Individuals should be paid for the work they are doing and there shouldn’t be discrepancies based on gender or ethnicity. Research conducted by WorldatWork and Korn Ferry shows that 60% of US organizations are working to resolve pay inequities. Additionally, state and local legislatures are taking steps to ensure that pay equity is a priority. The state of Washington’s Equal Pay and Opportunities Act (HB 1696) goes into effect on July 28, 2019 and outlines tactical steps employers must take that should move the needle closer to equity. The law firm of Dorsey and Whitney provides a simple explanation of the details of the law here . And previously we published a piece with steps you can take to avoid inequities that aligns with what the law is requiring.
It is easy to look at the new law and think of it as more items on the compliance checklist. But there are intrinsic benefits for businesses beyond complying with the law to compel you to take action.
A key component of the law is that a compensation range must exist for each position in your organization. Building a compensation structure for your organization and determining an appropriate compensation level for each role provides three benefits to the organization:
1) More control over your budget
With identified ranges for each position, it is easier to map out and stick to a budget. You already know the maximum cost of a new hire based on the highest number of the range. When you are preparing offers, you can be confident that the negotiations won’t leave you questioning how you can afford the candidate. An established range means you can communicate the maximum amount the role can earn and stay within your budget.
2) Saves you time when recruiting
The reality in our current very tight job market is that if an employee is looking to make a change it is for either a better culture fit or more money. And for a hiring manager, there is nothing more frustrating than spending time and energy recruiting a great candidate, only to learn in the late stages of the process that you cannot afford the individual. Having an established compensation range prior to kicking off recruiting efforts means you can be transparent in the job posting and confirm alignment with your established compensation range in the first conversation with your selected candidates. You’ll avoid getting swooned by great candidates that are out of your reach and focus your time and energy on candidates that are attainable.
3) Building trust with your employees and strengthening your organization’s reputation
Employees value fair pair and fair treatment most in a job, according to a Clutch survey of 540 full-time employees across ages and company sizes. Providing a compensation range for each position is an opportunity to highlight your commitment to fair compensation and equity across the organization. That level of transparency extends outside your walls as well. Candidates review available data on Glassdoor.com and make assessments about the quality of an organization based on the anecdotal data and comments prior employees have entered. With established ranges for a position, there is no need for candidates or employees to question the fairness of their compensation.
Scott Cawood, CEO of WorldatWork, who, along with Korn Ferry, researched steps employers are taking to address pay inequities, summarized it well: “Full transparency on compensation topics and a stronger employee understanding of an organization’s compensation philosophy and processes cultivate greater trust and a sense of fairness. A workforce that trusts its leaders and feels fairly treated is more committed and motivated to deliver results.”
Pay equity, for all genders and ethnicities, is important. What an individual made in past roles doesn’t dictate their value in your organization. Fairness and transparency are good business practices. The state of Washington agrees with this approach. This new law is a great opportunity for your business to make your employees a partner to value creation, both for themselves and for the business. Employees thrive in cultures of communication.