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How to Navigate Salary Transparency Laws with Your Current Employees

How to Navigate Salary Transparency

Practical insights into approaching salary range job postings within your business.

Salary transparency laws are becoming more prevalent throughout the country. In fact, at least nine states already have these laws in place, and some major cities, including New York CityCincinnati, and Toledo, are also following suit. And as of January 1st, California has newly released its guidelines and laws for employers to put in place.

The goal of these laws are to ensure marginalized groups are paid fairly and are given access to the same opportunities offered to their non-minority counterparts. These laws vary, some require that employers list a salary range in job postings, and some require that employers disclose salary ranges to job applicants as part of the hiring process. In some circumstances, the laws also may require employers to notify their employees of available promotion opportunities.

To comply with these new laws, employers need to be truly transparent with job applicants. But what happens when your employees see the posting and discover they’re not making what is listed?

Your employees may find these job postings on their own, or you may have notified them of the available position. Regardless, your employees might express dissatisfaction that the job offers more money than they’re currently paid. It’s important to understand how to deal with the result of salary transparency. Employees may feel angry, discouraged, or jealous, and ask for more pay or even resign. These reactions are understandable, and they may be warranted. As the employer, you can prepare for these reactions and perhaps even prevent them.

What should employers consider before posting a job opening?

Determine how you will handle current employee pay inquiries and adjustments:

Before posting the new position, you may want to increase the pay of the employees in similar positions. If the job posting has a higher salary range than an employee is currently receiving because of a competitive market for candidates, then it is appropriate for your employee to receive the same increase. If your employee decided to leave and seek a new job with that competitive salary, you, as the employer, would have lost an experienced and fully trained employee, which is what you want to avoid.

After that, determine how you will approach the conversation about salary ranges for new candidates. This conversation should not be only about your employee’s raise and how you, as an employer, may justify paying a new hire a similar or higher rate. You should also discuss the other benefits that your current employee receives as an employee with some tenure. Making sure that your current employees feel that they are appreciated when you are going to hire someone new is very important.

Make it clear that your current employees receive certain benefits that the new employee is not eligible for yet, like additional vacation time because of their years with the company. Be sure to highlight other opportunities like educational experiences if you offer those. These employees should feel appreciated for their years of service and what they have earned by proving their loyalty to the company.

Most importantly, before you post a position, are you prepared to lose employees over perceived or real pay disparities? If you aren’t, pause and think about a retainment plan before you move forward with your hiring plan.

A retainment plan should have an increase in salary or promotional title for your current employees. This plan is what you can offer your team based on your budget and organizational structure. Having this framework should help you when fielding questions and concerns, and potentially having uncomfortable conversations.

Evaluate the role you are hiring for against your current team’s positions with the following questions:

  • Is the starting pay for the position you are posting the same or more than what you currently pay employees in that position?
  • If so, why are you willing to pay someone new the same or more than your current employees?
    • Are you asking for more experience?
    • Are you expecting higher certifications or education?
    • Are your current employees not performing at the level you want for this position?
    • Are you only offering more pay to be competitive in the labor market?

Once you’ve sorted the answers to these questions, you may change your mind about the salary for the new position you plan to post, or you may handle the role differently.

The most important points when considering new pay transparency laws:

Pay transparency laws have been put in place to ensure that workers are being paid fairly, which means that it will inevitably cause a reaction if your employees realize they are not being paid the same as new hires. If you aren’t willing or cannot increase the pay for your current employees to match what you offer new hires, you are sending a negative message.

Put yourself in your current employee’s shoes and consider what will make them stay with your company. You should be ready to compassionately explain why you can’t or won’t increase their current pay. Remember how you send that message matters, and your employee may stay or go based on how this conversation unfolds. If you don’t think the employee deserves a raise, be kind to them. They may think they are doing a great job, and no one may have communicated otherwise. Therefore, in their mind, they do deserve more money for their hard work. You can offer this employee a chance to work with them on a development plan for their future and goals.

This opportunity to mentor and encourage employees in their career journey will give them a tangible vision of how they can prepare for a new role when the time comes down the road. It is important that this plan includes working with them on projected goals. It should break down throughout the year and give them achievable milestones. Provide them with encouragement and motivation so that they know what you need to see from them to receive more pay and a potential promotion in the future. You can review our blog around navigating performance management for more tips.

Additionally, remember to consider the cost of hiring someone new. It still costs the average employer 6 to 9 months of an employee’s salary to recruit, train, and replace them. Be picky in your hiring because your new person is an investment of time and money. And if you think that a current employee will be better suited for that opportunity, promote them!