Can you keep a secret? Neither can your employees.
Nor do they have to. Not only is it illegal under federal law for private sector employers to prohibit employees from discussing pay, but in some states, the laws go so far as to require employers to disclose pay ranges to employees or job applicants.
One-fifth of all U.S. workers are covered under pay transparency laws, and experts predict the trend will grow. Pay transparency refers to companies being open about the compensation provided for current and prospective employees as a step toward pay equity.
As a result of pay transparency laws, more people are discussing their compensation with teammates. It’s a safe bet that many will ask their managers for pay adjustments to correct differences they do not understand or accept.
[ Also read 3 workforce challenges for CIOs in 2023. ]
Leaders must be prepared to discuss compensation with their employees openly. Here’s where to begin.
1. Educate yourself
Many leaders are unprepared to address questions regarding pay and need to become more familiar with compensation practices in their organization. Ignorance is no longer bliss. If you don’t have a strong understanding of your organization’s compensation philosophy and pay structure, schedule an appointment with HR to learn more.
2. Familiarize yourself with your state's laws
State (and city) pay laws vary. For example, in California, employers with 15 or more workers must list salary ranges on job postings on a company’s hiring page or third-party websites like Indeed.com, LinkedIn, or other job boards. Businesses must also provide the pay scale to an employee for the job they currently hold upon request. (Note that Rhode Island doesn’t require employers to post pay ranges on job ads, but businesses must provide the range to job applicants upon request.)
Employers must disclose an offer's minimum and maximum range before discussing compensation with the candidate, when they officially hire the talent, and if the employee moves into a new position. Plus, they must provide a salary range for a current employee’s role at their request.
3. Prepare a response to commonly asked questions
You’ll almost certainly get questions, and you should have answers ready. Here are a few examples:
- Why am I paid less than the new hire?
- Why is my co-worker making more than me?
- What’s my position’s salary range, and how was this determined?
- What happens if I hit the top of this range?
- How frequently are salary ranges adjusted?
- How does our company ensure our pay keeps up with the market?
- How can I make more money?
- What’s the salary range for the position above me?
- Who can I speak with if I’m unhappy with my pay?
4. Set the stage for a successful conversation
Where you discuss a highly sensitive matter like pay will affect how the employee reacts and could impact the outcome. If you work in an open office environment, book a conference room. If you’re discussing pay with a remote employee, ask them to log onto the call from a place where they’ll have some privacy.
[ Also read Handling difficult workplace conversations: 7 tips ]
5. Don't be afraid to admit you don't know
Pay transparency laws are new for everyone, and the landscape is changing daily. If an employee asks a question you can’t answer, don’t be afraid to say something like, “That’s a great question. I don’t have an answer. Let me investigate this and get back to you by Friday at noon.”
The more you understand compensation practices, the easier it will be to navigate the new world of pay transparency. And you may even learn a thing or two along the way.
[ Ready to level up your communication skills? Get advice from IT leaders. Download our Ebook: 10 resources to make you a better communicator. ]