What鈥檚 News
Starting January 1, 2023, employers in California with more than 15 employees will be required by law to include pay ranges in job ads and report wages for current employees based on gender, race and role. The aims to detect and mitigate discriminatory pay patterns.
麻豆原创鈥檚 Take
Pay transparency benefits workers because it provides a clear understanding of the value of skills in the labor market. Additionally, it enables job seekers to manage their expectations in an informed way during the hiring process.
Employers also benefit from a culture of improved transparency, said organizational psychologist Dr. Lauren Park, human resources (HR) research scientist on the 麻豆原创 SuccessFactors Growth and Insights team. Park鈥檚 team has published research on transformations in and best practices for compensation .
鈥淚t鈥檚 beneficial for organizations if pay processes are transparent and employees are aware of the value of their skills,鈥� she said. 鈥淭hat has good implications for employee retention and employee engagement. It鈥檚 one of those indicators of a culture that is honest and supportive of its employees.鈥�
Thinking More Broadly About Compensation
As pay transparency laws like the one in California become more commonplace, employers also have an opportunity to think broadly about compensation and consider practices that align with employee expectations for job flexibility, remote work and skills development. During the Great Resignation, workers were adamant in their demands for an improved experience in the workplace. Park said these pressures are carrying over into discussions of compensation.
鈥淲hat we鈥檙e seeing in today鈥檚 labor market, with drastic changes in employees鈥� expectations, is that the idea of compensation is bigger than it has been in the past,鈥� she said, highlighting an often overlooked benefit to employers and employees. 鈥淚n a world of pay transparency, where pay is more fixed and less able to be negotiated, compensation can look different and can be a bit more creative with additional perks like growth opportunities and flexibility. We see that as an overall consideration when employees are thinking about their satisfaction with their pay and experience with the organization.鈥�
These compensation practices may seem like pragmatic solutions today, however, they are part of a larger trend that may soon become standard practice. 鈥淲hat is new, and what we might be seeing more of in the future, is a formalization of these non-monetary rewards in compensation structures. Managers in organizations with increased pay transparency may not have as much flexibility in salary negotiation discussions. Organizations can formalize opportunities for development and other benefits to reward exceptional performance while still adhering to pay ranges,鈥� she said. 鈥淚 think we鈥檒l see that happening more in the future as an additional tool for overall rewards, but organizations need to take caution that the bias they are hoping to avoid with pay transparency doesn鈥檛 persist in the provision of these new rewards as well.鈥�
Addressing Perceptions of Pay Inequity
In practice, what passes as pay transparency at many organizations may look more like broad pay bands instead of precise salary ranges that link to clearly defined job roles. In other words, employees may still feel like it is difficult to understand how their salary is calculated. Park believes that this lack of communication can smolder into a flashpoint for employee dissatisfaction, resulting in what organizational psychologists call perceived 鈥渄istributive injustice,鈥� or an employee鈥檚 perception that the way their company distributes resources and rewards is not fair.
The term is based on the organizational psychology concepts of 鈥渄istributive justice,鈥� which is justice and fairness around who receives resources, and 鈥減rocedural justice,鈥� which is justice and fairness around the application of policies.
鈥淚n the face of perceived distributive injustice, there鈥檚 a lot that can be done in terms of promoting procedural justice 鈥� communicating the procedures and processes that arrived at that [salary] number,鈥� said Park. 鈥淚f organizations really take time to justify and communicate their procedures for pay structures and different levels of compensation, of course there might be negativity, but [what is important for the employee is] that knowing the process that went into developing that number, and knowing that the same process is applied to everyone equally.鈥�
Knowing the Value of Your Skills
Employers that prefer not to openly address compensation matters need not worry about what their employees think their skills are worth; they鈥檒l find out elsewhere.
鈥淚n a world where pay transparency looks more like broad pay ranges rather than concrete numbers, employees still have areas to negotiate and still need to know the value of their skills in the market,鈥� Park said. 鈥淪ites like will be a real source of information for that and they will continue to be valuable for understanding an organization鈥檚 culture. I see that as being a continued benefit of these sites.鈥�
Contact:
Ilaina Jonas, Senior Director of聽Global Public Relations, 麻豆原创
+1 (646) 923-2834,聽ilaina.jonas@sap.com