Thursday, June 9, 2016

Is Pay Transparency Good?

It depends…..

Over the past few years, there have been numerous efforts in state legislatures and the federal government surrounding pay transparency. Most of these efforts seem to be indicating that more transparency about wages will help to alleviate wage discrimination in general and the "gender pay gap" in particular. I’ve written recently about the problems with some of the studies of the gender pay gap here.

Several states have passed, or tried to pass laws that would require employers to include a great deal of information in job postings; prohibit asking candidates about current or past salaries, and require more information be included on pay stubs. All of them purport to aid in informing employees about their pay, method of pay, etc., so they might know if they’re being discriminated against in pay practices. Having been in HR for more than 25 years, I’ve encountered very few employees who don’t know what their rate of pay is, or how they’re paid. None of these efforts have adequately explained how these laws will aid in preventing wage discrimination.

And then there’s the EEOC and the new requirements for the EEO-1 reports (see here about half-way into the post). The agency states that this massive collection of aggregate data will "alert" business to possible wage discrimination and encourage them to correct it, and will help the EEOC to target businesses for "review" of their pay practices. In my earlier post, I quote the US Chamber’s response. In essence, there’s no way that the collection and analyses of the data that will be collected in this effort will accomplish anything useful. The categories the EEOC will use will require wildly disparate jobs to be lumped together, with no real consideration for the many factors that go into decisions about pay. If anything, I believe, as many others do, that the use and publication of this mass of data will only cause confusion, misinterpretation and will further muddy the waters.

Now comes a survey that presents some very interesting data. A Point Taken-Marist survey shows that more than 70% of Americans do not think employers should be required to publish employee salaries, either internally or externally, and about 66% said they would not want their pay disclosed to anyone!  Furthermore, 58% say that if private companies make salaries public "it will increase conflict among employees within the company."  Well, that certainly raises some issues with the EEOC’s collection of data!

As an HR pro, I believe that businesses should be more upfront about what a position pays – at least the range – when recruiting. It would certainly make more sense for candidates to select in or out based on that information rather than waste everyone’s time. One cannot always surmise the general rate of pay from a posting’s job title or description. And, I also believe that a candidate’s current or past salary should have limited application in determining what salary will be offered. While knowing past salary can help an employer determine the level of experience, responsibility, etc. the person had in previous jobs, it really shouldn’t factor into what that employer will now pay – the business’s salary budget, the scope of the job, and the value of the position to the business should play more of a role than the candidate’s pay history. Having said that, I don’t believe that legislating the issue will be helpful.

So, whether pay transparency is good or not, depends on whom you ask.

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