It’s early 2023 and your employees are talking about pay transparency. Some employees are located in California or New York, where pay transparency legislation exists, but many are in other states where it does not. Regardless of their location, many employees have heard that if they ask, HR has to provide them with their relevant pay range. So here they are, beating down your door, wanting answers.
Providing a salary range
Unfortunately, providing your employees with their pay range may not be as straightforward as they think it is. Before responding, there are several considerations, including their position, level, salary potential, budget and location, to name a few. Additionally, you may get requests from employees in states where there is no legal requirement to provide salary range information. By only processing salary range requests from those where it is legally required, you risk creating negative cultural effects. In this age where remote work policies are the norm, determining how to respond to these requests ahead of time is key.
In some cases, even providing a salary range can be challenging. You hired an employee by paying them what they asked for, and now you are applying that same rate of pay to everyone doing that job. Effectively, one individual’s pay negotiation became your compensation strategy. While this may make life easier on the surface, you are setting yourself up for more questions than answers. Is this the right compensation strategy for your organization or just a default outcome?
One way to combat this is to use a benchmark to determine the salary range for the position. Benchmarks can target specific industries, locations and company sizes. By utilizing an outside benchmark, you have independent information to use when setting pay. Using those benchmarks to create a solid salary range allows for a more consistent approach to compensation decisions.
The next question
In the rare case that you have a salary range already established, it may seem easy. You look up the employee’s information, input their range into a form letter and send it off, thinking your job is done. And it is, until the employee asks the next question. The following is a realistic scenario.
- Employee: “Please provide me with my salary range.”
- HR: “Of course, your salary range is $40,000 – $55,000 annually.”
- Employee: “Then why do I make $41,000?”
- HR: “…”
This question can come in a lot of forms, but at the end of the day, employees want to know how they can achieve the top of their salary range. After all, the purpose of the legislation is to help employees know their wage potential. Is that something that you know how to answer?
To answer this question, it’s important to determine the factors that are taken into consideration when determining an employee’s salary. Ideally, these factors are what is valued in the organization, and what is viewed to be indicative of a successful employee. Some examples could be experience, skillset, education, certifications, performance or tenure. These are all factors that could determine where someone falls within their salary range. Often, your employee will want to know how they can grow their salary within the range. It seems simple enough to share, but when you do, they have more questions.
A compensation philosophy can be a powerful resource to answer the employee’s next question
A compensation philosophy is a tool that companies can use to guide the pay discussion. It is a lot easier to answer the “why” if you have a document that explains just that. Often this looks like a statement that outlines everything that could affect an employee’s compensation. A good compensation philosophy is well thought through and considers the company’s culture and values.
Developing a compensation philosophy isn’t necessarily an easy process. Members of leadership teams likely have their own pay philosophies, which often don’t align with each other. To realize the full power of a sound compensation philosophy, complete buy-in and alignment from leadership and management are essential. Engaging with a compensation professional to work through the process of creating your compensation philosophy — and aligning your team to it — is advised. Having a guided conversation around the pros and cons of each decision allows members of your leadership team to be cohesive in their approach to pay decisions.
Most employee engagement experts would agree that an employee who feels they have been treated fairly will feel more connected to the organization, and compensation decisions are no different. Having a thoughtful approach to compensation, in addition to other aspects of employment, leads to higher retention, performance and overall employee well-being.
How we can help
BPM’s knowledgeable compensation team is available to help guide your HR, leadership and management teams in creating a compensation strategy that makes sense to your employees; and ultimately provides you with an answer to that inevitable next question. Visit our interactive guide to discover additional ways you can leverage outsourced and managed services from BPM to help your organization realize its future vision.