Pay transparency is all the buzz lately, thanks partly to California’s new reporting law. But even before news broke of California’s Pay Day Reporting Rule, we planned on bringing up the touchy subject with you. Why? Pay transparency isn’t a passing fad. Austin tech employers are increasingly adopting the practice—either by choice or because they must comply in other jurisdictions in which they operate. More fuel for the fire: Top talent expects it.
“Assuming that pay transparency laws in other states don’t affect Texas employers is, frankly, putting your head in the sand,” says Paul McGaughan, Practice Director of The HT Group Technical Recruiting. “Many tech companies in Austin have ties outside the state—in California, Colorado, New York, and other states where pay transparency laws exist. It’s true they may be jumping in because they have to. But because they’re upfront with compensation, Texas employers that aren’t are at a disadvantage when it comes to attracting job candidates.”
Before you spill the beans, however, consider the following:
Tracking the Spread of Pay Transparency
“Just a year ago, only Colorado required employers to list salary ranges on job postings,” Bloomberg states. “In November, a similar rule in New York City will go into effect, followed by another in Washington state early next year. With California joining, companies like Alphabet Inc. [and] Meta Platforms Inc….will have to comply by January 2023. New York State Governor Kathy Hochul also has a bill on her desk, which would kick in 270 days after it’s signed, and a few other states mandate companies share pay expectations for open roles on demand. Even in places where it’s not required, employers have started listing pay information on job ads — with more likely to follow.”
Bloomberg points to a study by WTW (formerly Willis Towers Watson) that shows a tsunami of voluntary pay transparency is about to hit. While about 17% of companies surveyed already provide pay range details in job listings even when not legally required, another 60% plan to do so or are considering doing so soon.
It’s no wonder job seekers are beginning to expect it. By 2021, 39% of respondents to Career Plug’s Candidate Experience Report expected compensation to be included in an initial job post.
“With so many pay transparency laws being passed, 2023 will be a tipping point,” McGaughan predicts.
What Should You Do?
“It’s critical for employers to review their existing pay structure and practices with an eye to identifying and fixing disparities. For an employer with a robust pay equity strategy in place, transparency is nothing to fear and can even be a selling point,” says Emily Scace, legal editor at XpertHR. The company offers resources for employers looking to navigate pay equity, including How to Conduct a Pay Equity Audit and How to Comply with California’s Pay Data Reporting Rule.
“Transparency is nothing to fear” is a bold statement that we don’t necessarily agree with. We know how scary pay transparency can be. And in Texas—where there’s little reason to believe the laws will change anytime soon—what are the pros and cons?
Of course, if you employ workers in these jurisdictions that require it, you need to follow the law. Failure to comply could result in civil lawsuits and penalties. But as these laws spread—and the idea of pay transparency becomes more acceptable among employers—bucking the trend can mean losing out on great talent, pure and simple.
Holding out on even considering pay disclosure overlooks another critical factor: The ease at which today’s job seekers can find that information elsewhere.
“Whether to include compensation and other details in a job listing or not is a timeless debate,” states The HT Group Vice President of Sales Claire Reese, CSP. “What has changed over the years, though, is a job seeker’s ability to find out that information—and more—by other means. Sources like Glassdoor and Comparably have changed the game.”
But What If Your Compensation Isn’t Great?
If you’re afraid of pay transparency because your compensation never seems to measure up, you have a deeper problem to fix. Even more important than pay transparency is the pay itself.
BuiltIn’s 2022 Candidate Insights Report concluded the following:
“When considering a new job, candidates put a major emphasis on compensation in their decision, with 63% of employees quitting their jobs in 2021 because of low pay. When looking at technology professionals specifically, 70% indicated they were looking for a new job because of the ability to be paid more and 67% of candidates note compensation is an important factor when choosing their next employer,” the report states.
We recommend reviewing the full report, which outlines average tech compensation as well as reasons why pay transparency matters.
Yes, it stings that tech industry compensation has seen some of the most significant increases across the board. But while competitive compensation is vital, being the absolute top-paying employer in Austin—outbidding all others—surprisingly isn’t necessary. Take Austin software engineers as an example.
“Software engineers have complained of hostile work environments, their work preferences being ignored, intense and rigid processes, burnout, ageism, and the frustration of not seeing their hard work pay off directly,” says McGaughan. Those job seekers are looking for indications that they’ll be treated well beyond mere pay.
The DEI Aspect
Another significant reason employers fear opening the books on compensation: They may have a history of inconsistencies. Suddenly serious claims of gender inequality and ageism that weren’t a known issue among your staff before could be brought to the forefront with pay transparency. What to remember there, however, is that those inconsistencies can (and will) be found out, regardless. Taking steps now to even the playing field is in everyone’s best interest.
“It’s hard to deny that a female makes less than her male counterpart or that minorities make less across the board than the majority population when salaries are displayed. As a result, pay transparency helps to enhance diversity, equity and inclusion initiatives, and alleviate discriminatory practices,” BuiltIn’s research team states.
It may be reassuring to know that you’re not alone if you do have inconsistencies. More than 80% of U.S. employers who undertook pay equity audits found equity gaps in their organizations. It takes careful planning and the assistance of HR and legal to help eliminate surprises when finally making the switch. Even then, there will be growing pains. We’re learning that from the companies who have been legally compelled to forge the path, like Colorado-based Velocity Global.
“Out of the gates, suddenly, every job posting had a salary, right? You cannot paint every single person in every single job with that same brush. Maybe you’ve got somebody on board who is less experienced or had a change of career. So we’re not necessarily going to pay as much,” Velocity BuiltIn’sGlobal Founder Ben Wright told TIME Magazine, addressing the limited flexibility of Colorado’s pay transparency law. “It just creaDON’T ted so much angst and anxiety across the board. We lost some good people because of it.”
Pay transparency certainly isn’t cut-and-dry, but it’s also nothing to overlook. Many online resources address the issue, like HBR’s caution on The Unintended Consequences of Pay Transparency and this Pay Transparency Q&A from SHRM and Boyd Davis, global head of compensation at cloud software company Unit4. But before making the switch, talk to your HR and legal teams and seek a consultant if needed. You can also turn to our recruiters—including McGaughan and his IT and technical recruiting team—for trends and best practices.