Are You Ready for Full Pay Transparency?

According to a recent article, the San Francisco online search network firm “Hired” will provide full transparency for employee pay at all pay ranges in all positions.  A marketing firm called Verve with 170 employees took it a step further and posted a document internally listing every employee’s position and current pay.

Traditionally, employee pay was a closely guarded secret.  In most states, revealing employee pay could be a termination offense.  As most know, employee to employee pay discussion is not a terminable offense in California. Further, effective January 2018, it is no longer permissible to ask about prior pay to candidates in California.

What does this all mean?  In short, it means there is a growing trend forcing employers to be more open about pay practices. While it is an extreme approach to reveal the compensation of all employees, it is definitely a trend, particularly in California, to be very clear about pay ranges and pay growth opportunity.

This pay transparency is being driven, in large measure, by the extremely tight employment market.  Top candidates insist on knowing what pay ranges are and what their pay growth opportunities are within an organization.

Because a California employer can no longer ask about prior pay, that forces greater organization and clarity about job levels and pay ranges for each position.  One result of this pay transparency trend is ringing some of the subjectivity out of pay policies.  It also means that some thought has to be given to a point factor system or other method that objectively ranks the attributes, capabilities and talents required to be successful in each position.

As we have seen in some of the recent gender pay lawsuits, paying people subjectively, or “as little as I have to” can carry significant liability.  Further, we have seen several examples in the last year where our clients are simply paying too little to stay competitive in the market, particularly at the lower end of the wage scale.  High turnover, low quality employees, excessive complaints, and poor productivity can all be the result of a poorly designed pay system.

The market is forcing employers to have clear and logical pay policies in order to attract and retain top talent, particularly in competitive labor markets.

Pay Trends from the Employee Perspective

“Many of us who entered the workforce a longer time ago, entered into a culture where you didn’t talk about pay”, said Sandra McLellan, of Willis Towers Watson.  Today, people are much more comfortable discussing what they earn.  Moreover, “information” about pay is much more readily available than ever before.  Employees can visit GlassDoor, PayScale and Fairygodboss, all of which aggregate pay information from thousands of jobs across multiple industries.

Not only do employees want to feel that they are being fairly compensated, but this phenomenon puts a much greater pressure on managers and HR groups to be on top of their game when it comes to pay practices.  One employer, CareHere, who employs almost 1,100 employees, made the decision to be fully transparent with pay ranges.  “We were finding that when employees and candidates were coming to us with salary information, they were misinformed”, said Jeremy Tolley, Chief People Officer at CareHere.  “A lot of information that is available for free is inconsistent at best”, he said.

According to Scott Dorobski, Senior Director of Corporate Communications at GlassDoor, “Less than 10% of employers include pay information in job listings, yet 98% of job seekers want pay data before applying to jobs, so there is still a disconnect…”

In the absence of clear information from a potential employer, job seekers will go to GlassDoor, PayScale, LinkedIn and other sites which “crowd source” job information.  This may seem like a good idea, but employers know that there are many complex factors that go into total compensation.  Often employees focus on base salary as opposed to the total rewards of the position.

On the positive side, being clearer about pay says something about an employer’s culture and values.  Even if the company is not offering the most lucrative package, being up front with those kinds of values can mean something to top job seekers, because people want to work in a great culture and at a job they love.

As an added benefit, pay transparency also addresses pay equity and when the focus becomes objective based on what is the job worth to the company, there is a strong defense to claims of pay discrimination.

Significance

We believe the days are over when employers can ignore well thought-out, tight, and reasonably transparent pay practices.  Employers should have a clear compensation philosophy, a point factor system that objectively ranks jobs, and clear training for managers to explain the company’s pay practices.  Managers should have a solid sense of what total rewards are in an organization, particularly in the Bay Area.  Many who work in Silicon Valley know what it is like to be “outbid” for a key employee by a large tech company.  This means there must be transparent pay practices and a strong argument for total rewards, the total value of working at an organization.  For many employers, it may be time to start thinking about overhauling pay practices before talent is lost at the front door, or worse, out the backdoor.  ABD SharedHR has a strong compensation expertise to support your pay policies and practices.

Paul Finkle, CMC, SPHR – Executive Vice President

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

New Ruling in California for Off-the-Clock Work

On July 26, 2018, California’s Supreme Court ruled that employers must pay workers for the time they spend completing off-the-clock tasks, such as locking up after work.

The long-awaited decision is a result of a six-year legal battle between Starbucks and Douglas Troester, a California worker who sued Starbucks for not paying him for his closing tasks. In their ruling, the Court highlighted distinctions between the state and federal laws, advised employers to restructure work, utilize technological advances to track time, or make other changes to prevent employees from performing off-the-clock work.

The Fair Labor Standards Act, a federal law, generally allows companies to avoid compensating employees for time spent on duties the law describes as trivial or too difficult to track. In its majority opinion, the California Supreme Court said the federal rule does not apply in the state when it comes to certain off-the-clock tasks performed by employees.

The decision marks a win for labor advocates who say requiring hourly workers to spend minutes doing unpaid tasks amounts to wage theft. However, business groups say the ruling will encourage frivolous lawsuits and cost companies money.

Troester argued that during his 17-month tenure, he worked 12 hours and 50 minutes of off-the-clock work. At $8.00 an hour, that amounts to roughly a little over $100.00. Associate Justice Goodwin Liu wrote, “That is enough to pay a utility bill, buy a week of groceries, or cover a month of bus fares. What Starbucks calls ‘de minimis’ is not de minimis at all to many ordinary people who work for hourly wages.”

With this ruling, we expect this will open the door to additional lawsuits by employees in similar situations as Troester, which will also test the boundaries of the ruling to determine how much time spent doing work off the clock is enough to get paid. The Court did not specifically detail what they considered to be trivial or not. Associate Justice Leondra Kruger wrote separately to say that there may be some periods of time that are, “so brief, irregular of occurrence, or difficult to accurately measure or estimate, that requiring an employer to account for them would not be reasonable.” She cited as examples: glitch that delays logging in to a computer to start a shift or having to read and acknowledge an email or text message about a schedule change. In reviewing the facts of this case, the Court did deem that the compensation that was not paid to the defendant was significant enough to rule in his favor.

It is estimated that this case alone could cost Starbucks close to seven figures, and that all California employers with hourly workers could find themselves in legal and financial jeopardy. Starbucks has appealed the decision and the case is now in the 9th Circuit US Court of Appeals.

Candace Emmer, MA – HR Consultant

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services