Diversity and inclusion are top-of-mind concerns for companies around the globe. It's great that your company has committed to making your workplace as inclusive as possible, but the statements you see from other companies seem like a whole lot of talk and not a lot of action. You don’t want to be a company that pays lip service to such an important issue.
Meaningful progress toward diversity, equity, and inclusion requires action.
It requires that companies address outdated or biased policies and practices. Whether you’re a startup or an established company, one way you can take meaningful action toward a fair and equitable workplace is salary transparency.
When employees know how their salaries stack up against that of coworkers, the difference between what men and women make shrinks. And, while salary-transparency policies are often viewed as a way to reduce the gender pay gap, salary transparency goes beyond gender.
A salary transparency policy builds trust between your company and its employees and applicants. They can see that you offer fair, equal pay and a clear path for professional growth. With that trust, you’re able to build and retain a workforce of people from all backgrounds.
Build trust with objective salary formulas and intentional strategy
When companies keep salaries secret, it’s more difficult to uncover practices that contribute to inequality. Employees have no idea how leadership decides on promotions and pay for employees at various levels. With salary transparency, a company holds itself accountable to its employees.
Salary transparency builds trust between a company and its employees because it allows them to check the math. They can compare salaries across roles and departments and judge whether salaries are skill-based or a product of discrimination or unconscious bias.
Making the switch to salary transparency can be scary, not to mention daunting, especially for an established company. But it’s possible. In 2008, Starbucks made the commitment to close the pay gap within the company, and it proved no small feat. A decade later, they announced that they’d achieved 100% pay equity across gender and race for U.S. employees.
How did they get there? The same way startup Buffer tackled salary transparency three years after being founded: by analyzing compensation, creating an objective salary formula, and clearly communicating how they arrived at those figures.
Salary formulas allow companies to calculate pay based on objective metrics. It’s how companies can assure their employees that salaries reflect concrete items and not subjective opinions of an individual’s value to the company.
Some companies, like Buffer, use a location-based approach in their formula. Other companies, like HelpScout, favor a values-based approach to compensation. By comparing the two, you can identify which approach better fits the needs and goals of your company.
Having an objective formula, clearly defined roles and growth levels, and benchmarks that help identify salary ranges can also help you develop a transparent salary strategy.
Three elements of a salary strategy that promote fair pay.
Crafting a strategy also helps employees (and the public) understand how salary figures are determined, even if they evolve over time.
Since adopting salary transparency, Buffer has revisited their salary formula. For example, with their more recent formula, Buffer had three goals: re-benchmark base pay, re-evaluate its salary-data source, and incorporate role levels. Once they had an updated formula, they published the rationale behind their decisions and new calculations. In doing so, Buffer reinforced their commitment to fair pay and remaining 100% accountable to their employees, a practice that has successfully built trust within the company.
Companies should also be prepared to answer difficult questions about their strategy should employees have them: How did you determine the base salary for this job type? How do you calculate cost of living expenses for locations? What’s the difference between a master seniority level and an advanced seniority level?
Answers assure employees that the company put thought and intention into building a compensation strategy that pays employees fairly. This helps employees trust that, when it comes to salary, their company respects and values employees equally.
Salary transparency boosts retention by giving employees a clear growth path
For many employees, professional growth and advancement is a priority. However, women, and especially women of color, are offered a fraction of the growth opportunities that men are, and Black men are likewise overlooked for promotions when compared to the promotion rate of white men. This directly impacts women's and minorities' ability to earn more.
Here’s where roles and growth levels can help your company remain objective and fair in employe advancement. Roles that offer levels—junior, midlevel, advanced, or similar—need specific criteria that differentiate one level from the next.
When companies provide specific, skills-based criteria, it helps employees of all backgrounds to understand how they can get to the next level. Pairing each level with a fixed salary figure serves a dual purpose: it recognizes and rewards an employee’s growth, and it helps reinforce salary transparency at various levels.
For an established company, creating levels for a role can present a challenge. It may be difficult to explicitly differentiate between a manager and senior manager in terms of skill or job complexity, but it is necessary work to achieve transparency and fairness. For companies starting out, it might be easier to establish roles with various levels. Even if your company size means you aren’t filling every role at every level, it’s important to define these levels so that, as you grow, employee advancement remains clear.
Buffer, along with companies like HelpScout, Chewse, and Medium, has created career frameworks that clearly outline expectations at each level. These specific expectations then allow employees and their managers to strategize how the employee can advance and, as a result, earn more.
Buffer’s career levels for individual contributors, referred to in the company as “Makers.” (Source)
Developing clear growth paths is an essential step toward long-term employee retention. In 2018, LinkedIn reported that 94% of employees surveyed for its annual Workforce Learning Report would stay with a company longer if the company invested in their growth.
Building a career framework and tying it to a transparent salary figure also improves trust and reinforces your company’s commitment to promote and grow your employees fairly. It focuses on an employee’s present state and removes from consideration any systematic barriers, such as previous opportunities or education, that might’ve otherwise had a negative effect.
So how do you get specific with levels in a way that aligns with your company’s commitment to equality and fairness? That conversation is still growing, but here are a few things you might consider:
- Break a role into necessary competencies. If you’re building out multiple levels in a single role, consider breaking the role itself into different competencies. You can group related expectations and compare those to the corresponding expectations in the next level. For example, customer management could be part of a role with Level 1 requiring that the employee participate on weekly calls, and Level 2 requiring that the employee create an agenda for weekly calls.
- Map the evolution of an expectation. Take a horizontal approach, and chart how a specific expectation evolves from novice to master. It differs from a vertical approach, which might consider an entire role at the novice level, but charting an expectation on its own ensures that you’re setting realistic steps toward development and growth.
Look at the image above, and consider the rope analogy Buffer uses. Moving horizontally, you see a person’s experience and knowledge of rope evolve from Learning about rope (Level 1) to Knows more about rope than anyone, period (Level 5), with several steps in between.
- Get feedback, revise, revisit. Make career frameworks a collaboration. Author an initial draft, but share it with your team. Ask for feedback from managers and employees from multiple backgrounds. Listen to their suggestions, and make changes. Recognize that you may need to revisit the framework one day as the industry or role evolves.
Clear salary expectations reduce time to fill and attract qualified job candidates
With an internal salary transparency policy in place, you might consider making figures public by role. Some companies choose to dedicate part of their company website to disclosing salaries or discussing their salary formula, while other companies may share details in a blog post or a letter from the CEO. Another option is to include salaries or salary ranges in your job postings.
A month after Buffer posted their employee salaries for all the world to read, they saw their job applicant pool double in size. Why? It could be because applicants knew what to expect in terms of pay. They knew up front whether the position they were applying for would cover their living expenses, child care costs, and credit card and/or student loan payments.
Most importantly, providing a salary range removes the burden on the applicant to negotiate their worth.
Glitch, a company that provides a collaborative coding experience to developers, includes salary ranges on all job descriptions. Not only has Glitch seen an increase in the number of applicants, but the company has also received positive feedback from candidates.
The decision to use salary ranges instead of a specific salary is not an uncommon practice. When you consider the career frameworks discussed earlier, a salary range can encompass Level 1 to Level 5 salaries for a role. Ranges give hiring managers or those in charge of the hiring department the opportunity to place a candidate based on the objective, skills-based criteria outlined in the framework.
Excerpt of a Glitch job posting, complete with salary range details. (Source)
Providing a salary range also removes the burden placed on the applicant to negotiate their worth, a practice that continues to negatively affect women and people of color. Evaluators view women as unlikable when they negotiate, and Black applicants are viewed as pushy, despite negotiating the same pay as a white male counterpart.
Removing salary negotiation also focuses hiring conversations on the job an applicant is applying for, not on past work experience and salary. In fact, inquiring about past salary is now banned in several states. Why? Because women and people of color begin their careers at a significant pay disadvantage, and it adds up over time. It’s estimated that women lose $900,00 over a 40-year career.
Salary transparency requires long-term, meaningful action
Fair and equal pay is long overdue, and salary transparency can help close the gap. But, salary transparency isn’t a box can companies check and move on from. It requires that you revisit sources for base salaries and then update as needed. Review career frameworks against growth inside your company, and use data and insight to analyze trends in your workplace.
Change might take time, but salary transparency will continue to drive fair and equal pay for employees. It’s exactly the kind of impactful work that your employees, no matter their backgrounds, expect and deserve from their employer.