26 Jul Pay Transparency

Pay Transparency

In today’s blog, we discuss a topic that has been dominating the headlines, pay transparency. What information should employers share? What about employees? What is illegal and what is legally permitted? If you have questions about this topic then keep reading below for answers!  

Pay transparency has been dominating the headlines lately — but the concept tends to raise more questions than answers.

Should you start distributing spreadsheets that include employee names and salaries? Are there any legal requirements to consider? What should you do if you discover inequities in your compensation practices? And how do you appease chatty or web-savvy employees who complain they’re being paid less than they deserve?

Two types of pay transparency

Pay transparency can have two different meanings, according to attorney Liz Washko, a shareholder at Ogletree, Deakins, Nash, Smoak & Stewart, who spoke to HR Dive via email.

“First, pay transparency can refer to permitting employees to discuss their pay with other employees without repercussions,” Washko said. “From a legal standpoint, employers cannot prohibit this for any employees covered by the [National Labor Relations Act].” Some recent state laws forbid employers from enforcing such rules as well, Washko said.

Attorney Marissa Mastroianni, an associate at Cole Schotz, similarly cautioned employers about Section 7 of the NLRA: “Employers can’t have a policy (written or unspoken) saying that employees can’t speak about compensation with each other.”

Second, pay transparency can refer to “one or more systems whereby the employer provides or publishes information regarding its applicable pay ranges for a position or even the specific pay for an employee or position,” Washko said. While a limited number of states, including California, require employers to provide the pay range for a position upon the reasonable request of an applicant, in most places this is not legally required, she said.

How much should you share?

“Many external factors are putting pressure on employers to be more transparent about compensation,” said Felicia Davis, a partner at Paul Hastings. “Employees are asking more questions, shareholder groups are asking employers to be more transparent, and foreign countries are asking for more information to be reported. There is also an EEO-1 component.”

That said, added Davis, there are different ways to be transparent. “You can be transparent about the company’s overall compensation philosophy, how it sets compensation, and how it evaluates performance, salary increases, and bonuses without actually handing out a spreadsheet indicating how much each person earns,” she said.

Very few companies, Davis said, are completely transparent with respect to individual compensation decisions. “So many factors go into what an individual is compensated, and I have never met an employee who doesn’t think they’re a top performer,” she said. “Disclosing this data can lead to hurt feelings and is not productive.”

SOURCE: Carsen, Jennifer. (24 July 2019). “Pay transparency: How much should you share with employees?” (Web Blog Post). Retrieved from https://www.hrdive.com/news/pay-transparency-how-much-should-you-share-with-employees/555923/