Pay Transparency: The Impact on Your People

Part of a series  |  Pay Transparency Series

man and woman professionals having candid conversation in office

HR professionals and legal experts have been discussing emerging transparency laws for months. Most of that discussion has centered on practical applications to everyday business, like recruiting and people management. Let's be honest; figuring out how to comply with new laws can be complex and overwhelming, especially for multi-state employers. Check out our Pay Transparency Resource Hub for more information. But complying is only one piece of the puzzle. The other piece has to do with the way these laws impact the people in your organization now and those who may join in the future.

Experts can talk about compliance until they are blue in the face, but employers need more than just instruction on following the law. They need to prepare and anticipate how changes stemming from new pay transparency laws will impact their people. Whether their state laws require pay ranges on posted roles, pay data submissions, or providing the pay range to an applicant upon request, most employers have already started changing policies and practices. But policies and procedures affect people. And people have feelings, hopes, perceptions, work ethics, goals, etc. Your organization is made up of people, so it's critical to understand and prepare for how these changes affect your workers — the individuals that come into your organization every single day and keep it running smoothly.

With people in mind, we connected with Jason Delserro, chief talent acquisition officer, ADP, Deb Hughes, SVP of transformation communications and change management and HR for HR, ADP and Helena Almeida, VP managing counsel. These experts are facilitators for ADP's on-demand webinar that covers the impact of pay transparency laws. You can launch here: Pay Transparency — Managing the Impact to Your People. They answered our questions about how these new laws may affect organizations and people.

Recruiting people

Pay transparency laws have required many employers to reshape their recruiting practices, but that's the easy part. (Okay, maybe not easy, but at least it's clear-cut!) The more profound impact stems from how workers see organizations navigate and implement the new laws. Helena Almeida reminds us that most employees are ready to walk away from an organization not committed to pay equity. "Last year, the ADP Research Institute found that three out of four workers would consider looking for a new job if they discovered an unfair gender pay gap at their organization.1" This should cause employers to continuously examine their recruiting and retention strategies. An example of this might be proactively providing a pay range on all job postings. This shows applicants — from their very first interaction with your organization — that pay equity is something you are invested in at your organization.

Retaining people

Retention is interconnected with how an organization handles pay transparency laws because internal employees are likely to see external job postings that include newly required pay ranges. This visibility usually causes a comparison of the internal employee's pay to the range listed on the job posting, especially if it's for a similar role. There's no way to prevent this from happening, but there is a way to manage the impact this experience has on your existing employees. This is where communication and education are critical to employee retention.

Educating employees about your organization's pay equity vision is the only way to prepare for the impact pay transparency laws might have on them. That's just a fancy way of saying you need to explain your rationale to your people, tell them the truth, and create space for questions and concerns. Almeida says preparing front-line managers for questions about pay is essential: "There could be justified reasons for a pay differential like experience, performance or tenure. What's important is that you're prepared to have that conversation with employees who might have questions."

Deb Hughes says the best way to have these difficult conversations is to slow down and connect with the employee. "The key is empathy and listening to 'seek to understand' where that person is coming from. Sometimes it's not just about the pay range. Sometimes employees are asking something deeper, and there might be another way you can help that person if you lean in and listen."

There could be justified reasons for a pay differential like experience, performance or tenure. What's important is that you're prepared to have that conversation with employees who might have questions.

Helena Almeida, VP managing counsel at ADP

Your organization is more than a pay range

Some employers have felt that being required to add pay ranges to their job postings puts them at a disadvantage, especially if they can't pay the highest amount for a specific role. But Hughes and Almeida believe there's a way to flip the script.

"Pay transparency is the concept of really representing yourself as an employer. You might not pay the highest, but you can use that opportunity to discuss the other advantages of working for your organization," says Almeida. Maybe this means that along with putting the pay range in the job posting, you also include a description of other benefits. Feel free to think outside the box on this. Sure, you could include benefits like stock options, bonuses and PTO if your organization has those. But applicants are also likely to care about culture, diversity, equity and inclusion (DEI) efforts, and schedule flexibility. Add language that allows employees to learn more about the company instead of limiting yourself to a pay range.

The perfect pay range

Is there an ideal pay range? Most pay transparency laws have few details about what constitutes a "correct" pay range. While most pay range laws require a "good faith" range, we aren't as interested in what that constitutes in this article. We are much more interested in how the range you choose to post might affect people (and their perception of your organization.)

Imagine how frustrating it is for applicants to see a range listed as one dollar to one million dollars. Sure, it's a range. But is it a helpful range? What kind of message does that send to the applicants? Does it hint that your organization may be trying to keep something from internal employees who might also see the posting? It might send the message that you don't want to commit to pay equity — that you might have something to hide. Applicants may consequently have less interest in the role. Jason Delserro says, "Going too wide creates an inauthentic feeling and could degrade trust inside and outside your organization. Narrowing the range may give you more qualified candidates, but you risk cutting off too much of your talent pools. If you use authenticity as your north star, you reduce the risk on multiple fronts."

Applicants may also be affected by whether the offer they receive is at the higher or lower end of the listed range. Will applicants be offended if they are not offered the amount at the top of the range? Employers must remember that they can't control every aspect of how these laws affect prospects, applicants, and employees. But they can have candid conversations with applicants to explain how the offer reflects multiple factors like experience, education and market value for the role.

Will some applicants be offended if they do not receive an offer at the highest end of the range? Probably yes. But beginning the relationship with an open conversation about your pay rationale and the growth opportunities within the role is the best way to build trust with your applicants and potential future employees. Pay ranges should be an accurate reflection of what an organization is willing to pay for a role, but they can also be a realistic glimpse of what the future and growth possibilities could look like for applicants and employees.

People's perceived value

Compliance aside, the way your organization reacts to, handles, and adjusts to new pay transparency laws tells a story about the kind of employer you are. That story is seen by applicants, front-line managers and existing employees alike. What you choose to do will ultimately impact how your organization is perceived and how your employees and applicants feel about their work. Pay is personal. It touches a nerve connected with value, and every employee wants to feel valued — like they bring something important to their organization. Jason Delserro says this is crucial to employees' feelings about their work. "The best retention strategy is to make sure that every associate feels valued."

The wrap-up

Complying with pay transparency laws is crucial for business success. But adjusting pay practices is just one piece of the puzzle regarding how these new laws affect organizations and employees. It's important to step back and remember that every employee, manager and business owner is human. Everyone will be affected differently by these new laws. Slowing down and engaging with empathy is the best way to approach and manage pay transparency laws' impact on your current and future hires.

Did you know?

You can watch ADP's on-demand webinar Pay Transparency — Managing the Impact to Your People to go deeper on this topic.

  1. ADPRI, People at Work 2022: A Global Workforce View, 2022