Someone recently asked me “Why is there still a gender pay gap if there are laws in place like the Equal Pay Act?” Great question! The answer lies in two current movements: pay transparency and pay history bans. There are two reasons to get on board with this current movement. One is because you have to and the other is because you want to. Both reasons are the right reason, but one will reap greater reward.
As I always say…let’s start with compliance. Pay transparency laws, which require that compensation be included in job postings, are a key measure designed to close the gender pay gap. Pay transparency laws are in place in 8 states (and a number of cities and other local areas) with at least 15 additional states considering salary range transparency laws. When compensation is not stated in a job posting, the hiring company is not committed to the compensation that will be given. Companies may want to leave their options open “depending on the experience of the candidate”. While I understand the reasons behind this approach, it flies in the face of equal pay for equal work. A job should have core responsibilities and expectations. Whether someone has 3 years of experience or 10 years of experience, they will be doing that same job with those same responsibilities and be held to the same expectations. Therefore, they should be given the same compensation. Pay transparency laws ensure this is the case.
Before we talk more about pay transparency, let’s take a quick look at another movement happening around the job posting process: Pay history bans. For years, it has been standard practice to ask applicants to state their compensation for past positions when completing an application. Twenty-one states have passed laws which prohibit obtaining salary history to determine compensation during the hiring process. If one person made $50,000 a year in their previous position and another person made $65,000 a year in their previous position, should they now be paid differently for doing the exact same job? When hiring managers think the answer to that question is yes, the gender pay gap continues. Pay should be based on the job the person is currently doing.
Laws aside, why would a company want to adopt these approaches sooner rather than later? It has been shown that stating compensation on a job posting results in higher applicant volume and a higher quality candidate. Think about it…Do you want a candidate who will apply to any job (without really knowing important details) or the candidate who wants your job because it provides exactly what they are looking for? We all work to get paid so compensation consideration is key. Once in the position, seeing the potential for increased pay can be a great motivator for both retention and increased performance. Nobody likes looking out the back window when riding in a car. We prefer to see the road ahead and have some idea where we are going. Such is the case with compensation. Finally, a company that is willing to be transparent about compensation sends a positive message about an open, honest culture. That level of transparency is one of the things the newest generation entering the workforce is looking for.
To put all of this into practice does take some work. But once it is built, so many challenges are able to be resolved. So what are some steps to get started?
Payroll is often the biggest expense for any company. Yet, I’m amazed at how many companies don’t have a structure in place to manage it. Compensation management has endless benefits from ending pay discrimination to higher retention to simplified processes. Need some help getting started?
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