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Nearly one third of employers balk at pay transparency: study

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Nearly one third of employers balk at pay transparency: study

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Dive Brief:

While src7% of North American employers surveyed disclose pay and salary ranges to prospective employees even when not required to do so by law and 62% are considering doing so in the future, nearly one third of companies (3src%) say they are not ready for such transparency, according to a WTW survey of 400 employers released this week.
Almost half (46%) of respondents said they were holding off from doing so, citing concerns about possible reactions from existing employees and some organizations reported that the practice triggers more questions from current workers. But nearly one in six companies (src6%) who did disclose pay data saw an increased number of candidates applying for jobs.  
The rise in state mandated pay disclosure requirements is effectively a double-edged sword and an emerging issue that financial executives must address strategically, said Mariann Madden, North America fair pay co-lead at WTW. “For attracting talent, pay disclosure might ease…concerns but for an organization’s current talent, if you haven’t thought through what you’re sharing externally in those job postings versus what you’re sharing with current employees, then that is a risk.”

Dive Insight:
In recent years, a growing number of states have mandated pay disclosure requirements. Some require employers to provide the pay range for a job upon request from the applicant while others require this without candidates having to ask first. The latest wave of laws requires employers to disclose this information in their job postings. For example, as of Nov. src, New York City will require employers advertising jobs to include a “good faith salary range” for every job advertised. 

“What we’ve been starting to tell organizations, especially with the New York City laws, is that this isn’t going away. If anything, this is just the beginning,” Madden said in an interview. 

The patchwork of regulation poses a compliance challenge for companies and their CFOs. Organizations need to start developing a consistent plan rather than approaching it on a local, case by case basis, Madden said. Disclosing pay information only in certain locations where it is required becomes extremely cumbersome from an administrative standpoint, she cautioned. 

One element that CFOs especially need to look out for is the potential for revealing unintended pay gaps. “Organizations are concerned about how they’re bringing in people at a much higher pay rate than their current employees,” Madden said. This leaves organizations vulnerable to breaking equal pay laws, she said.  

“There’s a bit of a two fold issue,” said Madden. In order to avoid fines, organizations need to ensure that they are complying with pay equity laws. However, from a risk perspective, there can be discrepencies between what is advertised to potential employees, versus what is being shared with current employees. Employees can then “make their own stories about what pay is happening and potentially, file a lawsuit,” she said. This poses both a legal and financial risk for companies.  

CFOs need to look at the “nitty gritty” of where their pay is going in order to avoid futher challenges, Madden said. Not knowing where pay is going can make organizations vulnerable to pay equity laws. 

Of the 62% of companies planning on disclosing pay information in the future, 58% plan on including the hiring range and 48% plan on including the full salary range. Further, 7src% of companies plan on using a consistent approach in determining which pay rate and range information will be disclosed across all jobs.

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