By Demi Hanes, Trüpp.
Pay equity laws are going into effect around the country, increasing the likelihood of a law or a regulation being created that will affect your business (if it hasn’t already). Be proactive by addressing your compensation practices now and adjusting to these laws, regardless of your location. Here are a few key considerations when tackling pay equity in your organization.
Salary history questions during the hiring process
Several states have already passed legislation that prevents a company from asking job applicants about their salary history to determine what their starting pay will be. Adjust your hiring process to avoid asking about previous salaries. A preferred alternative is to ask the candidate what their salary expectations are. Laws differ based on location, so be sure to review specific requirements for your region.
Minimum wage laws and compression
The minimum wage is increasing significantly across the country. These rapid increases can cause salary compression issues further down the line. Establish a plan now for how you will address the increases fairly and effectively across your organization to avoid pay compression.
“Pay compression occurs when new hires are paid the same as or more than current workers in the same position, or when the pay difference between employee levels shrinks so that higher-level workers feel that their pay advantage is no longer significant.” – SHRM
A pay disparity occurs when two (or more) employees are receiving different pay for the same job duties when there is no justified reason. A common inequality we see today is the gender pay gap, with others being race or age. Be proactive and look at your employee’s pay. Ensure there are justified reasons for any pay gaps that might exist.
Pay transparency is a complicated topic, referring to the level of openness your organization engages in regarding your compensation strategy and employee pay. Some organizations may choose to be completely transparent, making pay information available for each employee, while others may choose to only share pay ranges for job categories or levels. Still others only share pay ranges for positions within an employee’s specific department. There are many reasons why an organization may choose one level of transparency over another, but it is important to consider your approach to pay transparency and carry it out consistently within your organization. An appropriate level of transparency contributes to employees feeling that they are being paid fairly. This has been shown to increase job satisfaction and productivity.
Some states have expanded laws to cover, not just jobs that have the same title, but jobs that are of comparable character. Comparable character refers to the similarities in job duties. Employee’s job titles and specific functions do not have to be exactly the same to be considered comparable in character. According to the state of Oregon, for example, “work of a comparable character is defined . . . as work that requires substantially similar knowledge, skill, effort, responsibility, and working conditions in the performance of work, regardless of the job description or job title.” This means you must have defensible reasons for any salary differences between employees with similar job duties across your entire organization.
Defensible reasons for a salary increase
Salary increases show your employees that they are valued and are doing well at their job. A raise can also boost morale and motivation. When an employee is given a salary increase, in order to comply with pay equity best practices, there must be a defensible reason. A few valid reasons for a salary increase include promotions, additional job responsibilities, certifications, and performance-based assessments.
Now is the time to address pay equity
Whether your region has specific pay equity laws in place or not, we recommend adopting accepted compensation best practices sooner than later. It can be very costly to make the required changes all at once when new laws pass, and hard deadlines are quickly approaching. By putting thought into your compensation strategy and structure and making small changes now, you can mitigate the impact on your organization’s bottom line, make decisions that maximize efficiency for your business, and spread out the burden over a longer period of time.