Recently, my friend’s manager asked what would stop him from leaving the organization. “Higher pay,” she replied. Her manager was reluctant to discuss compensation because it was “HR’s domain” and admitted that she expected my friend to ask for more vacation days. She told me: “Why would I ask for more days off when I’m sure the white guy next to me is making more money?” She left soon after joining a contestant for a higher salary. Like other highly educated and aspiring women of color I know, she has more options than ever to work in a place that recognizes her worth.
How did she know that she was getting less salary than the man next to her? She certainly didn’t tell – her former manager refused to tell her. But women of color are paid less on average, and for them as a Latina woman, the pay gap can be as much as 54% of the pay of their Caucasian male counterpart. She tells me that the issue is not only about earning more money, but the lack of pay transparency, which she found outdated and outmoded. She’s not alone: PayScale research finds that even when there’s no gender pay gap, the notion of its existence can undermine trust in employers.
Wage transparency legislation could make this kind of salary negotiation easier for managers and employees. Such laws are becoming the norm around the US; Law to disclose salary limits in all job postings takes effect in May in New York City, and California’s Senate announces a pioneering new wage equity bill. If it becomes law, it will require the most detailed wage transparency of any US state. Employers with 100 or more employees would be required to disclose the median and average hourly rates by demographic (race, ethnicity and gender) within each job category in the public report. And employees can ask for the pay scales of their current jobs, which an employer will be required to provide legally from May 2023.
Wage transparency reduces pay inequality. One study estimates that the gender pay gap could drop by as much as 40%. Researchers at HEC Paris studied the salaries of 100,000 American academics over two decades and found that pay transparency can improve pay equity (people being paid equally for equal work, identifiable like gender and race). regardless) and pay parity (how that pay compares to other roles and organizations). In institutions where pay is publicly available, the gender pay gap has narrowed significantly, as is the case with US federal government jobs.
So why is the law made to make this data available? Because pay secrecy has been institutionalized in our work culture.
Here’s what’s realistic. Managers must offer at least one range when offering salaries and increases, with clear criteria on what should be at either end of the range. To ensure fairness, norms and salary ranges need to be set by upper management and human resources rather than on a case-by-case basis. Managers should interact regularly with team members. Ask how each person feels about their compensation. Talk honestly about what they are going through and take actionable steps to get to the next level. It might look like this: ‘Your role range is $100,000-$150,000. That’s why you’re at $120,000 and to get to $150,000, let’s work on these measurable results within this period.’ An employee, especially one from a historically underrepresented background, will walk away feeling that he has reasonable access to information. And in today’s tight labor market, workers have options and prefer regular communication.
Managers must offer specific criteria on how to raise the salary range. One team I worked with did a detailed review of what was needed for each task at the ‘entry’ point and specified the outputs needed for promotion to the next level. That way, when negotiating salary with employees, managers can point to objective criteria rather than subjective reasons for promotions and higher pay—or lack thereof. Intention in this way also increased the number of women who had been promoted since then.
Above all, regular salary audits should be required in every organization. And every manager should evaluate how salaries are distributed among their team on a quarterly basis. In smaller companies, it can be as basic as compiling a spreadsheet. Of course, larger organizations can and should use software that allows them to track who gets access to the highest paying jobs and who doesn’t. Being proactive to correct any imbalances can lead to greater trust within the team.
I often encounter well-meaning leaders who are intimidated when they see data on how wide unchecked pay gaps can be, especially those based on race and gender. That’s why it’s always important to review the data.
And in no time, when it becomes law, the leaders will have no choice. Better late than never, I suppose.
Ruchika Tulashyan is the Chief Executive Officer of Candor, an inclusive strategy exercise, and the author of Inclusion on Purpose: An Intersectional Approach to Creating a Culture of Belonging at Work.
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