Do Tell: With aging law in place, some employers are still confused about pay transparency

Karen Shannon: Pay transparency can help businesses avoid discriminatory practices.

Lynette Weatherford: Openness about pay eliminates awkwardness with job candidates.

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Moving Toward Transparency

For those employers who want to move toward pay transparency, human resources expert
Karen Shannon offers these tips:
• Work with a human resources professional, whether internal or external, because that person will be well versed in rapidly changing laws.
• Do a compensation analysis regularly, at least every three to four years, to make sure your organization has the data it needs to make decisions about pay.
• Begin disclosing salary range early – ideally before the interview.
• Keep an eye on compression. If you need to increase wages for workers, have a plan to adjust salaries of existing workers over the next two or three years, and discuss this with them.
• Education and communication for employees needs to be part of the process.
• Remember that it’s illegal to try to restrict workers from talking about compensation or to discipline them when they do so.

­Some workers may be reticent when it comes to discussing their compensation. Pay feels like a private matter – one, like decisions made within a voting booth, that no polite person would ask about.

For nearly 90 years, under the National Labor Relations Act, workers throughout the United States have been permitted to discuss their pay; by law, most private employers cannot restrict open discussion of compensation, and they may not punish people who reveal details about what they make.

In 2014, President Barack Obama drew attention to the act when he signed an executive order applying the law to federal contractors. The order expressly prohibited retaliation against employees who talk about compensation.

It’s a right some workers don’t realize they already had, according to Karen Shannon, vice president of business consulting with business advisory firm Ollis/Akers/Arney – and some employers also fail to recognize the law.

“We find working with clients that some people still have that in their handbooks,” she said of policies against discussing pay. “Employees have the ability and the right to talk about compensation today.”

She added that federal law protects employees who talk about compensation.

“We can’t fire someone for talking about their compensation with a co-worker,” she said.

Restrictions on conversations about pay may originally have been intended to minimize employee relations issues, Shannon said, but she noted there is a better way.

“If we do the right thing – if people can talk about the terms and conditions of their employment – that helps to increase employee trust, retention and engagement,” she said.

The federal act is enforced by the National Labor Relations Board, though that body cannot assess penalties, according to its website; rather, it can seek make-whole remedies, such as reinstatement or back pay for discharged workers, and informational remedies, like the posting of a notice by an employer promising not to break the law, the website states.

A lack of teeth in the enforcement may be one reason many workers are not aware that they have the right to discuss compensation.

Employment website Monster reported in October 2022 that 98% of workers are in favor of pay transparency. Shannon said state laws requiring salary information to be shared by prospective employers are spreading like wildfire.

In an unscientific poll of Springfield Business Journal readers, at the time this article went to press, 76% of respondents said their workplace is not transparent about pay.

Efficiency
In job applications, disclosing a pay range offers a clear benefit, according to Shannon. She offered the example of a posting for an administrative assistant position with a salary range between $17,000 and $24,000.

“If I’ve got a candidate that has a minimum salary requirement $10,000 above the range, it saves me time and it saves the candidate time to disclose it,” she said. “Obviously, we’re not going to pay $10,000 more when we’ve identified the range.”

A quick review of online employment postings at sites such as Indeed, ZipRecruiter, Glassdoor and CareerBuilder reveal that not all businesses choose to post a salary range – at least not in Missouri. Employers in California, Colorado, New York City and Washington are required by law to include pay information in job postings, though specific requirements vary. In several other states – Connecticut, Maryland, Nevada and Rhode Island – a wage or salary range must be provided to applicants during the consideration process, according to information platform GovDocs. That source notes some municipalities also have transparency laws on the books.

Randy Austin, co-owner of Dancing Mule Coffee Co., said posting a salary range just makes sense.

“I guess my thinking is that it’s usually a question that’s going to come up anyway,” he said. “It’s going to be addressed sooner or later. It seems like you might as well know upfront.”

Austin said he always asks applicants if they have questions for him at the end of an interview process, and this is where discussions of salary ordinarily take place.

He said it’s almost impossible to know how people are going to work out until they give the position a try, and finding the right person to fit the job, the team and the culture is always a challenge.

Lynette Weatherford, president of HR consulting firm Human Resource Advantage LLC, said posting a salary range could be a great tool for recruitment.

“The prospective employee knows exactly the position they’re interviewing for, so it eliminates or reduces questions and saves some time,” she said.

It also makes the conversation easier, Weatherford added.

“It eliminates the whole tippy-toe dance,” she said.

Additionally, once workers are in the workplace, openness about wages could help with morale.

“Employees are always going to discuss what they are earning,” she said. “If you learn of somebody who may make more but has the same experience or qualifications, that’s going to cause poor morale out of the gate.”

She added that openness improves retention, too.

“When employers just put it out there, there’s no question, no back discussions occurring,” she said. “A culture of openness is just going to be more fruitful.”

Equality
Shannon said among the human resource topics addressed with clients, she fields quite a few questions about pay transparency.

“It’s one of the top trends for organizational development and HR practices that businesses are looking at,” she said.

One goal addressed by pay transparency is to close wage gaps.

“In general, pay transparency is about eliminating inequities and discrimination,” she said. “That’s generally what it’s trying to accomplish.”

Missouri doesn’t have any pay transparency laws on the books, but laws that have been passed recently in other states require private employers to disclose information about employee compensation either to their employees or to the public. In some instances, Shannon said meeting that requirement can be as simple as disclosing salary ranges.

She noted some states are also passing salary history bans, making it illegal for prospective employers to request information about past salaries from job applicants.

In a 2022 article in the journal Nature Human Behaviour, researchers Tomasz Obloj and Todd Zenger reported on a 10-year study of 100,000 U.S. academic workers that found pay transparency causes significant increases in both the equity and equality of pay at those institutions.

A 2021 report by the Institute for Women’s Policy Research found that nearly half of full-time private-sector workers said they were either discouraged or prohibited from discussing wages and salaries, and women were more likely than men to work under a pay secrecy policy. This was less likely to be the case for public-sector workers, whose pay is a matter of public record, or for unionized workers.

In its 2022 analysis of median hourly earnings of both full- and part-time workers, the Pew Research Center found the gender gap is still present in workplaces, with women earning an average of 82% of what men made in the same positions. The gap has been virtually unchanged for two decades, the analysis notes, as women made 80% of the level of pay made by men in 2002.

While the gender gap is frequently referenced in conversations about wages, an ethnicity gap also exists. The U.S. Census Bureau noted Black women were paid 58% of what non-Hispanic white men were paid in 2020, and the Economic Policy Institute found the median Black worker earned 24.4% less than the median white worker.

In Springfield, median hourly earnings of women ages 30-49 were 81% of those of men the same age in 2019, according to Pew, and that landed them nearly in the center of the 250 metro areas reported by researchers with a rank of 118.

“Without pay transparency, employers are able to make decisions that are not based on fair and equitable pay practices or that are blatantly discriminatory,” Shannon said. “Sometimes, I don’t think people have the intent to harm or discriminate, but I see it in every industry, with large corporate entities and small family-owned businesses.”

She added, “Communication is key as you start making changes.”