California’s pay transparency law is about to take effect and it has the potential to send shock waves throughout many organizations. Included in this law, companies with 15 or more employees are required to provide pay ranges to any requesting employee for the position they occupy and include pay ranges on all job postings.
So, what are some possible challenges with this new law? Picture with me, if you will, a tenured employee discovering that a duplicate position for your company is posted on an external job board and has a salary range $10,000 higher than what they currently make. Similarly, an employee knocks on your office door and asks to see the current pay range for their position, along with 3 other employees, only to discover that they are making quite a bit less than the person next to them.
These are just two of many potential scenarios that employers may face in the new year. Now, imagine what could happen after employees find out they are not being compensated fairly: negative social media posts about your company, quiet quitting, or an employee mass exodus, to imagine just a few.
There are some practical things that employers can do to prepare for the new law and mitigate employee issues, such as conducting internal pay audits, correcting inequities, and conducting comprehensive market salary research.
However, there is a larger topic begging to be addressed in this issue of pay transparency: company culture.
The new pay transparency law will most likely be least disruptive to companies who already foster a culture of transparency.
A culture of transparency is one that conducts itself with openness and authenticity. This type of culture doesn’t happen by accident. It is initiated intentionally by leadership and fostered throughout a company.
Does a perfect company exist? No. But healthy companies do and they are created and sustained by leaders who make efforts every day to ensure the workplaces they are responsible for remain healthy by the intentional choices they make.
It will be much easier to have a conversation with a disgruntled employee who is frustrated about their pay when a manager or business owner is honest about business practices or the shortcomings of their organization and communicates a plan to make necessary corrections. In what ways, for instance, may your company lack diversity or have a certain bias? Where have you noticed a disparity between company core values and how business is actually conducted?
Companies that dig their heels into the ground and continue to keep employees in the dark about business or employment practices may find themselves suffering in the year to come.
Transparency in business is here to stay and it’s now required by law, at least in terms of pay practices. Whether a company embraces a culture of transparency depends on the willingness of leadership to be transparent themselves. Cultures don’t magically become healthy if leaders don’t set about the task of making organizational health a priority in their management style.
Here are some steps to creating a culture of transparency:
Concerned about how the new pay transparency law may affect your business? Reach out to us! Whether it be assistance with a communication strategy, comprehensive salary analyses, or conducting manager training, we at Clarity love to partner with businesses to help strengthen their organizational infrastructure, bring clarity to legal compliance and nurture a healthy culture.
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