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Thank you all for your patience! I was saying I think I'm cursed, because last year at RubyConf, I also spoke right before lunch and had similar issues.
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So, we're going to power through because lunch is next, and everyone loves lunch.
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I’ll go pretty quickly, but I love talking about this, so definitely come grab me afterwards if you want to know more about anything I might cover a bit quickly. Today, I'll discuss how we implemented salary transparency and why it matters.
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I'm Hilary, and I'm the VP at 10-4 Consulting, a web and mobile consulting company based in Madison, Wisconsin. I dressed as scope creep for Halloween last year.
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We sent out pictures to a couple of our clients, and one of them responded, saying, "Haha, that's me!" I thought, yes, but I didn’t say that because I’m a professional.
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So what are we going to be chatting about today? First, what is the big deal? Why do we even care about salary transparency? What are the different types of transparency? It's not just about posting wage data.
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What did we do at my company when we implemented it? What did we learn? What have we done differently since? Finally, we'll touch on the conclusion, which we might have to skip because we have limited time, but we can dive deeper in the following days.
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So, raise your hand if any of the following apply: You didn’t know what the salary would be until it was time to negotiate at one of your jobs.
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You suspected you were underpaid at one or more jobs. You were discouraged from talking about compensation, and at one or more jobs, you experienced some form of salary transparency.
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Fewer hands went up for that last one, which is not surprising. This is why salary transparency matters.
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There is an expected global shortage of 85 million tech workers by 2030. I want to highlight that I did my best to gather a mix of statistics that are global, but many are sourced from data within the U.S. or Canada, as that information was more readily available.
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For instance, 73% of U.S. tech workers are considering quitting in the next 12 months. You might be thinking, "Okay, well, I don’t run a business; how does this really impact me?" This could mean extra work on your plate.
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Anyone who has worked at a company that is understaffed knows there's work that needs to be done, and a lot of it often ends up falling on you.
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Company volatility, especially if you're at a smaller company, may lead to a situation where they might go under, or your department could be restructured.
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Unhappy co-workers can also create a negative atmosphere. No one likes being in a workplace where there’s low morale and everyone is frustrated and stressed out. Perhaps, that’s you—maybe you're in that position where things just aren’t going the way you want.
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From a few research studies, we see low pay, lack of advancement opportunities, and feeling disrespected at work frequently correlate with employee dissatisfaction.
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Can anyone relate to any of those experiences at a job before? You know you're in public, but what do employees want?
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Well, according to the same research study, about 40% of people who are considering quitting feel that better child care access or more flexibility would help. Not too surprising, but very few people cited those as major concerns compared with the need for better pay.
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In fact, salary transparency ranks high across various surveys about employee needs and desires. 80% want some form of salary transparency, 68% would switch jobs for better pay visibility, 63% prefer to work at a company with salary transparency, and 82% would be satisfied with lower pay if it was communicated clearly.
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Moreover, 60% will quit because they believe they're underpaid, and 70% believe that salary transparency is good for employee satisfaction. Recently, data showed that many individuals think they're underpaid, even if they are not, due to a lack of visibility.
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Of course, it’s important to note that the equity wage gap is even worse for women of color. More than 80% of employers who conducted pay equity audits found gaps in their organizations.
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These companies often self-selected to conducting audits but still found significant gaps, particularly for Latinas, Native Americans, and Black women, who may lose about a million dollars over their working lives.
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How does this happen? There’s no single individual factor responsible. A common question emerges: "If someone is unhappy with their pay, why didn’t they just negotiate?" This is a misconception as relying on negotiation alone does not solve the problem.
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Often, managers are your advocates. If you have a good manager who is willing to support you and has buy-in with decision-makers, then pay is less of an issue. However, if a manager is overworked or not good at advocating, that can significantly affect the amount of compensation you receive, regardless of your performance.
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Employees often have to advocate for themselves, especially at the beginning of a job. Relying on negotiation as the primary tactic for setting base pay is inherently flawed.
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It's a recognized problem in the industry, and globally, the estimated pay gap is about 23%. The problem persists and even widens over time due to consistent lower anchor points in negotiations.
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Ethics is about knowing the difference between what you have the right to do and what is the right thing to do. This principle is important, especially when considering legislation and guidelines that are taking shape.
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Even if a company is not influenced by the ethical argument, the legal ramifications will catch up soon if they haven't already.
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Types of transparency extend beyond just salary data. Initially, my understanding was that salary transparency simply meant posting what individuals earn. However, there are various forms of transparency to consider.
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For example, when posting a job opening, it is crucial to display the salary or its range. This approach is gaining popularity, especially in the US, but also in Europe.
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Various regulations exist around salary posting. Some legislation mandates salary must be included in every job listing, while others require it only be provided if requested.
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As of now, 17 U.S. states require one of these types of job posting transparency. A couple of additional states added requirements this year to take effect next year, along with Ontario, Canada. The EU has also passed legislation covering a wide array of salary transparency guidelines.
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What's the impact of implementing salary transparency? You'll see up to 90% more applicants. Not adopting salary transparency puts your company at a disadvantage.
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The data shows that 75% of new job postings over the past year on sites like Indeed and LinkedIn included salary information, reflecting a 35% increase in just the first half of 2022.
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Banning inquiries about pay history is another emerging facet of salary transparency as it protects individuals from the adverse effects of compensation history.
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Currently, 21 U.S. states, along with the EU, have made it illegal to ask about past pay. Compared to employers with access to wage data, those without tend to interview and hire candidates with noticeably lower previous salaries.
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This study found that without salary data as a reference point, employers made higher salary offers than expected, often misjudging the value of applicants based on their previous compensation.
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Furthermore, when past wages cannot serve as an indication of an applicant's prior success, hiring decisions must rely on other significant factors. This may include competence measurements such as real-world tests and practical tasks.
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By avoiding reliance on past wages in hiring, we have an opportunity to create more equitable starting points for all candidates instead of potentially perpetuating existing biases.
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With that being said, sharing internal and external salary data can drastically impact gender equity. A study over 14 years showed that publishing salary data reduced the gender equity gap by up to 50% among 100,000 U.S. academics.
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In Sweden, the gender pay gap is just 6% for those performing the same roles, indicative of a strong culture of salary transparency. In contrast, the gender pay gap in the U.S. was 11%, nearly twice as high.
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Surprisingly, one downside of transparency can be a slight depression of wages across the board, as many companies aim to standardize compensation. Nevertheless, employee satisfaction tends to improve in the process.
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Having transparent career paths is essential, as employees should see clear avenues for advancement and understand what is expected of them in terms of roles and salaries.
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The EU is currently working on regulations to require companies to share the criteria used to determine pay levels and career progression.
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The impact of this regulation may be significant, as 40% of IT software and tech workers indicated that limited career progression made them consider quitting their positions.
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Additionally, 40% of Gen Z workers stated they would accept a pay cut if they knew it would lead to career growth. Lack of opportunities for upward mobility has been cited as the number one reason for quitting by many workers.
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This highlights the importance of providing growth opportunities, especially in a field like tech, where job-hopping for better pay is common.
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Speaking of companies, let me quickly walk you through how 10-4 implemented various types of salary transparency and some lessons we learned along the way. It’s time for lunch, as we started a bit late.
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So, what were we already doing? We had some aspects of salary transparency that I didn't even categorize initially as such. For instance, we have a published career progression document that contains salary ranges and expectations for various roles.
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We also provide guidelines for how to ask for a promotion or a raise. I recall writing that documentation before becoming a partner, and one of the other owners questioned whether we should share how to ask for more money.
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I firmly believed we should because we value our employees and want them to feel empowered to negotiate. Our workforce is predominantly women, who often face social pressures around negotiation.
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We encourage our team members to approach us about raises at any time, even during quarterly reviews. What led us to expand our efforts in salary transparency?
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It was an eye-opening tweet I discovered around three or four years ago from Black Twitter. It emphasized how privileged it is to apply for a job without knowing the salary upfront.
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This led to the realization that we should openly post our salary ranges, which we already had documented in our career progression document.
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After seeing a presentation from Nancy Hawa at RubyConf in 2019, where she discussed her company’s experience with internal salary transparency, I felt inspired.
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I thought, how hard could it be? Everyone wants this, we have the groundwork laid, and we’re a small, close-knit team built on progressive values.
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However, I quickly learned that discomfort with the topic of money is prevalent in many cultures, especially those that value individualism.
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Surveys revealed that while 65% of workers support sharing average salaries by department, 75% oppose sharing individual salaries.
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This phenomenon underscores the disconnect people feel: while they want access to data, they also want to protect their individual privacy. As a small company, we felt that specificity was essential.
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The majority of employees valued the initiative, but one exception was the lowest-paid team member, who felt uncomfortable with others seeing her salary despite her satisfaction.
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In hindsight, we should have prepared everyone for this change beforehand and provided them adequate time to process the transition.
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We also should have gone to them directly, asking what concerns they might have instead of waiting for them to come to us.
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Another important point is not just the 'how' of transparency but also the 'why.' We explained how it cuts the gender pay gap and shows employees how they can grow within the company.
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Listening to their concerns was crucial because many employees are open to lower pay if they understand why it’s structured that way.
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Record keeping was also essential. We had to determine where all the salary data would be stored and how it would be tracked for updates.
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Many companies struggle with maintaining updated records as new employees are hired and raises are granted. In hindsight, we set up a system to regularly check in on the accuracy of our salary information.
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We included historical salary data to show how long it took for employees to receive raises, important for new employees to set expectations for their career growth.
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Sometimes we faced difficulties, but overall, our efforts have been successful. Over the past three years, many applicants cited our transparency as a motivating factor for applying.
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Our team members have become better advocates for themselves, and leadership can also use our documentation to justify raises during performance reviews.
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This transparency builds trust for new employees, who often feel the most vulnerable when starting, as they are unsure of societal norms and company culture.
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Going forward, we developed a pre-offer letter session where prospective hires discuss salary expectations, benefits, and career progression to ensure alignment with our company values.
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Moreover, I encourage candidates to come to the meeting with their salary expectations to ensure that they feel valued and excited about joining.
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Sometimes we couldn't meet those expectations. A recent junior hire was comparing salary information with friends working for companies known for their high pay.
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This comfort with open communication stemmed from our transparent practices, which made them feel secure in discussing salary wishes during the hiring process.
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By presenting our historical data and demonstrating our flexibility with compensation decisions, we were able to alleviate their concerns and ultimately got to a successful offer.
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As employees, we’ve also created an environment allowing for customization in how compensation is structured, whether in salary or benefits, based on individual preferences.
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However, we still need to enhance our transparency around partner compensation, focusing on how to best share profit-sharing and bonus structures. There’s still more work to do, and those areas remain our focus.
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That's all I have, so thank you!
