Episode 310: Pay Transparency, How It Can Help You

Pay transparency
Pay transparency is coming up more often as more and more states are beginning to pass laws requiring employers to be transparent about what they are paying people. Additionally, employees are becoming more curious about it when they see jobs that may be similar to theirs having a higher pay range posted with no explanation as to why. As an employer, this can be nerve-racking when you are first looking into it. However, listen to Paul Edwards, CEO & Founder of CEDR HR Solutions, and Michelle Richard, Senior Solution Center Advisor, discuss how enacting pay transparency at your workplace will benefit you as an employer with current employees, and any future ones.
Transcript

Voice Over: You’re about to listen to another episode of What The Hell Just Happened?! Join Paul Edwards and his guests as they discuss and sometimes even solve some interesting HR problems. 

Paul: And… I’m gonna go off the rails sometimes and talk about whatever I want. 

Paul: Hi, everybody. Welcome to today’s podcast of What the hell just happened in HR?!  I’m joined by Michelle today. Michelle is one of our…Are you a senior? Do we call you a senior advisor now?

Michelle: Yeah, I go by that title. 

Paul: Yeah. You’ve been here that long.

Michelle: Once in a while –

Paul: While. I mean, you’re like 74 years old so–

Michelle: [laughing] in CEDR years I am.

Paul: [laughing] in CEDR years? Ouch! So we’ve aged you since you’ve been here. 

Michelle: [laughing] In a good way. 

Paul: In a good way.

Michelle: It’s like fine wine.

Paul: Okay, so I already know what Michelle’s going to talk about today. It’s a very interesting subject. And go.

Michelle: All right. So salary transparency. 

Paul: Okay.

Michelle: That’s what I want to talk about.

Paul: Why?

Michelle: Because I was scrolling through social media, as I tend to do. 

Paul: Uh huh. 

Michelle: And I came across two, when I was looking at my Instagram reels –

Paul: Uh huh.

Michelle: I came across two salary transparency accounts, and their whole premise is walking on the street asking and asking people, what do you do? 

Paul: What do you do and how much do you make?

Michelle: And how much are you paid? And, you know, they say, they kind of give a little insight, like not everybody wants to answer and we’ll talk a little bit about that. 

Paul: Uh huh.

Michelle: But they are, they’re getting a lot of traction and they have a lot of followers.

Paul: Right.

Michelle: And it even interested me. So I now follow them.

Paul: Uh huh.

Michelle: So I just figured if I’m seeing this… I’m sure the algorithm is also showing this to many other working individuals.

Paul: Absolutely.

MIchelle: So I thought we could just talk about what is salary transparency to begin with. Right?

Paul: Uh huh.

Michelle: Because it can mean a lot of different things to different people. And I thought we could just talk about the basics of it and I would love later on, Paul, to know your perspective as a business owner.

Paul: Oh, I got perspective on this one.

Michelle: You’ve been a business owner for quite some time. 

Paul: Right. 

Michelle: And you have just, I’m sure, a lot of knowledge that you can share with us about how trends have changed and what you’re seeing now and how you’ve responded to it. So let’s talk about what it is.

Paul: Yep.

Michelle: So from an employee perspective, you know, it’s when an employee feels like they have access to see how much another, maybe employee, makes, maybe it’s at their place of work?

Paul: Uh huh.

Michelle: Or maybe it’s somewhere else in other business. But in a position that’s similar to them. 

Paul: Right.

Michelle: So how easy is it to find that information? 

Paul: Right. 

Michelle: And from an employer’s perspective, it’s how open, how transparent, you know, it’s in the name, salary transparency. How transparent is it? How open are they being as far as displaying–

Paul: Right.

Michelle: Salary ranges. 

Paul: Right. 

Michelle: And just starting wages.

Paul: And so the other thing to factor in here is that we’re seeing not really transparency laws, but we’re seeing laws which have transparency language in them being passed, which I think starts in California and, Michelle, you could probably name a couple of other places.

Michelle: Washington, Colorado.

Paul: There you go. Where you’re supposed to publish some kind of a range that people make.

Michelle: Uh huh. Exactly.

Paul:  So that’s a form of this transparency thing. And I, by the way, I’m for that. And I’ll explain, you know, when you get back to me and I get to give some insight, I’ll explain why I like that. And I’ve actually been trying to get our members to do this big business thing –

Michelle: Uh huh.

Paul: For quite some time.

Michelle: Yeah. And, you know, I think I can first speak to it as an employee myself. 

Paul: Uh huh.

Michelle: Right? I’m comfortable enough talking about it with you, my CEO –

Paul: Uh huh.

Michelle: How, you know, this is something that I support as well, not only as a professional in HR, but also as an employee myself. You know, I get that it feels taboo. Like it still feels a bit taboo to me –

Paul: Uh huh.

Michelle: To discuss pay? 

Paul: Uh huh.

Michelle: To ask, you know, how much do you think I can get paid next year if I work towards this? I mean –

Paul: Right.

Michelle: These are things you still get nervous about as an employee and reasonably so. I mean, it’s just the way that things have been, but I’m excited for where this can go for just a couple of reasons. Number one, because it’s empowering and it builds trust between me and my employer. You know and it clearly defines goals. It attracts top talent. I mean, I don’t know if I’m top talent, but, you know, I think I’m pretty good at my job. 

Paul: You are!

Michelle: And I…I want to be able to discuss that. 

Paul: Uh huh

Michelle: You know, I want to be able to discuss what is that worth and what are my goals and how can I get there. 

Paul: Right. 

Michelle: So I’d love to hear your perspective, Paul, as a business owner.

Paul: Well, first I want to talk about the owner of CEDR who gets the phone calls from the members about things related to employees discussing wages and upsets and stuff that happen inside of the businesses that we work with. So, you know, you’ve done a good job of making a case for why it can be a good thing. And I can make an even better case for it, for transparency. Do I believe that everybody’s pay, in the company, should be posted somewhere for everybody in the company to be able to see it? I do not believe that, that there’s anything constructive in that. I –

Michelle: I agree.

Paul: I just. Did you say you agree?

Michelle: I agree. Yes, I do.

Paul: Awesome! Okay. By the way, anybody who’s listening, I had no idea what Michelle would say. And Michelle knows, especially in the podcast, she could be like, “let me tell you why you’re wrong, Paul.”

Michelle: [laughing]

Paul:  And then she’d have like seven things and I’d get ambushed. 

Michelle: [laughing]

Paul: But I’m glad you agree. I don’t know that there’s a lot to be gained from that, and it brings me to this kind of term of the constructive use of the knowledge and the destructive use of the knowledge, or a less than constructive use of the knowledge. 

Michelle: Uh huh.

Paul: So the upset that we get for the phone call is that, and this is the way it almost always is, ‘I have an employee who’s really not a great employee, and she just figured out what other people are making and she is in my office complaining because she’s not getting paid the same as someone else who just got hired. And now she’s mad and she’s gotten everybody upset and what I want to tell her is, is that it takes every fiber of my being, not fire you at least once a day.’ 

Michelle: [laughing]

Paul: ‘And you’re in here complaining and asking me why you’re not making more money when you were absent 16 times in the above and beyond the 14 days I give you –

Michelle: [laughing]

Paul: And I get patient complaints about you all the time and you’re never and you’re never, you don’t ever seem to be happy here.’

Michelle: Uh huh.

Paul: Well, that’s a subjective conversation, right? 

Michelle: Yup.

Paul: It’s you’re a, you’re bad and they’re good, and therefore they make more money and there is nothing to be gained from that conversation. Not as a manager, not as that employee who maybe could be making more money if you could manage better and, and show them how they could make more money?

Michelle: Uh huh. And what this comes down to Paul –

Paul: Uh huh.

Michelle: And especially what we see at the Solution Center, because I agree, I’ve been on the manager side of it –

Paul: Right.

Michelle: Not loving having to explain why someone’s getting paid a certain rate. 

Paul: Yeah. 

Michelle: But it all comes down to asking yourself, how is this going to impact me? What answer am I going to give that individual?

Paul: Right.

Michelle: You want to be prepared for that, because this is the reality. You know, this is, it’s not going away. At least I don’t think so. I think more laws are going to pass. That’s the prediction online, right? By professionals.

Paul: Uh huh.

Michelle: It’s already starting. I think I read somewhere it’s about 17 states that have passed some forms of –

Paul: Something.

Michelle: Salary transparency laws.

Paul: Uh huh.

Michelle: So you know, just starting to think about, maybe it’s not in your state yet, but start thinking about if I have an employee that comes to me, just like Paul said, how am I going to focus in on the issues –

Paul: Uh huh.

Michelle: That they’re having –

Paul: Yeah.

Michelle: And just having that conversation be prepared for it. And if you’re thinking, well, I don’t know how I defend that, then just start looking at, you know, salary ranges, making sure that it’s as equitable as it can possibly be and that’s when you can work with the professional. You know, give us a call if you’re a CEDR member or work with somebody that is in the business and can give you some solid third party, more neutral based guidance.

Paul: So if you go into any well-run, universities are famous for doing this, larger organizations are famous for doing this, if you’re going to any of them, you look at how they handle compensation. This is the conversation I’m about to have is, Michelle, the one that I want the people who are listening to think about, adopt, start thinking about this if you’re not already using it. There’s something known as pay bands. So University of Arizona here in Tucson, I use them as an example. They have a division of HR people who are constantly researching the market to see what other people are being paid, because if you’re, if they’re not researching and they’re not being reactive, then they may be underpaying and someone will take their best people away from them. 

Michelle: Hmm.

Paul: So they’re constantly adjusting the pay band up, up and down a few dollars. And on the other side of that, they’re checking to make sure that they’re not overpaying –

Michelle: [laughing] Yeah.

Paul: For entry level people because the market has changed. So, you know, that’s great for them because, you know, they have all the tax money in the world. 

Michelle: [laughing]

Paul: They don’t have a profit loss. So they can hire as many people to figure this stuff out and call around and research and pay for all sorts of things. That’s great. 

Michelle: Uh huh.

Paul: You know, we can’t be doing that. Not even, you know, most companies don’t have the resources to be doing that all the time. 

Michelle: Right.

Paul: But you can create pay bands. And we have a great, we have a great article on this.

Michelle: Yup.

Paul: And the other thing that I like about pay bands is that you can within your pay band say this job pays between $13 and $18 an hour or $40 and $70 an hour or whatever it looks like, and you can put conditions upon which someone can advance through those pay bands, which can include all kinds of factors, and I’m not going to go into all of them, but time of service, amount of experience that you had before you came. So someone who comes in an entry level may start at the lower level where somebody else may, you may be there for three years and someone comes in and they get more than you get, and it’s because they have six years of previous experience and bring something new to it that you as an existing employee don’t quite have yet. But within the pay band you can put things in like education, certifications, amount of experience, length of service, there’s all sorts of things that you can put in place, and we do it here at CEDR. One of the examples is, if you’re a, if you are capable of presenting, if you’re capable of traveling, if you’re capable of being a leader–

Michelle: Uh huh.

Paul: If you’re capable of writing, if you’re, if you can do these things, you can make more money on an hourly or a salary basis as you develop in the company. So those are the objective, not the subjective reasons for having a pay band in place and having some transparency there. I do think that everybody who does like-jobs should kind of know what each other is getting paid. 

Michelle: Uh huh.

Paul: I mean, I think it’s okay –

Michelle: Some kind of range. 

Paul: You know–

Michelle: Keep it even.

Paul: You know that somebody is in the range and, you know, if they’ve been here for six years, that and they’re a high performer, you can look over and say they’re probably at the, you know, at the top of the pay band that I’m in. I’m still working my way towards that, if that’s the conversation that’s going on.

MIchelle: Exactly. I’m so glad you mentioned that, Paul. Just,  I’ve seen those pay bands, you know, working at larger companies–

Paul: Yup.

MIchelle: And I’m so glad that this is becoming a trend now more so in small businesses, even though not as much recent research can happen, at least it’s being thought of.

Paul: You know, the other thing I want to offer, Michelle–

Michelle: Yeah?

Paul: Is if you publish your pay band, then you don’t end up interviewing people who already expect to make a lot more than what your pay band offers. 

Michelle: Exactly. 

Paul: You know, you never spend any time with them. It’s that old, remember that, the old way?

Michelle: [laughs]

Paul: You’d bring somebody in, they were the best candidate or you might bring in five great candidates and have all five of them tell you, I, I can’t work for that. I’m already making $4 more an hour, and no one would publish it or talk about it because it was a little bit taboo.

Michelle: Yup.

Paul: On the other side of it, and this has always been very frustrating to me, and I think this goes back to, you know, I didn’t suddenly own a company. I worked. I worked in warehouses. I had you know, I’ve had jobs. I think a person should be paid what the job is worth, not what they negotiate themselves out of. 

Michelle: Hmm.

Paul: So, you know, if I’m thinking I should pay you $15 to $21 in the pay band and I say, what were you making at your last place and what would you like here? And you say, Oh, I don’t know, $14 an hour? I shouldn’t give you $14 an hour. I should start you at $15 and if you’ve got three years of experience, I should start you at $16.50. 

Michelle: Yep. 

Paul: That’s the, that’s the reason for the transparency.

Michelle: Exactly.

Paul: The other thing is, is that it’s been shown that the ton of studies out there, that if you don’t create some kind of transparency and you don’t move people up the ladder, that there is a group of people who are disenfranchised in this model whereby they’re always, they were underpaid at their last job and now they’re going to get underpaid again because they just didn’t know that they could negotiate or they weren’t good at negotiating. Not everybody’s a good negotiator.

So they, it ends up perpetuating this low pay and it’s women. 

Michelle: Mm hmm. 

Paul: Yeah. It’s I mean, it’s shown I mean, I don’t remember. It’s like a woman has to work like six more months to make what males make.

Michelle: Yeah. As I was going through just looking up some articles, there was a lot of data out there. So if you’re curious there’s a lot of gaps based on gender, race. 

Paul: Yeah.

Michelle: I mean, and we’re not even touching on that today, but it’s there. And doing this will help to close that gap. It’s never going to be perfectly equitable. That’s what I’m reading. 

Paul: Yeah.

Michelle: But that can be the goal and that’s the idea here. Is that exactly what Paul said: You’re paid what you’re worth as far as your job and experience go and those objective criteria alone.

Paul: And as a manager and as an owner, you have to stop and do this. You have to do this. I mean, I should be more clear. You have to stop and create these pay bands and give it some thought. And when you do, I think you’ll find that it’s amazing. I want to leave us with one last thing because we’ve run over because we try to keep these things short. Two things: First thing I want to leave you with is I love nothing more than for someone who’s come in and who’s complaining about their pay based off of what somebody else and it’s not fair and everything else to explain to them why they’re not getting paid what the other person is. You just open the door for me to go, okay, let’s talk about your absences –

Michelle: [laughing}

Paul: And everything else and let’s talk about the difference between you and that other person. Now, I say that… I really don’t enjoy that conversation, but that’s where, that’s where that can go. The other thing is, is that, everybody just remember, we’ve said it over and over, you can’t keep employees from discussing their benefits, wages and it’s not legal. 

Michelle: Yup.

Paul: So just remember that if it’s going on and it happens and it’s not going on in a constructive way, which is a very common thing, tread lightly.

Michelle: Uh huh.

Paul: If you’re one of our members, you give us, you know, one of CEDR’s members, you give give us, give them a call and we’ll take good care of you. But, you know, don’t, don’t create a policy or tell people they can’t discuss their benefits or their or particularly their wages.

Michelle: Thanks, thanks for that Paul. That’s true.

Paul: Did I miss, did I miss anything else?

Michelle: No. No. I –

Paul: Are we good? 

MIchelle: I think we’re good.

Paul: Yeah. Pay bands, study pay bands. Get out in front of this. There are all kinds of awesome advantages to pay bands.

Michelle: Yup.

Voice Over: Thanks for joining us for this week’s episode of What The Hell Just Happened? do Paul a favor; share this with your network. If you have an HR issue or a question, and you’d like us to discuss it on this show, send it to podcast@WTHjusthappened.com. For more HR advice and insights from Paul and his team of experts, you can also join the private Facebook group, HR Base Camp, or visit HRbasecamp.com. Make sure you tune in next week. And remember: better workplaces make better lives.

Mar 27, 2023

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