Article originally published in the American City Journals on April 4, 2022.
On May 15, New York City’s pay range transparency law will go into effect. This will require employers to include the pay range when advertising job openings. The purpose of this law is to address pay inequity affecting women and minorities.
Some business groups oppose this legislation, claiming, “Changes will be difficult to implement, give employees the upper hand in salary negotiations, and make New York City appear less business-friendly,” according to a Feb. 1 Fortune article.
To the contrary, pay range transparency is not difficult to implement if a position has been benchmarked and a salary range established above and below the midpoint. Companies need to implement this anyway to properly manage their compensation system.
Giving “employees an upper hand in salary negotiations?” Applicants want to know the salary range of the job they are applying for. Why would you want to hide it?
Making “New York City appear less business-friendly?” I don’t think so.
Many businesses are resistant to change, sometimes to their own detriment. There are no reasons to not be transparent regarding the pay ranges of jobs.
For a job that’s unique within an organization and has no external market benchmark, the job needs to be benchmarked internally to ensure vertical and horizontal equity with other positions within the organization.
When I was chief operating officer at our company, due to employee dissatisfaction with the prior compensation system, we developed a new system with employee input. We established midpoints and salary ranges (20% above and below the midpoint) for all positions using external or internal benchmark data. This information was made available to incumbents currently in the position as well as internal and external job candidates. We also shared with employees the annual movement in the midpoints based on the competitive marketplace.
How the performance review and compensation process worked was explained to all employees and job applicants. There was no need to keep anything hidden.
Individuals new to their position would generally be paid below the midpoint until they learned the job, with the expectation that their salary would rapidly rise to the midpoint. To be paid at the midpoint, an individual had to meet expectations and demonstrate sustained performance of the full range of job responsibilities. To be paid above the midpoint, the employee had to significantly exceed expectations on a sustained basis and contribute to the continuous improvement of their area of responsibility.
When an employee shared that they were unhappy with their current pay, they were told that they were compensated commensurate with their performance, and that if they wanted to earn more, they had to improve their performance or be promoted to a higher-paying job.
Being transparent about how the compensation system worked built trust and credibility with employees. This is a lesson to be learned by those who oppose New York City’s new pay range transparency law.
There is no reason why your company’s compensation system should not be transparent and easily understood by your employees. It allows employees to focus on their job and not compensation issues, which leads to better company performance.
Stan Silverman is founder and CEO of Silverman Leadership and author of “Be Different! The Key to Business and Career Success.” He is also a speaker, advisor and widely read nationally syndicated columnist on leadership, entrepreneurship and corporate governance. He can be reached at Stan@SilvermanLeadership.com.