In recent years, a growing number of state and local governments have mandated pay disclosure requirements, with some requiring companies to disclose pay ranges upon request, and others requiring companies to disclose this information to the general public.
As of Jan. 1, California and Washington state joined several others in disclosing pay ranges on all job postings.
Some finance leaders balk at disclosing such information — nearly one third of companies said they are not ready for such transparency in a September WTW survey.
But data is a finance leader’s best friend and there are ways that executives can take advantage of the new laws, said John Arendes, CEO of training platform Traliant.
Good for the company and potential employees
“For the employee, these transparency laws let them know what potential value the company is putting on the role,” said Arendes in an interview with CFO Dive. Therefore, potential employees aren’t wasting their time applying to positions that they are overqualified for.
These laws can also save organizations money for similar reasons. “You don’t want to interview someone that you can’t hire and can’t make happy anyway,” said Arendes. “These laws are actually saving organizations money. It costs you to interview people that eventually, you can’t hire,” he said.
With cost control and labor shortages remaining top of mind for finance executives right now, transparency laws can help CFOs find talent at the right price, according to Arendes.
It’s human nature to ask for higher pay as an employee, said Arendes, but these laws give finance leaders data points to come back and say, “oh, based on your experience, you’re really worth this salary, but you’re still giving the candidate room to grow, because they know what the job can pay,” he said.
Transparency is key in all relationships, including between employees and employers. “You wouldn’t want to start dating someone and then find out they have three other partners,” said Arendes.
Lean on data
When it comes to complying with these laws in a strategic way, understanding the data behind them is key, according to Arendes.
In order to prevent these laws from leading to slumping employee retention at your own organization, “using data to understand what roles are paying candidates from a historical standpoint and from a US standpoint is really important,” said Arendes. “We always strive for the 50 percentile,” he said, meaning 50% of the time they offer higher than the average pay of a given role, and the other 50% of the time they offer lower than that average.
Understanding your own internal data, and being aware of where your pay is going and to whom — in terms of gender, race, job role — is just as important as the external data. “You should not be guessing,” stressed Arendes.
