Shine Light on Pay Practices Strategically

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By Martin Berman-Gorvine

Sept. 21 — Pay transparency is a good thing for employers, but the amount of information to disclose depends on a host of considerations, attorneys and consultants agree.

“It’s a somewhat complicated issue—it depends on the level of employee you’re talking about,” Shannon S. Pierce, of counsel with business law firm Fennemore Craig, PC, told Bloomberg BNA Sept. 20.

The National Labor Relations Act permits employees to discuss their wages as a way of advocating for better working conditions, and California law, as an example, has parallel provisions, she said.

While employers may prefer that employees discuss only their own pay, the National Labor Relations Board takes the position that workers should have the right to compare their pay with that of other workers, Pierce said. As a result, an employer “needs to think carefully before disciplining employees for that.”

“At a higher level, one could argue that pay transparency becomes less necessary,” Pierce said. “Employers need to be able to negotiate salary and other key terms with executives and other sophisticated high-level employees.”

Those negotiations become more difficult when pay information is publicized, she said. In any case, employers should ensure they are making pay decisions based on “qualifications and merit” and not forbidden factors such as gender or age, she said.

When employers are transparent about pay in the way that activists wish, the results can be “misleading,” Pierce said. If a man is paid more than a woman for the same job, but the reason for the disparity is that the man has greater qualifications, the statistics may look as if discrimination occurred when, in reality, it did not, she said.

New Employee Expectation?

“Employees increasingly expect pay transparency,” Adam Peddicord, senior director for customer success at Seattle-based compensation data and modeling firm Payscale, said.

According to his data, a greater proportion of “top-performing companies” have pay transparency policies compared to the general run of companies (47 percent versus 40 percent).

There are five levels of pay transparency according to Payscale’s analysis, Peddicord said: “here’s what you get paid; here’s how we use market data to determine pay; here’s where your pay falls and where you can go; here’s why we pay like we do; [and] here’s everything you want to know about everyone’s pay.”

“Being transparent means being at 3 or above,” he said. “Not every organization has to reach 5,” which he jokingly dubbed “whoa!” because so much information is public.

Employers must decide on their pay transparency level based on their culture and strategy, he said, and, at the same time, “being transparent doesn’t mean having to pay everyone more.” A poll showed 82 percent of employees “are okay with low pay if the rationale is explained,” he said.

However, “whenever there’s a disconnect between my own view of my worth and the company’s view,” the risk that the employee will leave the company grows, Rusty Lindquist, vice president of product marketing at Lindon, Utah-based HR software company BambooHR, said. “You can’t just assume people will feel they’re paid fairly.”

“We know that lack of pay transparency can lead to unconscious bias and can lead to bias lawsuits,” Ariane Hegewisch, program director, employment and earnings at the Washington-based Institute for Women’s Policy Research, told Bloomberg BNA Sept. 20.

When people assume that women are being paid less than men due to their gender, “this has a knock-on effect on motivation and efficiency” that pay transparency can avert, she said. Hegewisch said that pay transparency can also help strengthen employers’ pay-for-performance policies.

Peddicord and Lindquist were speaking Sept. 15 during a webinar sponsored by Payscale and BambooHR.

To contact the reporter on this story: Martin Berman-Gorvine in Washington at mbermangorvine@bna.com

To contact the editor responsible for this story: Tony Harris at tharris@bna.com

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