Whether you like it or not, pay transparency is coming in hot. Across both the US and Canada, states and provinces are ruling that employers must include pay ranges with all job postings. In our view, this is good news; pay that’s transparent is more likely to be pay that’s fair. Publishing ranges tends to make them less subjective, and, in theory, should contribute to the much-needed closing of gendered and racialized pay gaps. The problem? Many employers have no idea how to implement transparent pay or are worried about the impact it might have. At many small organizations, the pay ranges they’re now legally obligated to post are simply not in place. If you’re a founder (or HR pro) finding themselves in this spot, you might have questions.
The good news? We’ve got answers. As a team, we’ve helped dozens of small organizations design compensation philosophies, bands, and systems that scale across sizes and borders. Here are the top questions we get about pay transparency, and some tips to get started with rolling it out.
I’ve got nothing in place at all. Where should I begin?
Welcome! First, pay transparency is a journey– it can’t be developed and adopted overnight. It requires valid data, a framework, manager buy-in, and employee education. Then, to keep the system working, it needs to connect with your other people processes like career pathing, performance, and feedback. If you are completely new to compensation work and have never designed bands, check out The Bright + Early Guide to Paying People for the step-by-step process we use in our own work. But, at a high level, here’s where to start:
- Kick things off by designing a compensation philosophy. Your philosophy is the core of how you make pay decisions, like what behaviours you want to incentivize (or avoid), how often you’ll review pay, how you will incorporate things like benefits and perks relative to salaries, any bonus structures you want to implement and in what percentile you will pay relative to the market rates for each role. It’s best to decide on one centralized strategy here, rather than applying it anew to each role. (Again, the Guide to Paying People will give you detailed steps here, as well as an example).
- Building a transparent pay system relies on having the right job descriptions. Job descriptions describe what people are being paid to do, which will help you match your internal role to the external market. Titles alone won’t cut it here, as titles can differ between companies and industries. If you’re starting from scratch, get your job descriptions in order for every role and level. A Bright + Early best practice is to standardize levels across your organization, meaning that a manager, director, or VP generally has the same level of responsibility as another.
- To source the right numbers, you’ll need a salary report or database. This means investing in market research aligned with your industry. It’s necessary to set aside an annual budget for compensation databases or reports or work with a consulting firm that has access to them. Without valid data, your bands will stagnate and you won’t be able to maintain pay transparency. Whether you use a report or database will depend on the type of industry you are in. For example, non-profits mostly use annual reports, whereas tech companies can use databases such as Radford and Pave.
- Once you have your data, you can apply your philosophy to it to build your salary bands. It’s important to note that market data should not be conflated with salary bands; salary bands are indeed informed by the market data, but what you do with that data should be unique to your organization and based on your philosophy.
What if the role I am hiring for is unique and not listed in reports or databases?
Sometimes, you may need to hire for niche roles or even create a new one that is unique to your team. In these instances, it’s common to blend the pay research for a few similar roles to create a unique salary band that’s still aligned with the market.
Doing all the work to create a compensation philosophy and bands will take some time, but I’m under pressure to roll out pay transparency now. Should I wait until the project is done?
We get it– you’re building the car while you’re driving it! There are some people programs you can launch as an MVP and iterate along the way. However, when it comes to something as sensitive as pay, we believe that it needs to be done with thought and intention. At a minimum, you need to have your job descriptions in place to correctly match your roles to the market, and you need to have a valid data source. If time isn’t on your side, working with an external resource (like Bright + Early) can expedite the process!
What if we make bands and our current employees are being paid above or below them?
After you’ve built your bands, you may realize that you have employees already being paid under and/or over them. You’ll need a strategy to deal with these nuances. For folks under the band, make a plan to bring them up. For folks over the band, you’ll likely need to freeze their salary until the market catches up; lowering anyone’s salary is never an option.
If you’re concerned about retaining employees who might need such a freeze, ensure they are correctly leveled. If they are at the right level, lean on other aspects of your total rewards program to incentivize them. Can you offer extra vacation perhaps, or stock options? On the flip side, if you have an underperformer that’s below band and you feel hesitant to give them a pay increase, it’s important to have a clear conversation about expectations. You’ll still need to bring them up to the new band, however, as part of pay equity.
What if we can’t afford to change our current team’s salaries?
This is a common concern, especially if this is the first time you’re doing this work. We don’t recommend sharing transparent salary bands that existing people are below; it’s likely to cause some blowback. Your bands need to reflect reality. Ultimately, they come down to your philosophy and where within the market research you want to (or can realistically afford to) pay. For example, if you want to pay at market average (in the 50th percentile), but realize that you cannot sustain that, you’ll need to consider a lower market rate to start with. You can update your philosophy as you grow and can afford more.
What people programs do I need to have in place to support pay transparency?
To define expectations and match your roles accurately to the market, you need updated job descriptions. To provide employees with clear feedback and direction on their career and pay trajectory, you need career paths and organizational levels. To measure the quality of work, you need performance management and feedback programs. These systems work together to ensure you can develop and sustain a transparent pay framework.
What do I tell people when their offer or salary is at the bottom of the band?
We believe in placing people’s salary within their band relative to their expertise. So, if someone is new to the role and level, they are learning and should be placed at the start of the band. If someone is coming with previous experience, they can be placed at the band midpoint (or higher) since they are coming with the required skill set needed for the role with little-to-no ramp-up. So, when it comes to explaining band placement to a candidate or employee, you can let them know that they’ve been placed in the band based on whether they’re still learning the role or moving towards mastery of it.
What do I tell people if they don’t agree with their salary band placement?
This is a tough conversation that managers should be prepared to have. Generally, all managers who have pay conversations should be familiar with your compensation philosophy and how decisions are made. The main goal is to be able to clearly outline why people may be in the same band but be paid different salaries within it. If performance is part of your pay philosophy, then you’ll need to have clearly defined expectations for what performance looks like and how it influences pay. If someone believes they should be higher in the band, you’ll need to level set and clearly articulate the gap, whether it’s in performance, years of experience, skill set, location, market data, etc.
The hope here is that you’ve defined the expectations through your job descriptions and career paths, you have a mechanism for measuring the quality of work, and you’ve sourced reputable data, so you have the tools in place to have this conversation easily.
What if we’re open to various levels of experience/seniority when hiring?
While it’s best to know what you need from the outset, this happens. The good thing about having salary bands is that you can post a wide range that encompasses multiple levels. When meeting with candidates, it’ll be important to set expectations that the wide range shared represents multiple levels of seniority. Ideally, you’ll share how those break down; for example, if you end up making an offer at the intermediate level, the range will be X, but at the senior level, the range will be Y. The more information the better.
What if a candidate wants to negotiate?
One of the good things about pay transparency is that it doesn’t automatically only reward those with strong negotiation skills. While negotiation within a band could be possible, many organizations are now taking an approach where they avoid it. If you’ve decided to take a no-negotiation approach, you’ll want to communicate this to the candidates early on and walk them through your philosophy and approach to pay, and the reasons behind it. In our experience, we’ve found that candidates appreciate the thought and transparency when companies do this proactively.
Can I make an offer that’s above (or below) the pay range posted?
Nope. The purpose of salary bands is to remain within them so that you can manage and scale a fair, transparent, and defensible system. If you find yourself continuously pursuing candidates outside your listed bands, you may want to reexamine either the role (are you sure you’re hiring at the right level for your needs?) and/or the bands themselves (are you in too low a market percentile?).
What about respecting the confidentiality of our team? I think some people would rather others not know what they’re paid.
Complying with a pay transparency law mandates the wider bands to be shared, and for companies to submit annual pay reports. What an individual is specifically paid can remain private and confidential. That said, part of the pay transparency journey is to gain buy-in from the team, which means spending time and intention with training managers and staff. Historically, pay has been taboo; it’s only recently that people are calling for transparency and discussing it more often, so the subject may be difficult or new for some. As part of our compensation work at Bright + Early, we double down on manager training and ensure managers walk away from the experience with a sound understanding of how pay works. Then, they can have meaningful conversations with anyone who might be feeling nervous about the new system.
What if we pay different bands based on different locations?
The first step is to decide on whether to pay based on location or pay universally; The Bright + Early Guide to (Ethical) Global Pay is a good resource here. Once you have your strategy, you can share your pay approach wherever you’re posting. Some companies choose to have different job listings for different markets. Others could have a single job posting with a large band but mention that the exact rate depends on location.
I’m worried my competitors will look at our public pay bands and use them to their advantage.
Unfortunately, this isn’t something we can control. Keeping pay private will not help you avoid turnover or missed hires. Even if you aren’t paying the highest salaries, other things can attract good teammates. This is where you should lean on your unique values and your culture: make it known why someone should work with you! Is it because you have an amazing work/life balance? Or maybe you are globally distributed with a work exchange program? Lean into your DNA, and you’ll find the people that align with it.
Rolling out transparent pay is a lot of work, but can have a huge positive impact. First, building the systems needed to support it, like good job descriptions and objective measures of success, gives people a clearer roadmap toward doing a better job. Additional perks of transparent pay include more equitable workplaces, higher team trust, and less time spent interviewing candidates who don’t align with your budget. Like most secrets, getting pay out into the open can be scary, but it’s often the right thing to do.
See more of our pay guides:
Want to dive in deeper? Bright + Early builds compensation strategies for companies that care. Drop us a note at email@example.com to get started.