2023 Compensation Trends: Show Your People You Value Them By Building Trust Via Transparency
On January 1 of this year, SB 1162, the Pay Transparency Act, took effect in California. This is great news for both employers and employees in the Golden State. What does the new law do, and why is it good for California businesses? The Act requires employers with more than 15 employees to disclose pay scales in their job postings. It also mandates these companies share salary range information with those workers who inquire about them. (An existing California law had only obligated employers to provide salary range information to applicants after a first interview.)
In addition, employers with 100+ employees must now submit a pay data report to the state by the second Wednesday of May. The report must include mean and median hourly rate for each combination of race, ethnicity, and sex within various job categories. (It’s helpful to note that California is not the first state to have such pay transparency requirements. Colorado, New York City, and Washington already have similar legislation in effect. Several other states have comparable laws pending.)
Moreover, SB 1162 is just the latest in a series of laws passed by the California legislature aimed at establishing equity in pay scales among all workers regardless of their sex, race, age, ethnicity, and other factors. Pay transparency and pay equity are driven by the need to create a level playing field with respect to compensation for underrepresented groups.
Such laws are positive developments for workers. Why? They help to ensure employees are being treated fairly and that they are being judged on the value of their performance, not on biological factors beyond their control. Businessowners also benefit by increasing trust and loyalty in their workforce, helping to eliminate a potential source of resentment among their work staff.
So, what can you, as a businessowner or leader do, to support the spirit of our emerging pay transparency laws? For one, it helps to post the actual minimum and maximum of your organization’s salary ranges. (If you don’t have formal ranges, now is the time to create them. Call me. I can assist.)
Despite these recent changes, I am aware of some corporate HR leaders who want to get around these requirements by posting “truncated” ranges. This idea flies in the face of the spirit of pay transparency. Worse, it will be hard to maintain since employees are supposed to know their position’s pay range upon hiring. I have also heard about employers posting overly broad ranges, where minimum and maximum values are well beyond 25% below and above grade midpoints. This just signals to prospective employees that these organizations lack a culture of trust. It also begs the question: What are they trying to hide?
Savvy employers-of-choice, on the other hand, are leaning into the spirit of pay transparency legislation as yet another way to show their employees how much they are valued. (It also has the benefit of helping them steer clear of government entities’ attention and potential fines.) So rather than trying to evade the new rules in the new year, how about embracing them to aid both your staff and your organization?
And speaking of 2023, inflation is still with us. It’s definitely easing up, according to the latest reports, but a single trip to the supermarket will show you prices are still up. Even so, overall U.S. salary increase budgets have reached their highest level in 20 years, rising to an average of 4.1% in 2022 with a 3.8% median, this according to WorldatWork’s Salary Budget Survey.
Here’s a closer look at what the data tells us about compensation trends in the United States:
Even with continued economic uncertainty, organizations are planning to increase pay budgets in 2023. In fact, American companies project an average salary increase budget of 4.1% for 2023, up from 3.9% in 2020 and 3.7% in 2021.
Some increased budgets are projected to be in the 4.6% range—or higher.
These increases come as organizations seek to attract and retain top talent in a highly competitive market. In addition, many companies are employing salary increases as a powerful tool to reward employees for their hard work and dedication, especially during trying times.
Traditionally, the start of the new year is an optimal moment to reflect on the past, acknowledge our mistakes, and resolve to do better in the year ahead. As we’ve discussed in previous articles, creating a positive company culture—one creating and facilitating an environment in which workers are valued, acknowledged, and rewarded—is a subject of growing interest throughout the world. Pay transparency and meaningful salary bumps are just two more critical ways tomorrow’s leaders can show their employees how vital they are to their company success in the year ahead.
For more information on how your company can best comply with new pay transparency laws and even thrive from their adoption, please contact me at laura@conoverconsulting.com. Here’s to an empowered 2023.