who does not. Being proactive about addressing any imbalances can make strides toward greater trust within the team.

I often encounter well-meaning leaders who are horrified when they see the data about how wide unchecked pay gaps can be, especially by race and gender. That’s why it’s always important to review the data.

And in no time, when it becomes the law, leaders won’t have a choice. Better late than never, I suppose.

Ruchika Tulshyan is chief executive officer of Candour, an inclusion strategy practice, and the author of ‘Inclusion on Purpose: An Intersectional Approach to Creating a Culture of Belonging at Work’.

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Published: 16 Mar 2022, 10:23 PM IST
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