Salary transparency requirements are making major headway as another significant factor in an already tumultuously competitive labor market. A shortage of financial talent, particularly accountants, combined with some CFOs planning to use layoffs as a tool to hedge against a slowing economy, has created the perfect storm for competition as talent retention and recruitment continues to be paramount for CFOs prioritizing workforce concerns this year.
Proactive CFOs who are looking for ways to seek and hire the best talent should not view salary transparency requirements as another form of compliance, but as a tool for both parties to use when it comes to the determination of compensation and overall reflection of company values to potential applicants.
Gen Z’s De-Stigmatization of Compensation Conversations
Discussions around compensation, especially between coworkers, are often avoided altogether in conversation. Despite clear guidelines by the National Labor Relations Board (NLRB) that say workers are permitted to discuss compensation in person at will, few do. According to Valerie Capers Workman, chief legal officer at Handshake and former vice president of people at Tesla, salary transparency is more than a labor issue, it’s a communication issue, driven by the emergence of Gen-Z into the workforce.
“For far too long, the topic of salary has been taboo, but it shouldn't be,” Workman told CFO.
“Internal transparency and open communication are going to be the key ingredients to effectively rolling out a salary transparency strategy,” said Workman. “An equitable talent strategy can’t just be about your new hires; your employees deserve the same opportunity to understand their pay. Take the time to communicate with current employees about pay equity efforts and expectations, especially if it’s new to the organization.”
Workman stressed younger workers are seeking higher compensation and are willing to negotiate, so proper leveraging of transparent compensation practices may be key to companies who are looking to hire younger talent.
I fundamentally believe that salary transparency will encourage the creation of a more equitable and diverse workforce while helping organizations to drive innovation and competitive advantage. — Valerie Capers Workman, chief legal officer at Handshake
“A bigger salary is still the number one thing workers want in a new job, and that includes recent graduates,” she said. “In my experience, while it’s often senior executives who are setting policies about salary transparency at any given company, a senior executive typically asks about compensation early on in their own hiring process for a particular job."
Workman continued: “[Gen-Z applicants] might even be working with an executive search firm who shares that information before they even speak with a company. Job seekers early in their career have the least amount of leverage to make that ask, and that’s one of the reasons why we’ve seen Gen Z step-up and be a driving force on this issue.”
According to the executive with over twenty years within legal, compliance and human resources, it's Gen Z’s unique experiences that have put them in a position to institute change around compensation communication.
“I encourage anyone I talk to about this to put themselves in the shoes of a first-time job-seeker,” she said. “This generation not only had their college experience disrupted by the pandemic but are now graduating and entering the workforce during an uncertain time and facing the high cost of living and high student debt. Having insight into a role’s potential compensation is as practical and necessary as knowing the required skills or where a job is located.”
With the compensation offerings of competitors widely available, a parameter has been set for many roles and ranges for companies. In job postings for staff accountants in the New York area on LinkedIn, salary ranges were as broad as $75,000 to $105,000 (see chart below).
Many companies who operate in states without salary transparency requirements, like Austin, Texas-based B-Corp and insurtech LOOP, already have fair and equitable compensation practices in place. LOOP's vice president of finance Ryan Forish described to CFO how his company takes a variety of factors into account when it comes to determining a range and final compensation for potential hires.
“For entry-level roles, we have small ranges and aim to hire at approximately the 50th percentile of the range, with some variability depending on the candidate’s applicable work experience compared to experience requirement in the job posting,” said Forish. “For example, if a job posting requires one to three years of experience and a candidate has three years of applicable experience, our offer will likely be higher than the 50th percentile for pay band.”
Forish spoke about the benefits of pay audits for both fair compensation and overall hiring practices. “We just completed our first compensation audit utilizing our new pay bands and salary ranges,” said Forish. “The audit focused on ensuring pay across bands was equitable, and job titles were commensurate with employee performance and experience. We plan to complete this process at least annually, and more often if market changes indicate a review is necessary.”
“In future iterations, we plan to increase our rigor around compensation equity across gender, race, age, and sexual orientation,” he continued.
Improving Equity and Efficiency in Hiring
Salary transparency’s measurable impact on labor markets is too soon to tell, but its impact on the overall approach to recruitment and hiring is evident. According to Workman, organizations that approach compensation with more of a transparent mindset will put themselves in a better position than their competitors that choose not to.
“I believe the world is shifting towards greater salary transparency in response to the desires of our emerging workforce and the changes brought on by extended remote work during COVID,” Workman said. “I’m thrilled to see that because I fundamentally believe that salary transparency will encourage the creation of a more equitable and diverse workforce while helping organizations to drive innovation and competitive advantage.”
Along with agreeing with Workman on the idea of salary transparency creating a chance for more diversity and equity, Forish also spoke on the idea of salary transparency efficiency for both parties, particularly in the early stages of the hiring process.
“My preference on either side of the interview process is to be fully transparent on the salary and equity components of compensation at the beginning,” said Forish. “I think it builds trust between the candidate and the hiring company and creates efficiency in the hiring process as candidates will eliminate themselves from consideration if compensation expectations do not align.”