Recently, my friend’s manager asked what would stop her from leaving the organization. “Higher pay,” she responded.
How did she know she was getting paid less than the man next to her? She didn’t, not for sure—her former manager refused to tell her. But women of color are paid less on average, and for her as a Latina woman, the pay gap could be as much as 54% of her white male counterpart’s salary.
The issue, she tells me, isn’t only about making more money, but the lack of pay transparency from her former manager, which to her felt outdated and exclusionary. She’s not alone: PayScale research has found that even when there isn’t a gender pay gap, the perception of its existence could reduce trust in an employer.
Pay transparency laws could make these sorts of salary conversations much better for both managers and employees. Such laws are becoming more the norm around the country; a law to disclose salary ranges in all job postings in New York City takes effect in May and California’s Senate has announced a pioneering new pay equity bill. If it becomes law, would require the most detailed pay transparency of any U.S. state. The public report would require employers with 100 or more employees to disclose the median and average hourly rate by demographics (race, ethnicity and gender) within each job category. And current employees could ask for the pay scale of their current jobs, which an employer would be legally required to provide, from May 2023.
Pay transparency reduces pay inequality. One study estimates the gender pay gap could be reduced by 40% if pay transparency was widespread. Researchers at HEC Paris studied the pay of 100,000 U.S. academics over two decades and concluded that pay transparency could significantly improve pay equity (people getting paid equally for equal work, regardless of identities such as gender and race) and pay equality (how that pay compares with other roles and organizations). The gender pay gap has reduced significantly in institutions where salaries are publicly available, like in federal government jobs.
So why has it taken legislation to make this data more available? Because pay secrecy has been institutionalized in our culture.
Here’s what’s realistic. Managers should offer at least a range when offering salaries and raises, with clear criteria on what it takes to be at either end of the range. To ensure fairness, the criteria and the salary ranges need to be set by upper management and HR rather than on a case-by-case basis.
Managers should have pay conversations regularly with team members. Ask how each person feels about their compensation. Talk honestly about why they’re making what they are and actionable steps they could take to get to the next level. It can look like this: “The range for your role is $100,000-$150,000. You are at $120,000 for this reason and to get to $150,000, let’s work on these measurable outcomes within this set amount of time.” An employee, especially one from a historically underestimated background, would walk away feeling like she has fair access to information. And in a tight labor market like this one, workers have options and prefer communication at a regular cadence–not during a once-a-year performance review.
Managers should seek to give specific criteria on how to move up the salary range. One team I worked with did a detailed review of what each job required at the “entry” point and specified the output required to get to promotion to the next level. That way, when having salary conversations with employees, managers could point to objective criteria rather than subjective reasons for promotion and higher pay–or lack thereof. Being intentional in this manner also increased the number of women that were promoted from then on.
Most of all, regular pay audits should be required at every organization. And every manager should evaluate how pay is distributed among their team on a quarterly basis. In smaller companies, this could be as basic as compiling a spreadsheet. Of course, larger organizations can–and should–use more sophisticated software that lets them see patterns in who gets access to the highest-paying jobs and who doesn’t. Being proactive about addressing any imbalances can make strides toward greater trust within the team.
I often encounter well-meaning leaders who are horrified when they see the data about how wide unchecked pay gaps can be, especially by race and gender. That’s why it’s always important to review the data.
And in no time, when it becomes the law, leaders won’t have a choice.
Better late than never, I suppose.
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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Ruchika Tulshyan is CEO of Candour, an inclusion strategy practice, and the author of “Inclusion on Purpose: An Intersectional Approach to Creating a Culture of Belonging at Work.”
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