5 Steps to Confidence in Your Approach to Salary Transparency
Updated: Nov 16
In this article
Anyone working on their company’s transition to pay transparency right now knows that it’s about a whole lot more than just plopping a salary band onto your job description.
If it were that simple, every company would be able to easily comply within about an hour at most. After all, you can’t exactly open a role if you don’t already have a budget approved for the role. Which means that — presumably — companies already have all the salary information they need to get their job descriptions compliant with new salary transparency laws going into effect.
So then why is this such a big deal? Why do companies take months — sometimes years — to get to a place where they can comfortably make salary transparency a reality?
It’s because listing salary bands on the job description isn’t the beginning of the path to pay transparency — it’s the finish line.
How we got here
We’ve written previously on pay gaps, Equal Pay Day, and the history of how we got to present day pay equity issues. Our previous post has great background information to help you understand the potential systemic bias that might be holding your company back when it comes to addressing salary transparency laws.
As one example, I’ve written previously on the benefits of New York City’s transparency laws when they were enacted. And while Ethena has recently come out with 5 Effective Ways to Build and Maintain Pay Equity Within Your Company, I’d like to complement it with a “Part II” post that includes actionable resources for my fellow HR and People Leaders.
5 steps to start addressing salary transparency today
To get to a place where you can comfortably list salary bands on job descriptions (without immediate and terrible fallout, confusion, and a whole lot of belated backpedaling), you need to first create the infrastructure to support a culture of salary transparency within your company.
Here’s 5 steps to get to that point:
Step 1: Define your compensation philosophy
Defining your compensation philosophy (and making it clear) is a critical first step. This shouldn’t be some overly flowery, cryptic nonsense. It should clearly articulate the principles that guide your decision making process around how much to pay people at your company.
People leaders typically fall into two categories here:
If you don’t have a clear set of principles, it’s time to create them.
If you do have them, write them out so your company can stick to them.
Examples of things to consider:
Do you pay top of market?
Do you pay at the 50th percentile?
Do you adjust pay based on geographic location? If so, why?
Does your company prefer to invest more in perks and benefits and less on salaries?
Or maybe you don’t have the funds to afford 75th+ percentile, so instead you offer higher equity packages?
Whatever it is, make it clear and put it in writing. This will force you to think through your priorities and what you can realistically afford. Your compensation philosophy will help you stay consistent in your decision-making processes when it comes to new hires or pay increases. And it will offer you clarity when employees and candidates ask about how you determine salary bands.
Step 2: Create job levels in your salary transparency work
A compensation philosophy alone won’t help you determine how much to pay someone. That’s because an employee’s market value is determined by a number of things, including:
Creating job levels that complement your compensation philosophy will give you a more holistic picture when determining someone’s salary.
To start, make sure you have a clear understanding of what levels exist across your company and what it looks like to perform at each level. (This is different from someone’s title, by the way.) After completing this exercise, it will make it easier to more accurately determine compensation per role.
In fact, many compensation tools require you to enter a job level that is not just a title — that’s because the same title at one company might mean something very different at another company.
Having job levels is what you’ll want to index for in order to lean on consistency and comparability in the market. There shouldn’t be too many of these. Try not to create more than six or seven job levels. And you don’t have to make them overly complicated. Here is an example of our job levels at Ethena. And additionally, here’s some free compensation platforms to help you determine pay ranges:
Step 3: Create checks and balances
Even when you create salary bands, anyone who’s ever worked in HR knows that these will be constantly challenged. People will always try to argue for the “exception” and not “the rule” (cue: pay gaps).
By creating checks and balances now, it will help you think about all the ways this could “break,” aka, have exceptions. To remedy this, put a stop gap in place for it now. Some examples of this include:
What steps will you take if a candidate tries to negotiate above a salary band?
What will you do if a hiring manager finds a really shiny candidate and decides they want to break the rules to lock them in?
What will you do if an employee gets an external offer and their manager wants to counter-offer, but has to break the salary band to do so?
Who gets final approval on an offer letter?
Who is reviewing all offer letters to make sure that we’re applying our rules consistently across the board and not giving one team or set of individuals special treatment?
At Ethena, we stick to our stop gaps. For us, we don’t negotiate on compensation, and we’re upfront about this with candidates from the start. The salary bands we advertise on job descriptions are the same ones we use internally, and all offers have to be reviewed and approved by HR before anything gets communicated to a candidate.
Hiring managers have to include a case argument for the offer amount they’re making (i.e. how they determined where someone falls on the salary band). And if during the recruitment process, we learn that we need to increase a salary band to stay competitive or at market value, we will additionally apply that increase to everyone internally who resides at that salary band at the next performance review.
Step 4: Educate your team on your approach to salary transparency
Employees can’t know you’re being thoughtful about your approach to pay equity if you’re not sharing your thought process, so educate your team!
Tell them your compensation philosophy.
Tell them how you determine where employees fall along the salary band.
Share job levels.
Train your managers to speak articulately about these critical topics.
Your employees already know that market value varies based on X, Y, and Z factors. They already know how much they’re getting paid. And many employees are now also talking to each other about how much everyone else is making. If you don’t educate them on your approach to pay equity, they’ll come to their own conclusions amidst your silence.
Don’t force them to fill in the gaps with things that may or may not be accurate about your compensation philosophy by refusing to share something you — presumably — put a lot of thought into and genuinely stand by.
By proactively sharing your compensation philosophy and approach to pay equity, you’ll:
Clear up potential rumors.
And open yourself up to helpful feedback and suggestions.
This will ultimately make your job a whole lot easier. By not having to constantly field questions about employees confused on their pay, you’ll remove potential skepticism about pay equity as well.
Step 5: If you’re not currently paying equitably, fix it
Salary transparency laws are coming (or are here, depending on what state we’re talking about). Addressing pay equity now is fixable, and is a worthy exercise to tackle in your organization.
Some additional tips when addressing it includes:
Audit what you’re paying people internally and get everyone into the appropriate salary bands.
Don’t have one band that you’re listing on an external job description, and another one that you’re using internally. (Employees will realize it when they see that their pay doesn’t match the band you’re putting out there, and it’s going to cause problems).
These 5 steps to feeling confident about your approach to salary transparency are a great start (or complement) to your pay equity work in your organization. To be clear: it’s likely going to cost you a pretty penny to get everyone in your organization to the correct pay band they should actually be at. But, it’s a whole lot cheaper than having to backfill them when they quit.
Speaking of pay equity, how equitable would you rate your workplace culture? If you’d like to improve it, let’s talk. At Ethena, we’re pretty passionate about helping HR and People Leaders build better workplaces. Or request a sample DEI training to see for yourself how our content-first focus is driving workplaces like yours into a more equitable future.