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Top 5 New-Age Rules of Paying Employees
When determining how much to pay, creating policies about pay, or determining what and when to discuss pay in the application process, know these rules.
When you’re determining how much to pay a new employee, setting your company’s policies regarding employee salary disclosure, or deciding whether salary history should be discussed in the application process, there are plenty of laws, regulations and best-practices to guide you along the way.
To help you stay up-to-date with trending pay practices, here are the top 5 rules to keep in mind.
1. Paying below market? Disclose the salary upfront.
A recent survey by SHRM found that 83% of candidates who were told upfront that the job was below-market salary accepted the job anyway. Those same employees subsequently reported higher levels of job satisfaction and engagement, perhaps due to their respect for the organization being upfront about the lower pay amount.
In other words, if you find a great candidate but don’t think they’ll accept the role because of its low pay, ask anyway and explain why the salary is set where it is. You may be rewarded with a fantastic new employee that you didn’t think you could afford!
2. Comply with the Equal Pay Act of 1963 and applicable state laws.
Yes, the Equal Pay Act (EPA) was passed years ago, but it’s still in effect today. Its basic premise states that employers must pay the same wage for the same job, regardless of the employee’s gender.
Pay discrepancies are, however, permitted based on seniority, merit systems, quantity or quality of production, and other non-gender-related differentiators. Since 1963, nearly every state has enacted its own equal pay laws that go even further.
3. You may not be able to ask a job candidate his or her previous salary.
A handful of states and municipalities have recently enacted regulations that make it illegal for interviewers to ask candidates for their salary history. Note that laws vary from location to location. Some restrict the question only in specific municipalities or for certain categories of employers. Others permit salary-history questions after an offer is made and/or restrict what you can disclose as a former employer.
Before you post a job, be sure to check the laws.
4. You can’t prevent employees from discussing their pay.
Employers can’t discourage employees from talking about their wages, and employees can’t legally be dismissed for not keeping their compensation a secret. The National Labor Relations Board (NLRB) has defined the discussion of wages as a “protected, concerted activity.” You’ll find more history on the subject here.5. Salary transparency is a thing.
Ready for this? There is a growing trend towards making EVERY employee’s salary known company-wide. Switching to a transparent system, however, can be a little rocky. While female and minority employees frequently see a bump in pay, other employees may experience a decrease in salary. Companies that have adopted salary transparency policies note that you don’t have to pay everyone in the same role identically; variations in pay can still be based on experience, seniority, merit, etc.
Where to Find More Help with Pay Practices
Our Stratus HR experts are here to help clients determine the right pay range for a new or existing role, providing expertise and tools when hiring, equalizing pay, or considering merit increases. Contact your HR rep for more information.
Not a current Stratus HR client? Book a free consultation and our team will contact you shortly.