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The Present and Future Pros and Cons of Pay Transparency Laws

183:906269490 • October 18, 2022

The road to pay equity won't be easy.

Whatever your thoughts on California’s new pay transparency law, it’s undeniably going to affect employers all over the nation. For any employer not immediately affected, view this moment as a crystal ball looking into your future. As I’ve mentioned, there are other states that have enacted transparency laws prior to California, and now there are sure to be more that follow.


We’ve already talked about the details of the law and the ways you can get ready. Now I want to take a moment to get into the pros and cons of the law. While the inevitable is coming, we can still reflect on how this is going to play out, what our role can be in the process, and how we can prepare for the future or maybe even shape the outcome.


Pro: Pay Transparency Uncovers Pay Inequities and Gaps


This is, after all, the intent at the root of the law. Once you document all your job titles and pay ranges, as well as each employee and their base pay, you may start to see some problems. You may notice people falling outside of the pay range associated with their title. You may notice pay discrepancies within and across categories like gender, race, and ethnicity. This is why pay transparency is required. So we can identify these problems and resolve them.


Pro: Potentially Improves Retention as Employees have a Clear Career Path to Follow


Pay is a huge motivator for people, and if your employees have a clear understanding of what their potential is within their current role or even moving up to the next rung of the ladder in your organization, they are potentially more likely to choose to stay. Change is difficult, and it’s plausible that employees may even choose a lesser compensation at a place where they are comfortable and on a path of certainty rather than risk moving somewhere else.


Pro: Can Increase Trust and Productivity


Think about a vault that holds knowledge. The organization is the keeper of that vault and all of that knowledge. And it only doles out small pieces of knowledge to its employees. How easy do you think it is for an employee to trust the organization? Knowledge counters a lot of things like fear and insecurity. When people know exactly how the compensation structure works and what their pay range expectations are, it can set the groundwork for organizational trust. With that first step of visibility, confidence can be built, and stresses can be reduced so the organization can ultimately have a more productive environment.


Con: Takes Away Negotiating Power


Both employer and prospective employee lose negotiating power through this legislation. This can hurt your organization’s ability to be competitive. It can also hurt the ambition of current employees—why go above and beyond if there’s a clearer cap on what you can achieve? It can also make attracting employees a challenge if you’re unable to present a pay range that is as competitive as other organizations in your industry.


Con: Can Devalue Talent Differentiation


When the range of achievement (because that’s what pay ultimately symbolizes) is fixed, it will be difficult to motivate your top talent to continue being top talent, especially if their exceptional work is maxing out at the same pay as someone else’s “meets expectations” work.


Con: Long-term Homogenization of Pay Levels Across Jobs


While this isn’t an inevitable effect of pay transparency, there is a strong possibility that we’ll see a gradual uniformity of pay ranges across jobs. That may not be a huge problem within a state, but when considering the country as a whole with the large variations in costs based on geography alone, this could pose some unique challenges.


We have to take into account that there are a lot of unforeseen possibilities inherent in the fallout from this law and others like it. Sometimes the best intentions of the people in power result in surprise outcomes that no one saw coming. There will be benefits, but there will also be consequences and course corrections.


Regardless, we can prepare and adapt and do our parts to shape the future of our organizations within the boundaries of these new requirements.


In case you missed it, check out Part 1 of my Pay Transparency series, outlining the details of what’s inside California’s new law and how it affects you. And Part 2 gets into how to prepare for the new requirements.

By 183:906269490 December 16, 2024
In my first Best Practices post, I talked about the importance of knowing what you can pay for your sales roles before worrying about what the market is saying. In my second post, I covered ways to utilize culture in a sales organization . The following Best Practice in sales compensation involves job content. Job content plays several roles in your compensation plan: 1. It gives your salesperson a guide to what success looks like in their role. 2. It gives you a guide to evaluating the performance of your salesperson. 3. It rationalizes differing levels of variable pay outcomes for varying performance levels. 4. It provides your organization with the structure needed to comply with any reporting, pay transparency, or other regulations. Hopefully, that’s enough to convince you of the importance of taking the time to define your new roles and revisit the definition of your existing roles. Now, here’s how job content actually does those things. Defining the job The first role of job content is to define the who, what, where, when, and how of the function. It can be tempting to borrow a job description from LinkedIn, Glassdoor, etc., with the assumption that the content will be similar enough to fit your needs. However, the way a specific role performs is unique to the organization it’s acting in, which is why it’s important to take the time to define the job from scratch. Here are the questions you should be answering in your job content: What does the person need to do on a daily basis? How does this individual pursue sales, and in what segment or with what type of customer? Where should they focus their time and attention when building a pipeline of deals? Who should they be interfacing with, both internally and externally? When do they engage with customers and/or prospects? What portion of the sales process do they own or support? How do they interface with and influence decision-makers? Now, even though I said to write your job description from scratch, that doesn’t mean this is the time or place to get too creative. Job seekers are going to be searching by job title or category, so it’s essential to stick to the common vernacular regarding industry jargon and expected job titles. Job Description: A Byproduct of Job Content Another positive outcome of creating job content for your roles is that you will have generated much of the information needed for a job description if or when you’re ready to hire. Information such as: Job duties and responsibilities that clarify the type of work and engagement with customers. Qualifications/Requirements that are both minimum and desired. Those include education, knowledge, skills, capabilities, and competencies. Performance measures of the role include items like achieving sales targets, new logo acquisition, development of pipeline, accuracy in forecasting, etc. With all of this information on file, it will not only be easier for you to prepare to hire for the roles you want, but it will also be easier to evaluate existing employees in those roles. Beyond all of that, you’ll be well prepared for competitive market research and establishing your variable pay program. I’ll be posting more best practices on the blog, but if you’re anxious to dive deeper into the subject of sales compensation, you can grab a copy of my book Starting Simple: Sales Compensation and consider working through the companion Workbook to build a sales compensation plan from scratch.
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