BERMAN LARSON KANE
Career Report
May 2016
Feature Story
OPEN PAY POLICIES COULD BECOME GROWING TREND
Picture this: your client company has an open pay policy — where salary bands and compensation of individuals are visible throughout the organization. Such a proposition may be a heart-stopping notion but, according a Monster.com article, recruiters and other staffing professionals would be wise to ponder the challenges and opportunities posed by pay transparency.
Why? Among other things, the article pointed out, it provides a means to overcome a job candidate’s potential doubts, fears, and objections around compensation during the job offer process.
Elements of open pay, a widespread practice among government entities, have recently gained momentum as a legal requirement for many private-sector firms. About a dozen states, including California and New York, adopted laws in 2015 that strengthen workers’ rights to: ask their employees about compensation, discuss pay with coworkers, and disclose their salary to others.
The primary goal of these laws intends to advance pay equality. Indeed, these state measures typically expand on longstanding Federal protections for pay rights.
Indeed, companies that choose a fully open pay policy — giving every employee access to everyone else’s salary — remain rare. Still, this phenomenon may potentially become a growing trend, especially if more upstarts follow the lead of tech firms like New York-based SumAll, a data analytics company and San Francisco-based Buffer, a web-based platform that helps share social media content.
What does all this mean for recruiters selling opportunities to candidates who may see salary transparency as an ill-considered scheme? Here, according to the Monster.com article, are some top considerations, from the mouths of open-pay experts and practitioners:
Putting chips on the table can avoid wasting everyone’s time. With open pay, compensation is typically addressed toward the beginning of the recruitment process. This means candidates can quickly learn whether a job is worth going after, says compensation consultant Jim Brennan.
“Candidates no longer have to wonder what’s real and what isn’t,” says Brennan. And hiring managers, HR people and compensation specialists may no longer have to suffer through a series of candidacies that may well result in a stalemate or counteroffer ping-pong match.
Known salary bands can make negotiation more straightforward. “Open pay lowers the stress level in the hiring process,” says Dane Atkinson, CEO of SumAll, the 28-employee firm founded in 2011. At SumAll, a team comes up with the salary offer by comparing their appraisal of the candidate’s potential with the performance of current employees and then looks for an approximate match.
An open-pay search may increase the recruiter’s workload. Open pay is not all good for recruiters. With transparency, no manager can expect a company to make an exception to its internally published pay bands for an exceptional candidate; and recruiters can’t eliminate applicants who have been underpaid — mostly women and members of minority groups.
“Pay transparency is bad for recruiters and good for candidates,” says Brennan. “It’s much easier for recruiters to use prior pay as a proxy; with open pay, recruiters may have to work harder and do more research.”
Transparent pay can reduce inequities among demographic groups. With salary out in the open, unfair pay practices tend to quickly diminish — an objective that sometimes eludes even those employers that make serious efforts to treat equally all workers’ requests for raises.
A system weighted toward equity is doubly important for aforementioned women and minorities, who often tend to be weaker salary negotiators, according to studies cited by a Penn State Law Review article. Thus, open pay can be a great selling point to candidates who are members of protected classes.
Open comp companies can speak fluently about pay for performance. When each of your employees knows what everyone is paid, it requires some transparency about compensation differences among people doing similar work.
“You can think of open pay as a call to action to organizations to communicate about how comp is derived and how it links to performance,” says Salary.com CEO Kent Plunkett. “The biggest problem I see with open pay is how you feel if you’re in the bottom third” of the pay band.
Open pay can exemplify a transparent company culture. “Pay transparency is an opportunity for a company to communicate culture and employer brand,” says Plunkett. Open-pay companies are likely skilled in communicating their culture to recruiters and the candidates they source.
Transparent pay can reassure candidates about working for a smaller employer. Candidates may have heard horror stories from friends who went to work for an exciting small company but become mired in a low to middling pay range. Visibility into your client’s open-pay structure may help overcome such objections.
“At companies with fewer than 50 workers, it’s more likely that employees will feel that pay is not systematic and open pay can mute this concern,” says Plunkett.
Openness makes compensation systems more self-correcting. Open-pay systems tend to keep themselves honest. “Once you publish a pay rate, it becomes consistent, because there’s pressure to keep it so,” says Brennan. And pay transparency makes it harder for executives to create exceptions.
Transparency tends to help employees keep up with market pay rates. “Open pay brings vitality to the whole talent acquisition process,” says Brennan.
Clearly, the article pointed out, with company-wide visibility into pay data, changes in compensation can quickly sweep through a given employment classification, helping to boost employee morale as inequity is addressed, Brennan believes. Another possible benefit of open pay: while labor costs may tend to be higher in the short term, they will be lowered in the long term due to reduced employee attrition.
NEWS FROM BLK
“April Showers they Bring May Flowers” we are not sure of this east coast weather but we are super pleased to report that May has brought a new blossom of job orders. Segments that are getting warmer for the hot summer are scientific, pharma, marketing, sales and information technologies. Shortages have appear and top talent competition continues to heat up. Hot times are on the horizon for the job-seeker.
We are also pleased to report that our infrastructure improvements continue to assist our clients in stream lining the talent acquisition cycle. If you would like to learn more give Bob Larson, CPC a call 201-556-2887 or email him at larson@jobsbl.com.