You Ask, I Answer: Salary Transparency Pros and Cons?

Tim asks, “Is salary transparency a good thing or a bad thing in job listings?”

Salary transparency is a good thing for job seekers and workers, as it allows them to see if they are being paid a fair wage for their role. It can also help to reduce discrimination and inequality within an organization.

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Machine-Generated Transcript

What follows is an AI-generated transcript. The transcript may contain errors and is not a substitute for watching the video.

Christopher Penn 0:00

In this episode, Tim asks, Is salary transparency a good thing or a bad thing? I guess it depends on your culture.

Salary transparency matters for two different areas first is in job listings, right so that people can get a sense of how much does a given position pay? Now, transparency in job listings is good for the job seeker, because it allows you to look at a position say, okay, are they funding this position appropriately, it is less good for a company, obviously, because if everyone is publishing, salaries, on job listings, then the incentive is for job seekers, particularly for commodity jobs, to pick the highest paying company and apply their first right, so the companies that pay the most will naturally attract the most candidates, all other things being equal.

That obviously is a problem for companies where you don’t have the budget to pay top dollar for position.

Those folks who, you know, kind of like Google search listings, those folks who are in position three, or position 10, or page to have a set of job listings for listing by salary, they’re gonna have a harder time attracting talent.

And in general, for the commercial sector, that’s not necessarily a bad thing.

It’s certainly as good for workers, where it could cause issues would be for nonprofits, right, because generally speaking, nonprofits, can’t afford to pay as much as regular private sector companies, they just don’t have as much budget.

But on the whole, I think it’s a good thing for job markets, because it makes salaries, something that is competitive that companies have to pay attention to, and pay commensurate to the need that they have for talent.

Now, again, if you’re running a company like I do, I co own a company.

That is a challenge, right.

And so we would have to do other things to highlight.

If we can’t pay top dollar for specific kinds of talent, we have to do other things to say, here’s some parts of working at ze Trust Insights that could make up for not having the biggest salaries listed.

For example, we might have a culture that’s not toxic, right.

So you will not be asked to work 90 hours a week to only get paid for 40, we might advertise that we are minority and women owned, right, if those are things that are important to you, we might advertise on our environmental practices, if that’s important to you.

So just like price isn’t the only factor when you’re purchasing something.

Salary is not the only thing that people consider with job listings.

But it is one of the first things.

And we are seeing trends now in the industry, particularly in places like California, where everybody has to list salaries.

And again, that’s not a bad thing.

It also can create extra churn within an organization, right? If you are working, say as an account executive at an agency, and you’re getting paid $46,000 a year, and you see a new job listing on your company site for account executive $49,000 a year you can legitimately go to your manager and say, Hey, why are we hiring for my exact role, but the you know, the new candidates getting paid $3,000 more.

So those salary listings will likely create churn for people in existing roles, if a company does not step up the pay to match what is what is happening.

Now, the knock on effects of this will be that companies will have to pay more, which again, not a bad thing, but then in turn will have to charge customers more.

So there will be an inflationary aspect of that.

But in terms of benefiting workers and benefiting job seekers, it’s a net good thing.

Now the second angle where salary Transparency can come into play is within an organization itself.

Should you be able to see what somebody else is getting paid.

Again, right now, that’s a that’s an internal policy, there are companies that publish their salaries that publish exactly what a person makes.

I’m not a fan of that.

At the individual level, only because of some privacy stuff, right? Person disclosing their individual income, I think can be problematic.

The intent is to highlight and and minimize or eliminate pay gaps.

Where if you have say 10 people in an organization who are vice presidents,

seven of them are male, three of them are female, and the seven males earn X dollars more than the three females who are in the exact same role.

Or you have a case where you have you know, seven people Who are Caucasian and three people who are black and again, you have a salary disparity publishing salary listings, internally can help reduce or eliminate inequality within an organization.

What I would prefer to see is that organizations move to a salary and pay system.

Most of the federal government does, where there are grades, there’s a grade based on the title, right GS one, GS two, GS three, and an associated dollar amount.

And then a seniority column, where if you have been a, if you’re a GS four, but you’re five years into your role, there’s an adjustment for being being that senior in that role.

And then everybody gets paid the same, essentially, for that role.

So if you are, if you are a GS five, but you’ve been in the in the role for seven years, you get x dollars.

And if somebody else is a GS five, but they’ve only been in the organization for two years, they get this amount of dollars, and nobody has to guess, am I getting paid more or less than somebody else? Right, we all if you’re just five at at your seven, you get x, if you’re just five a year eight, you get x, that is to me very fair, it eliminates the ability for you to discriminate against somebody based on protected class characteristics like age, or gender, or sexual orientation or ethnicity.

You are just in these roles, and then you get promoted based on those criteria.

I think that probably is one of the most fair systems that you can come up with.

All other things being equal.

Now, are there exceptions to that rule? Of course there aren’t.

But generally speaking, that’s a good way of handling it.

So salary transparency, definitely a good thing for job listings, mostly a good thing for inside companies, for the purposes of reducing discrimination, for the purposes of creating more equality, and more compensation based on results.

You know, that’s the other part that can be tricky.

So if you are a salesperson, everyone should have the same base, right? So your base is 20,000 Are your draw is 20,000.

And then your Commission’s are based on you know, whatever, whatever schedule you’ve got.

So you could have a commission schedule for if you for your first $250,000 in sales, you get paid 6.7% For your next two and $50,000 in sales, you get paid 6.9%.

So again, we’re not let allowing an organization to discriminate based on characteristics immaterial to the job, but you are allowed to pay people differently based on performance.

A high performer high producer, makes $2 million in sales.

Yeah, they should get higher and higher commissions, the bigger and the more they sell so that somebody has an incentive to sell $10 million worth of real estate or server appliances or private jets or whatever the thing is, you absolutely want to have pay and compensation be an incentive for performance and incentive for doing good work.

And having again published set scale so that people know what to expect can be that incentive, someone’s like, I want to make more money, how do I make more money this year? And say, Okay, well, your bracket to 6.7%, you got to sell an extra quarter million dollars to get to bracket three, if you can do that your your commissions go up.

So even in a case where you have commissions, having set numbers, and set schedules, increases fairness, and still keeps that motivation for people who want to work extra hard to want to get to that next level.

It’s clear what the next level is.

It’s clear how they get to what performance metrics they need to get to so good question.

We could spend a whole bunch of time on on compensation stuff, but I think this is a good place to start.

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