The podcast ‘The Truth Behind Salary Transparency’ delves into the impact of the legal mandate for salary range disclosures in over 10 states since 2016.
The discussion revolves around the reactions of companies, misconceptions about these laws, and strategies for success.
The guests, Shannon Schiltz and Brandon Cherry, both from a16z’s people practices team, share their insights on the matter.
Origins of Salary Transparency
Salary transparency began as a cultural shift, particularly in Silicon Valley, where companies were encouraged to be open about their compensation plans.
This was a notable deviation from traditional practices where salary details were typically exclusive to government jobs.
Flexibility in Adjusting Salary Ranges
Companies need to be flexible in adjusting salary ranges in response to market changes.
In recent years, the market has dictated that ranges need to be moved almost every year.
These are guiding principles, not laws, and companies need to be adaptable in their approach.
The earlier you think about putting a compensation structure in place, the stronger and healthier your company is because you have consistency, not fairness, consistency. – Brandon Cherry
Avoiding Overemphasis on Exact Salary Ranges
Companies, especially small ones, should avoid spending too much time on defining exact salary ranges.
It’s important to balance the time dedicated to this process with the return on investment, as these ranges are likely to change over time.
The key is to have guiding principles and an understanding that the compensation structure will evolve.
Salary transparency became a cultural thing. It became very much a Silicon Valley thing too, that people should just be confident with what they pay each employee. – Shannon Schiltz
Salary Transparency as a Cultural Shift
Salary transparency has evolved from being a cultural shift to a legal mandate.
It encourages companies to be confident about their compensation plans and to justify them.
This marks a significant shift from traditional practices where salary details were generally exclusive to government jobs.
Fairness vs Consistency
In the context of salary transparency, there is a distinction between fairness and consistency.
Fairness can be subjective and vary among individuals, whereas consistency refers to a company’s systematic approach to compensation, which includes benchmarking roles against market data, targeting a certain percentile, and having a clear compensation structure.
Importance of a Robust Compensation Structure
A robust compensation structure is crucial for companies to succeed in an environment of salary transparency.
This structure includes a compensation philosophy that defines the competitive market, a leveling architecture that clarifies career progression, and the use of third-party market data to set salary ranges.
Such a structure enables companies to have transparent and consistent discussions about compensation with employees.
Company Reactions to Salary Transparency Laws
Companies have varied reactions to salary transparency laws.
Some adopt a ‘wait and see’ approach, observing the enforceability of these laws, while others choose not to post their jobs or post unrealistic salary ranges.
These responses underscore the challenges faced by companies in complying with these laws and managing their implications on their workforce.
Benefits and Challenges of Salary Transparency
While salary transparency can lead to difficult conversations, it ultimately benefits companies by reducing cross-employee competition and fostering trust.
However, companies need to be prepared for these discussions and have the necessary infrastructure to effectively articulate their compensation policies.
Defining ‘Critical Talent’
‘Critical Talent’ refers to employees whose departure would significantly impact the company.
While these employees might not fit into standard salary ranges, companies can maintain consistency by defining ‘critical talent’ as a category that warrants above-range compensation.
Building Salary Ranges
Building salary ranges involves focusing on factors like years of experience, scope, impact, and influence, rather than individual names.
Once the levels are established, market data is incorporated, and people are leveled based on the criteria.
This process often reveals employees who are either way above or below the range.
Timing for External Help
External help for figuring out compensation structures is typically beneficial when a company receives a significant infusion of money and is about to scale up hiring.
The goal is to establish a consistent compensation structure that doesn’t feel limiting but serves as guideposts.
Salary Ranges as Guideposts
Salary ranges are not fixed rules, but guideposts that surface trade-off decisions a company makes along the way.
These guiding principles help companies make informed decisions while being aware of their consequences.
