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Pay Transparency Is Here. Are You Ready To Discuss It?

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If pay transparency isn’t yet a hot topic in your organization, it soon will be. Recently, several states have passed pay transparency laws, and others are planning similar legislation. These laws require employers to post salary ranges in job listings. As a result, many employers are taking steps to get ahead of these changes — often disclosing pay range information before it’s required by law.

Sharing pay ranges externally has its own challenges. But it’s also likely to mean employees will start evaluating where they fit within the organization. Is their compensation at the top or bottom of the scale? How does their pay compare with others? Is it time to ask for a raise or search elsewhere for a better-paying job?

Benefits of Pay Transparency

For employers, this new focus on pay transparency may seem like a Pandora’s Box. Naturally, this kind of openness can cause some trepidation.

However, this is also a perfect opportunity to refresh how you share pay information with employees. Choosing to be more open about compensation can actually help your organization in multiple ways. For example, with thoughtful communication, you can:

  • Attract top candidates
  • Build internal trust and retain high-performing employees
  • Create a more inclusive culture
  • Support compliance with pay transparency laws

3 Steps for a Strong Internal Communication Plan

Before you jump into tactical action, it’s wise to take some time to be sure you’re thinking about this challenge from an employee’s perspective. Here are three steps to consider as you create your pay transparency communication plan:

1. Assess Your Situation

Compensation can be complicated. Many employees may not have a clear understanding of how pay works at your company. Baseline data about awareness and knowledge across your organization will provide powerful insights as you set objectives and create your internal communications plan. If you don’t have existing research to analyze, here are several suggestions:

  • Conduct a Brief Audit: Review your communication channels to understand how pay and compensation topics are currently communicated. Focus on tone, details, level of transparency, audiences (such as department managers), and frequency. Does information need to be more accessible? More coherent? More consistent? Do people managers have access to resources that can help them answer questions effectively? Use this as a jumping-off point when developing your objectives. This audit will also help you uncover communication priorities. For example, if pay-related information is not communicated regularly, you may need to build foundational knowledge into your plan.
  • Initiate “Reality Check” Interviews: Start with the HR team — your compensation specialists. What are they hoping to accomplish with their policies and programs? What changes are they planning, if any? Next, reach out to a few employees from various areas of your organization and ask high-level questions. Quick, casual interviews like these are an easy way to confirm how your workforce views compensation. You may even uncover issues that aren’t yet on your radar.
  • Research Other Companies: Because pay transparency is a trending topic, it’s easy to find examples of organizations that are effectively tackling the issue. Case studies from other organizations can be a great source of inspiration as you develop communication tactics and messaging.

2. Craft Your Compensation Story

Pay transparency isn’t just about the “what” (actually dollar amounts). It’s also about the “how” and “why” behind those numbers. Therefore it’s essential to help employees understand big-picture ideas about pay at your company. This is where a narrative helps. You’ll want to build a story or a set of key messages that:

  • Clearly explain your organization’s approach to pay — your philosophy and policies
  • Inform and focus communication so employees clearly understand your approach
  • Provide a roadmap for people who are responsible for communication, so they deliver consistent messaging

When creating your organization’s compensation story, start with these three questions:

  • What is our pay philosophy? This should describe your company’s decision framework for compensation. It should outline the pay structure and components, including overall cash compensation, benefits, and rewards. Consider how this approach aligns with company values and articulate the level of transparency you’re committed to when communicating about pay.
  • What are the benefits of pay transparency? Whether it’s attracting quality candidates or driving a more inclusive culture, find a way to weave in your value proposition. This will help stakeholders understand the “why” behind sharing pay information.
  • What actions (if any) do you want people to take? This is where you explain how employees can learn more about compensation, such as process changes, or new ways to access information. Note: Actions may differ by audience (for example, managers versus general employees).

Remember, this isn’t one-and-done. Your compensation story should be an ongoing part of communication about compensation and rewards. Consider embedding messages into onboarding, benefits discussions, performance management processes, and more.

3. Prepare Leaders and Managers

Once you’ve established your pay philosophy and developed a set of key messages, it’s time to put it in the hands of your spokespeople: leaders and managers. Employees often turn to them first with pay-related questions. Tools, resources, and guidance will not only help them deliver the message, but also prepare them to deal with potentially tough conversations.

Set up your leaders and managers for success with the support they need:

  • Provide answers: Everyone who fields questions from employees needs to understand their communication role. They also need to know how compensation works in your company: how base salary is set, how ranges are determined, and other factors that influence these decisions (including location, role, and experience). Create topline messages, FAQs, and detailed guides to provide answers that address a wide range of scenarios and concerns. Also, be prepared to update these resources on an ongoing basis. By empowering leaders and managers to discuss pay confidently with their employees whenever the need arises, you’ll ensure those conversations are informative, accurate, and productive.
  • Provide training: Host a workshop to help leaders and managers understand how to conduct effective compensation conversations. This also provides a forum for leaders and managers to discuss issues with their peers and expand their knowledge about this important topic.

A Final Note on Pay Transparency

Pay transparency is a powerful trend that can lead to a more equitable workplace, overall. But, as new external reporting requirements become a reality, employers should expect to hear many questions and concerns from employees. Organizations that prepare to address pay questions with more open and transparent internal communication are positioning themselves for success. Are you ready?

Pay Inequity

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“People don’t care who they hurt or beat. For the love of money.” excerpt from the song “For the Love of Money,” by The O’Jays

Pay inequity. This is a well-worn topic that has been getting a lot of attention, especially over the past few years. Pay inequity is an insidious practice felt by many and one that knows no boundaries. Undeniably, it’s more targeted at certain people based on their gender, age, occupation, education, race, religion, and geography. There are even people in the Hollywood spotlight who have spoken out against this transgressive bias, as even these privileged few have felt the wrath of pay inequity’s duplicitous effects.

Albeit the United States Supreme Court has laws in place to counteract the negative effects of pay inequity, it’s still an all-to-common occurrence, because these laws are not properly enforced with assurances of stringent consequences to the offenders.

You’ve Not Come A Long Way Baby

From 1974 through 2014 the organization, American Association of Women, conducted a research study that found female workers in the United States were garnering salaries (depending on the state) that range from ten percent to thirty-five percent less than their male counterparts doing the same job with the same number of years’ experience. This same organization predicts that based on the current salary trend, it will take another 100 years for this pay gap to close. Further, according to the Organization for Economic Cooperation and Development, the United States is one of the more egregious countries when it comes to the blatant practice of pay inequity in the gender pay gap.

The topic of pay inequity is not just a matter of gender and race bias, however women, especially those of color, tend to be at the bottom of the pay scale. According to an article in The New York Times, a 2016 research study uncovered the harsh reality of how businesses view work performed by women. The study found that duties completed by women are not perceived as being a value-add in the workplace. Further, some researchers suggest that society places pressure on women to pursue historically lower paying female-oriented jobs versus seeking jobs that men have traditionally held. The conclusion here is that women succumbing to these pressures are being suppressed by a society that is not ready to view women as equals to men in the workplace and beyond. But women are not the only people suffering from this bias.

Other Casualties

The topic of pay inequity goes beyond targeting women; it similarly affects both women and men of color. Valerie Wilson, an economist at the Economic Policy Institute, determined that the pay discrepancy between white households and black households in the United States, has widened since 1979. Further the National Women’s Law Center found that the average Latin male and female employee would have to work 73 years longer to collect the same pay as their white male counterparts.

The National Bureau of Economic Research economists, Carruthers and Wanamaker, conducted an investigation to unearth wage discrepancies against black men during the 1940’s. One thing they uncovered was certain localized laws from the 20th century and earlier (mostly practiced in the southern area of the United States) set a precedence where segregated, oppressed black citizens were only allowed access to public schools where very little money was endowed and with that, adequate education was lacking to advance and support post-school employment to better paying jobs. The sad truth is this oppression is still felt and imposed on black working Americans decades later.

Additionally, a combination of age, inexperience and gender can, also, come into play when pay inequity is suspected. As employers are evaluating people entering the workforce and considering their universally under-developed skills, instances of young females being paid less has been reported when compared to males in the same age group.

How Can We Solve This Problem?

As a society, we need to re-examine certain perceptions and traditions, however if we cannot come to a consensus, we will never move the needle forward to solve the problem of pay inequity. To begin, better wide-spread education and public awareness are a must. People need to know where their money is going and how it is being spent. There are many suggested solutions from varying pundits to remedy the pay inequity problem, but they need to see a follow-through on execution. Three such ideas are:

  • Cap CEO pay
  • Increase taxes on the super-rich
  • Penalize companies for shipping jobs abroad

Clearly when it comes to these ideas, we need an aggressive plan of action. Capping CEO salaries, can be done but certain considerations need to be identified first. Who will be the oversight to enforce this? How will the appropriate consequences be determined and how will the policy be imposed? Which CEOs fall into the capped salary structure? Obviously, publically traded companies must disclose their financials, so they’re the obvious choice, but are there other companies which should be considered? Also, setting a limit on CEO exit plans, where all too often, the golden parachute is a ridiculous amount of money. Increasing taxes on the 0.00001 percent of the population that are billionaires is certainly worth a long look. As one solution, a structured plan can be imposed with proper tax levying based on capital gains within identifiable tax brackets. Penalizing companies for sending work abroad is a good idea, but companies need to be properly incentivized to want to keep work here. If companies choose not to observe, then imposing penalties such as paying tariffs, along with increased income tax for business conducted here may need to go into effect. Also, as part of keeping consumers informed, boycotting the company’s products and services may be used as a message to companies that do not comply.

These three options are just a few in a long list of other proposed solutions that have many layers of complexity to consider. With thorough consideration they can work, but a better understanding of the consequences and benefits needs to be carefully weighed first. We need a workable solution with quantifiable outcomes and accountability that incentivizes companies to do the right things and a system in place that oversees the follow-through on execution of the policies. Conjecture is not going to get us to where we need to be. Caring, listening, talking, resolving and taking the appropriate steps to stop pay bias is the right thing to do… of this, I am sure.

 

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#WorkTrends Recap: Modern Compensation: Putting People First

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When companies start to work on their compensation plans, they often do so with spreadsheets and formulas, far removed from either the people impacted by compensation or the organizational objectives. Modern compensation brings people front and center in the pay business, creating a win/win situation between organizations and individuals.

On today’s  #WorkTrends show, we were joined by special guest Tim Low from PayScale. We discussed the idea of putting people first in compensation plans and why that makes a difference in business.

Here are a few key points Tim shared:

  • How to use modern compensation practices to engage, motivate and reward top people.
  • How compensation can be a team sport, communicated transparently across the organization.
  • Why compensation should be a win/win, not a battle, between employee and employer.

Missed the show? You can listen to the #WorkTrends podcast on our BlogTalk Radio channel here: http://bit.ly/2afsbcO

You can also check out the highlights of the conversation from our Storify here:

Didn’t make it to this week’s #WorkTrends show? Don’t worry, you can tune in and participate in the podcast and chat with us every Wednesday from 1-2pm ET (10-11am PT). Next week, on July 27, host Meghan M. Biro will be joined by Chris Voss, former FBI Lead International Hostage Negotiator, who will help us explore and understand the art of negotiation.

The TalentCulture #WorkTrends conversation continues every day across several social media channels. Stay up-to-date by following the #WorkTrends Twitter stream; pop into our LinkedIn group to interact with other members; or check out our Google+ community. Engage with us any time on our social networks, or stay current with trending World of Work topics on our website or through our weekly email newsletter.

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#WorkTrends Preview: Modern Compensation: Putting People First

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When companies start to work on their compensation plans, they often do so with spreadsheets and formulas, far removed from either the people impacted by the compensation plans or the organizational objectives. Modern compensation brings people front and center in the pay business, creating a win/win situation between organizations and individuals.

Next week on the #WorkTrends show, we will be joined special guest Tim Low from Payscale to discuss the idea of putting people first in compensation plans. Here are a few things Tim is expected to share:

  • How to use modern compensation practices to engage, motivate, and reward top people.
  • How compensation is a team sport, communicated transparently across the organization.
  • Why compensation can be a win/win, not a battle, between employee and employer with fair pay.

Modern Compensation: Putting People First

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Tune in to our LIVE online podcast Wednesday, July 20 — 1 pm ET / 10 am PT

Join TalentCulture #WorkTrends Host Meghan M. Biro and guest Tim Low from Payscale as they discuss how to put people first in compensation.

#WorkTrends on Twitter — Wednesday, July 20 — 1:30 pm ET / 10:30 am PT

Immediately following the podcast, the team invites the TalentCulture community over to the #WorkTrends Twitter stream to continue the discussion. We encourage everyone with a Twitter account to participate as we gather for a live chat, focused on these related questions:

Q1. What are the benefits of a people-focused compensation model? #WorkTrends (Tweet this question)

Q2. What are some signs that a modern compensation model is in demand? #WorkTrends (Tweet this question)

Q3. In what ways can compensation be a win/win for employees and employers? #WorkTrends (Tweet this question)

Don’t want to wait until next Wednesday to join the conversation? You don’t have to. We invite you to check out the #WorkTrends Twitter feed, our TalentCulture World of Work Community, LinkedIn group, and in our TalentCulture G+ community. Feel free to drop by anytime and share your questions, ideas and opinions. See you there!

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Are You Paying Yourself Enough?

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Paying yourself should be the easy part of running your own business. Yet while many struggle to work out exactly how much they should pay themselves, there are also plenty of others who are unable to rewards themselves with what they deserve.

Working Out Your Salary

First things first is working out how much you should give yourself. When you’re starting out often you can’t give yourself a top CEO salary but you do need to be covering your basics. So work out all of your outgoings – and maybe scale a few down – and check that they leave room for your pay. Don’t be modest and don’t be over-the-top.

Breaking even or even seeing a profit increase for a few months doesn’t mean you can start upping your salary significantly. You need to make sure your company is truly profitable and not benefiting from a short term boost in customers. If you do want to give yourself a bit more though, why not consider rewarding yourself with a bonus made up of a percentage of your profits that month?

After a long run of successful months, you can feel safe to start upping your pay to truly reflect the time and effort you’ve sunk into your business. But what if things have been going well, but you’re still struggling to make the cash you deserve? Your sales have been up every month yet breaking even never seems to get easier. What’s happening?

Review Your Cash Flow

One of the most common problems when it comes to rising sales with no rising income is late payments. It doesn’t matter how much product you’re shifting, if you’re not getting paid for it, it’s not helping. Businesses are more global nowadays and this isn’t just a problem in the US, UK companies are relying on small claims courts to get what they’re owed, while in Australia the government has had to step in with a Prompt Payment Protocol to tackle the issue.

In other words, whether your customers are domestic or international, actually getting paid for your services is an important step in paying yourself. This is why including a late payment clause in your contract is highly important. Include interest and penalties for when your client doesn’t pay up as this will not only encourage them to pay on time, but it’ll make sure you’re not out of pocket when they finally do.

You’ll most likely have some protection in your state, so be sure to research what legal means you can use to get what you’re owed.

Balance Your Books

If you’re not having cash flow problems, yet you’re still struggling to see your fortunes improve, it looks like you’re going to have to balance your books. Money is leaking out somewhere and you’re going to need to fix it. Take a long, detailed look on where all your money is going and try to trim the fat.

It doesn’t have to be one big cut either. By changing electricity provider, looking into free software alternatives, or renegotiating your office rent you can make small savings that can add up to bigger ones. It might even be worth looking into alternative sources of revenue. Got a spare desk no one’s using? Then rent it out to local freelancers for a bit of extra cash.

Finally, if you’re still struggling to make your way despite getting paid on time and cutting any waste, it’s time to re-think your business model. Is it actually sustainable? Are you charging enough? Is your company structure just not viable? It might be that you’re spreading the work too thin and need to cut back on staff or that you’re simply selling yourself too short.

In the end, you deserve to get paid a decent wage for the time, energy and ideas you pour into your business. Spend some of that time making sure that you do.

Exempt Or Non-Exempt Employees: Does It Really Matter?

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Proper employee classification can have a significant impact on an organization. The penalties for non-compliance can put a large dent into the growth and long-term stability of your business. On the federal level, penalties can include back wages, fines, interest and liquidated damages. In addition, employers with incorrectly classified workers may also be subject to penalties imposed by the state(s) in which their business operates.

The Department of Labor is responsible for the administration of the Fair Labor Standards Act (FLSA), which establishes minimum wage, overtime pay, record-keeping, and youth employment standards. Shown below are three recent settlements obtained by the Wage and Hour Division (WHD) of the DOL. These settlements may seem small, but it is important to note they are for local companies. Penalties are not limited to small companies; larger corporations such as Walmart have amassed penalties in the millions for various wage-and-hour infractions over time.

  • Structural Systems Inc.: $17,154 for nonpayment of travel time and also misclassification of workers as exempt resulting in unpaid overtime.
  • Rice Precision Manufacturing: $92,727 in back wages and liquidated damages for failure to pay overtime.
  • Downtown Hilton Head Inc.: $23,155 for three restaurants found to have overtime and record-keeping violations.

Employment Classification 101

The FLSA defines specific criteria for each type of employment classification. Both classification categories are governed by a set of requirements every business owner should be familiar with. We’ll start with the most basic definition of each classification as follows:

  • Exempt:  Workers exempt from the overtime and minimum wage provisions of the FLSA.
  • Non-Exempt: Workers subject to all FLSA provisions, including the payment of overtime.

There are a number of exempt classifications; the most common include the Professional, Executive and Administrative exemptions. For the purposes of this article we will focus on the Administrative Exemption. To qualify for the administrative employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The third bullet point above mentions “the exercise of discretion and independent judgment with respect to matters of significance” and this is where many employers run into trouble with the exempt designation for a position. The DOL has issued guidance on this which in part reads:

Discretion and Independent Judgment: implies that the employee has authority to make an independent choice, free from immediate direction or supervision. Factors to consider include, but are not limited to, whether the employee:

  • has authority to formulate, affect, interpret, or implement management policies or operating practices
  • carries out major assignments in conducting the operations of the business;
  • performs work that affects business operations to a substantial degree;
  • has authority to commit the employer in matters that have significant financial impact;

Matters of Significance: refers to the level of importance or consequence of the work performed.  An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer.

It is important to remember that all of the tests mentioned above must be met in order for a position to be properly classified as exempt. If all tests are not met, the position must be classified as non-exempt and all FLSA requirements must be observed. Please see dol.gov for all federal exemption requirements.

It is imperative to know if the state(s) your business operates in have their own requirements/tests to determine exempt-vs.-non-exempt status. For example: California has a much higher minimum salary required for exemption, currently $33,280 annually; the federal requirement is $455 per week, which on an annual basis is $23,660. You may have positions that meet the federal requirements but do not meet the state requirements.

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