S5 E7: Pay Equity & Pay Transparency

Podcast April 30, 2024

• Comprehensive Compensation Services
• S2 E5: Is Your Company Ready for Pay Transparency?
• Link to AIM HR’s Recruiting Services
• Link to AIM HR’s Audit Services

Transcript:

Pete Wright:
… both.

Kyle Pardo:
Glad to be back, Pete.

Sarah Piscatelli:
Hi Pete, nice to be back.

Pete Wright:
Kyle, we’ve done this before, right?

Kyle Pardo:
We’ve done this. We’ve been talking about it.

Pete Wright:
We have been talking about this for a while, and that was past Kyle and Pete. That was season two Kyle and Pete, as I refer to them. This is season five, and we are talking a little bit more about how this pay equity, pay transparency universe is shaping up in Massachusetts and beyond. Can you do me a favor and set the table, where do we stand right now on pay equity?

Kyle Pardo:
Sure. So we have been talking about it. It is legislation that is still in a pending phase. It is not a law in Massachusetts. But what has changed in the last couple of seasons since we talked last is that other states have moved along. And so there are now I think eight states officially that have pay transparency, another two that will be starting at some point soon. So we are seeing as a topic that it is really gaining traction in the country. And in Massachusetts, we think we’re heading in that direction as well. So it’s not going to go away.

Pete Wright:
For those who don’t know the difference in terms, what is the difference between pay equity and pay transparency, Sarah?

Sarah Piscatelli:
Okay, yes. The difference is pay transparency means when a position is open or even when it’s not, if somebody internally is desiring a position, an employer has to show the wage range, the lowest and the highest pay, make it very clear what this job pays, so take some of the subjectivity out of it with applicants going in. Pay equity generally, at least here in Massachusetts, means equal pay for comparable work. And comparable work here is defined as work that requires the similar skill, effort and responsibility performed under similar conditions. So that’s pay equity. And that means that there’s no discrepancy between genders, no disparity. And anybody who’s paid for that. You can’t use gender certainly as a criteria for setting a different rate of pay for a comparable job.

Pete Wright:
Okay. So given those definitions and the fact that this bill, this legislation hadn’t taken shape before, it still hasn’t taken shape now, let’s talk a little bit about what HR managers and organizations have to potentially look forward to that might disrupt operations. It starts with recruitment, right?

Kyle Pardo:
Absolutely, absolutely. So what we’re seeing more is that when positions are posted on Indeed, which is a very common place for a position to be listed these days, there’s a requirement to put the salary range in there. And so companies are starting to see that and thinking like, “Okay, this is going out there, that everyone can see this, an applicant will see it.” And so for companies that have not had pay ranges in the past, they really need to start thinking about that, “I need to have that in place before I start recruiting.” But I also need to have it in place, as Sarah said, if somebody internally asks what the pay range is for a position. So really having a compensation system is becoming more and more important for companies.

Pete Wright:
The last time we talked, we talked about the potential discrepancy that was happening when there are new structures put into place that don’t take into consideration long-term employees. So there are bonuses and salary ranges for new employees while people who’ve been working for you for a while, they remain at their current salary. Does anything in the proposed legislation deal with that as in terms of equity?

Kyle Pardo:
I don’t think it’s in there specifically, no. But if you see a job posted at your company and you know what the pay range is, if you’re not in that pay range, I’m sure that as an employee you’re going to start having curiosity about what the range is and would go to your HR department or your boss and ask about the range. So while it’s not in the proposed legislation, it’s something certainly that I think will come up.

Sarah Piscatelli:
Right. In the Massachusetts Pay Equity Act, which has been around since 2018, I believe, that has exceptions, and one of them is experience, seniority. Those can justify a difference in pay, Pete. So if there’s somebody new coming on, certainly you can pay them less than somebody who’s been there for five, 10 years.

Pete Wright:
Sure. Well, this does get to I think one of the central topics we wanted to take on today, which is the changing culture of pay in organizations. There are age and gender and generational differences that are changing the way employees think about their compensation. What are you seeing in your work with organizations and the challenges that they’re having in using compensation as a recruitment technique or strategy using compensation internally and externally when the way employees think about their pay is changing?

Kyle Pardo:
So I saw a statistic recently that I thought was really interesting about this, and it was a study done by Forbes where they asked people as part of different generations whether they would share their compensation with their co-workers. And 65% of millennials said that they would share their compensation, which surprised me. That’s a significant amount who said that they would share their compensation with their co-workers. Only 37% of baby boomers said that they would share their compensation. So I think culturally, there is a difference in terms of what people are willing to put out there into the public, we know that, through social media. And so younger generations are more likely to put that information out there. But the second part of the study said that millennials were also more likely to lie about their compensation.

Pete Wright:
What? What?

Kyle Pardo:
So what’s interesting to me about that is if younger generations are sharing the information, but maybe they’re not sharing accurate information, what does that do around the compensation discussion and in the feeling in the workplace? So I think the idea of having pay transparency and having ranges that everybody knows about will maybe help some of that come into line a little bit more.

Pete Wright:
You have to wonder if that’s going to make people feel more hesitant to share their compensation, or if HR managers, hiring managers are going to have to say, “You’re going to be paid this, but when you lie about it, make sure you say this.” So I mean, when I say the little hairs stand up on the back of your neck, that’s kind of me. I was raised in an era where you just don’t talk about how much money you make. You’re both nodding your heads. It feels completely weird to me that we’re having this conversation, because it’s just so far from the norm. Are there other issues around transparency that we’re seeing at work and how employees are handling their pay, besides just the generational statistic you mentioned?

Kyle Pardo:
I think we’re seeing it in gender as well, and I think this is cultural norms, where without pay transparency, studies have shown that employees in general maybe are afraid to ask about compensation, because they don’t want to appear ungrateful. But women more specifically don’t ask about it because … either lacking confidence, they don’t want to be viewed as being too aggressive, or they very often prioritize the needs of others and think, “I’ll just take what I have and be happy about it.” And so I think without, again, having that pay transparency, I think that’s where we’ve seen some of that disproportionate pay between men and women.

Sarah Piscatelli:
I think, too, people come in pretty well armed. This information is more readily available, what this job pays in this area. And that’s going to be another piece if the legislation we were talking … the wage transparency, that passes, then employers of a certain size, the number hasn’t yet been hammered out, but probably 100 or more employees, there will be data published, what these jobs pay in different parts of Massachusetts. But that information is out there. You can go on a lot of websites and find some good data on what this job should pay. So people are better informed, I’d say, than they were when we were looking for jobs a while ago.

Pete Wright:
The gender issue is I think an interesting one, particularly because we’ve had pay equity on the books for six years or more, and so it feels like that in addition to transparency, the social media aspect, we are arming employees for a different kind of discussion. Are you hearing anything about the DEI aspect, LGBTQIA+, the race, beyond gender issues, in pay equity, pay transparency at work?

Kyle Pardo:
I’ll give you another term to throw into the mix, is the wage gap or pay gap. And that is the difference … if you took the pay for all men and the pay for all women, what’s the gap? And the Boston Women’s Workforce Council does a great survey of this every year, and currently it’s 21 cents is the difference in terms of what men get paid versus what women get paid. And it’s even larger discrepancy for Black women. And so what we’re seeing when we look at that type of gap is that it also means that there are fewer women and fewer minority women in higher level positions in organizations. And so anything we can do to try to continue to chip away at these gaps and arm people with that information so that they can really take a look at what’s holding people back in the workplace from not only advancing in pay, but advancing in position is really important.

Pete Wright:
How do you guide employees to have those conversations more competently? And I’m thinking about our HR managers who are here listening to this show, right, HR pros listening to this? I mean, in the spirit of helping their people grow, how do you help them have conversations that are challenging in this way? We talk about organizational barriers, we talk about the discomfort of challenging the wage gap. Again, you mentioned specifically not wanting to feel like you’re too bossy or ungrateful. Those are the kinds of things we want to help people move beyond in these conversations. How do you consult them to start those conversations more authentically?

Sarah Piscatelli:
I think transparency within an organization is a good start to it. And employers can conduct pay audits and give at least some of the results to the employees, show what their goals are, saying, “Here’s where we are, here’s where our goal is,” just to sort of open the discussion. I think that would go a long way to making employees feel more comfortable in taking this on and bringing it up.

Kyle Pardo:
Yeah, I mean, I agree. I think rather than putting the onus on the individual or the employee, I’d like to focus on the HR person or the executives in an organization to establish that culture of transparency. I think it benefits everybody by having these discussions, in the sense that if you have an opening for a position and you let everybody know what the pay range is, you’re only going to get people applying who are open to that pay range. So it’s going to save everybody time, that we’re all on the same page. We know what the pay is going to be. Don’t apply if this isn’t what you’re looking for.
I do think that the company should have some flexibility within those ranges, meaning again, to the point, a range is a range. There’s going to be some people in the lower end of the range and some people in the higher end of the range. And so everybody’s not going to get the same pay. But really if the company thinks about it proactively and they have a really good system in place of how they make those decisions, then if an employee comes to them with a question, they’ll feel like they’re in a good place to say, “Based off of your years of experience or your education or your skill set,” or whatever it might be, “this is where you fall within the range.” But you know that everybody else doing that job is not going to be significantly being paid more or less than where you’re at.

Pete Wright:
You mentioned Indeed earlier. And the last time I remember we talked specifically about what some of these platforms were doing. If hiring managers weren’t putting in the salary range, they were using the algorithm to say, “Here’s what somebody in this market is going to be making.” And are we seeing that come into fore? I feel like that might be contributing to salary misinformation across industries if you’re not on top of it. Is that happening?

Kyle Pardo:
That is happening. It will put in a range and it’ll say, “Based off of this area, this is what we think this position is.” The other thing is there’s all sorts of other sites out there. There’s Glassdoor where people can rate companies and they can include that type of information. There are salary surveys that are self-reported, meaning it’s not the organization reporting the data, the individuals are. And so a lot of those types of platforms can lead to misinformation. And so it’s a bit hard to weed through that and figure out what the right information is.

Pete Wright:
To your point, it puts the onus on HR to make sure they’re leading the charge on making transparency a safe conversation across organizational culture.

Kyle Pardo:
Yeah, absolutely.

Pete Wright:
So let’s talk a little bit about the coming challenges and considerations in potentially the new world. How do we start, 8:00 A.M., day one?

Kyle Pardo:
The good news is that if this gets passed to Massachusetts, there will be an implementation period. So day one, we’ll have a little bit of warning time before we get to that, so that’s the good news. But it really goes to taking a look at two things. One is internal equity, and the second is external equity. And so you might want to start looking at survey data to make sure you’re in the right range, meaning are you paying similar to other organizations in the same industry, the same geographic area? And there are all sorts of surveys available to gather that information.
And the reason why that’s going to be important is because as you are potentially required to start posting your pay ranges, other organizations are as well. And so the consumer, if you will, the applicant has that information and can make a decision on where they want to work. And then the internal piece obviously goes back to pay equity and making sure that there’s that internal comparison. So I think as the first step is really taking a look at where you can get that external market data and also your internal data to start making those decisions.

Pete Wright:
Sarah, how does this change the face-to-face employer, potential employee negotiation?

Sarah Piscatelli:
It gives parameters, right? Because if the employee comes in, first of all, they’re informed, they’ve been told the job … It could actually shorten the negotiation, right, because it’s very easy for the employer to say, “That is the high end of the pay range. We’re not going one penny beyond that. And that’s it.” Backing up a little bit, it might require the employer to decide, what are they looking for? It might mean a review of a job description so they can say, “This is the high end of the pay range, has this degree, has this many years experience,” whatever it is they’re looking for, and just really be able to articulate that. I think it could help to cut to the chase though when you’re doing a negotiation; it’s not wide open from the beginning and there is this set range. So that’s what I expect, anyway.

Pete Wright:
Something we’ve talked about before, the importance of getting those job descriptions in order. That seems like a healthy step three, is if you haven’t gone back to review job descriptions and requirements, now’s the time.

Kyle Pardo:
Yeah, now’s the time. And another topic that we may be coming back to in another podcast is taking a look at what’s really becoming more common is skills-based hiring. So previously, you’d see a college degree required for every position. And more organizations taking a look at that and deciding, is it required? And so as you do things like that and you figure out what’s in the job description and what the pay range is, it might be based off of what your requirements are. Is a college degree required or some other type of certification or skills level? So yeah, you’re absolutely right, Pete. That’s a big part of it.

Pete Wright:
This to me feels like such an open opportunity to really look at how you’re talking to your employees about, “Hey, what are the” … when you say, Sarah, that there are parameters around these conversations, just remind people, what can’t you do from an HR perspective when you’re talking to somebody about pay?

Sarah Piscatelli:
Well, here in Massachusetts, you cannot ask for salary history. I don’t know how unique that is, whether other states … You cannot say, “What are you making in your job now,” and then low ball it and come in just above that, right? So that’s one thing that’s maybe particular to Massachusetts, but I believe other jurisdictions have that same requirement. And another one is you can’t, in Massachusetts anyway, you can’t prohibit employees from talking about their pay. So you’re able to discuss it freely. My first job out of college, that was something I was told on the first day: talking about what you’re paid is a fireable offense. Plenty of people broke it, but that was told to me specifically. They didn’t tell me much else, but that was it. Yeah, so beyond that, that’s really all I can think of. Kyle, do you have any other thoughts on that?

Kyle Pardo:
No, I think you’re absolutely right. Those are the two big ones to stay away from. Yes.

Pete Wright:
And are there any federal considerations that are coming, or are we still just everything we’re talking about here is state level?

Kyle Pardo:
Everything from pay transparency, we’re talking about state level. But the important thing, again, is that more and more states gain traction. If you have employees or locations in several states, you’re really going to want to take a look at them because there are some different rules around pay transparency depending on the state. A lot of them follow the same premise, but there are some different penalties and different reporting requirements depending on the size of the company. So as more and more companies seem to be having remote employees or having locations spread out through the country, take a look at what the state law is in the states where you operate.

Pete Wright:
So in our show notes, I have links to comprehensive compensation services, AIM’s recruiting services, AIM’s audit services. You can learn more about all of the things that AIM HR Solutions can offer you to get your head and your operations around the coming changes to pay transparency, pay equity in the state of Massachusetts, and clearly beyond. Thank you both so much. Kyle Pardo, Sarah Piscitelli, thanks for being here today.

Sarah Piscatelli:
Thanks, Pete.

Kyle Pardo:
Thanks, Pete. Always a pleasure.

Pete Wright:
Always a pleasure. And-