As a Colorado-based recruitment company, we at Sheer Velocity have seen the effects of legislation designed to provide compensation transparency to candidates and employees. Some companies posted remote job openings available to everyone in the United States with the exception of Colorado so they wouldn’t have to post a salary range. Pay equity has been a hot topic, but these new state mandates are having effects on employers.
The leverage for salary negotiation has long been tilted to employers. These new bills are providing candidates with negotiating power they didn’t have before. According to Lynne Anderson, partner and leader of the pay equity team at Faegre Drinker Biddle & Reath, “The goal is to force employers to make sure compensation is based on specific job requirements rather than the applicant’s negotiating skills or salary history.”
The level of transparency being asked of companies is an indication of their company culture. According to a recent SHRM article, “The prospect of pay range disclosure, like other pay transparency laws, should force employers to consider what kind of story their disclosures would tell to current employees, job seekers and their competitors for talent.”
As we’re already seeing with entry-level jobs, if you are underpaying employees, it is getting harder to keep them and recruit new employees. The great resignation has seen many industries with lower-paying roles lose workers to other industries where they can make a higher wage and receive benefits.
Compensation transparency isn’t just affecting new hires. It is also impacting your current employees. They can see your new job listings and they can see competitive listings and quickly determine where they fall in the advertised pay range. If you think this is problematic for your employee base, an internal pay equity analysis should be conducted and adjustments made where you see problems.
With pay ranges published, candidates will push for the high end of the range. This is going to require education for hiring managers to describe how the criteria are set for each role and its range. While transparency eliminates the often difficult “what is your expected salary” discussion, it creates a potentially even more difficult negotiation within the published range. This is especially true if the role is in a highly competitive industry.
While these changes are a tough pill to swallow for some companies, over the long term, more transparency can benefit employers and employees. It may shorten the hiring timeframe by eliminating candidates who are looking for a higher wage. Communication about salary will become less taboo and employees will have a better understanding of how pay decisions are made.
Here is a link to jurisdictions with wage disclosure requirements. Until the federal government acts to create a national guideline, employers with offices in multiple states will need to pay attention to the different legislation each state implements in order to stay compliant.
And if you have questions on hiring practices, creating a culture of transparency, recruiting, or other HR and executive topics, check out our blog.