The following is a transcript of our podcast conversation with Shari Kalsta. You can listen to the full episode on Spotify or Apple Podcasts.
Sarah Wilkins
Hello, and welcome to our first episode of Humans Beyond Resources. For our first episode, we are discussing pay transparency and how to build trust with your employees and candidates. With recent pay transparency laws going into effect January 1, 2023, in Washington and California and at least five other states already having similar laws in place, we wanted to bring you some practical advice and guidance on how to handle pay transparency in your organization. Reverb wholeheartedly agrees with transparent pay practices and believes that sharing certain compensation information with employees and candidates will build trust and accountability across the organization. To address some common pitfalls and best practices, we are chatting with Shari Kalsta, a senior compensation expert. Welcome, Shari. Thanks for joining us.
Shari Kalsta
Thanks for having me. I’m excited for this.
Sarah Wilkins
Yeah, I can’t wait to get all your expertise. I’d love to start by hearing from you on some of the common pitfalls you see when companies are implementing pay transparency practices.
Shari Kalsta
Sure. Well, there’s a lot going on right now, and I kind of bucket all of these things into three main buckets that I’m seeing. One of them is, unfortunately, no action. I find that some employers don’t even have this on their radar, but it’s not the end of the world, and we can help. I also see panic, and I see analysis paralysis. So let me explain those a little bit. We see some companies playing catch up, and they’re just making all of these decisions out of desperation. They’re in panic to get in compliance with everything, but with just a little bit of guidance, a structured approach with clear guidelines can be quickly implemented. What I see these kinds of companies doing is they post really large pay ranges because they’re not necessarily prepared, and they haven’t done any analysis of their current employee pay. So there’s a lot of fear of, what will our employee reaction be? So they go to, oh, my gosh, we’ve got to post this and and make it huge, and then nobody can really tell what we’re really doing. This technically meets the letter of the law, but it also has unintended consequences in both the candidate pool that you can adopt and in the employee population. And then on the analysis paralysis side, what I see is companies that really want to get very detailed with their pay ranges to attract the right candidates, which is great, but they get really hung up on those details along the way, and they miss the big picture. So without a real strategy behind it and clear change management and communication all of that analysis kind of gets lost in the chaos and hiring managers, recruiters and even current employees are left confused and sometimes even irritated.
Sarah Wilkins
You were talking about kind of the panic portion we saw in the New York rollout, how companies just posted very large ranges and like you said, it technically met the letter of the law, but it definitely doesn’t look great for employees or candidates to have such a wide range. Would you agree?
Shari Kalsta
Yeah, no, totally. And when candidates are out there looking, they see a range like that and if they see it in more dialed in range, who’s going to get that candidate applying? It’s going to be the more dialed in range.
Sarah Wilkins
So you build trust by having transparent and clear practices up front, right, versus that wide range.
Sarah Wilkins
Shari, you just shared some of the common pitfalls or things that you see companies doing right now with regards to pay equity. How can companies avoid these pitfalls and what best practices would you share?
Shari Kalsta
Well, of course I would say do everything and do it right, but we don’t have time for that right now. Right? So there are some main things that you should do right away and that’s really understanding your company’s current compensation program, maturity level, and I have like five different buckets for that. I refer to them as needed, where you don’t really have any standardization and the processes are kind of all over the board. We see this a lot with small companies and they’re just addressing things as they come. Then you have emerging which you’re beginning to develop processes and use some consistent approaches, but it’s not quite dialed in yet and then developing. So you might have created a compensation philosophy and some sort of strategy and some structures and maybe even brought some tools in, but you haven’t dialed that completely in yet. Advancing is where you would have reliable data sources, a strong philosophy, great strategy, you’re really doing pretty great at all your comp stuff. Then at the end you’re in the optimizing where you’re confident in your sources, your strategy, your structures, and really what you’re doing over time is just optimizing those and making them better. So understanding where you are in that range of possibilities and where you want to get maybe in the next six to twelve months really can help you dial in. What to address first. I always encourage to start with your job architecture and that’s what are your jobs, how many levels are there? Are you creating career development opportunities with those levels? You can create these levels even if you don’t have employees to put them in, because then you have this great architecture to plug current employees and future employees into. When you’re doing that, you can also make sure that you are building out job descriptions or career development tracks and keeping them for future like in a library. This is really important with some of these new laws that are coming up because California, for example, is one where you have to be able to show an employee’s pay, job title, and the description of that job for their entire career and three years after they terminate. So get that job description library started and if you have that, then you have everything you need to go get market data and analyze your pay. When you’re doing that, you’re building out what philosophy you want to use for your pay, how you’re going to do that. And then once you have all of those pieces, which is a lot, it’s a ton of pieces, but then you can really start doing all your analysis around your current pay, understanding where your outliers are and beginning to address any inequities. So it is a lot, but these kinds of things are not just going to help companies address pay transparency, they’re going to feed into everything else like performance management, ease of recruiting, having easy pay, conversations about promotions with your employees. So it’s worth it because it’s not just addressing pay transparency.
Sarah Wilkins
Yeah, I think that’s a great point and I was going to ask kind of further. You mentioned this is a lot of work, obviously, and you know, we work with a lot of small companies or smaller nonprofits. How can they approach this in a way that can not be too much work but get some set on the right foot? You think kind of the same way?
Shari Kalsta
Yeah, well, for sure it can be as complicated or as simple as you want it to be. I always encourage clients think about the simplest way to do this. So if you are wanting to build out different levels of a job and have job descriptions, you may not have this big, fancy, long, perfectly written job description to start. You might have an Excel spreadsheet that just lists out experience by level and different knowledge, skills, and abilities by level. Really simply that gets you to where you need to go for the market benchmarking and you can expand on that later when you have time. So that’s one way I would start out to do that.
Sarah Wilkins
Then one of the things that I think gets missed a lot when we’re doing any kind of change or anything is the change management and any kind of recommendations with communicating this information to managers and employees. How have you seen that work well?
Shari Kalsta
Yeah, I think when you’re having the compensation philosophy conversation like how do we want to pay our employees, what can we afford, what market are we targeting? You also need to be having the conversation of who are we going to tell this to, what is the audience and how often are we going to talk about it? So the audience may be all employees internally, it may be just managers, it may be as open as you possibly can get including putting something on your website for candidates to see. So I consider that part of the comp philosophy conversation in the very beginning, and then that builds out like a project plan of communication. Like, we will talk about this pay transparency project we’re going through once a month with our leaders and provide them talking points to talk to their employees. So something like that. Every company is going to be different on what they want to share and to who, but have that conversation right up front.
Sarah Wilkins
I think that was going into our next question is just helping to equip managers. There’s so many terms and processes and things like that, kind of digging a little bit deeper into that. How do you equip managers to be able to share and answer questions from their team?
Shari Kalsta
Yeah, so it’s interesting because one of the first questions I have started to ask my clients and I think it throws them off a little bit because we’re talking about pay transparency. A lot of times I will say, tell me how you define a promotion in your company, and I’ll ask numerous leaders this, and almost every time I get different and significantly different answers from people. So using that as an example, I usually go into, let’s create a salary administration manual of source where we list all of these terms that are used in compensation and we define them, and that becomes part of our communication and manager training and employee training. At the end of that, as you’re working through all of these different things, you are building out this manual that really defines everything. So not only the terminology like, what is a promotion, how often can it be done, who has to approve it, but then it can begin to define the processes. By the end of this whole project, you also come out with a one stop shop salary administration manual that has everything that you’ve been talking about through the whole process in it, and then you have that for new employees and new managers as well.
Sarah Wilkins
I wanted to go back to something you said about companies can decide how much information and who they share it with and things like that. I think there’s a misconception maybe around pay transparency that everyone knows everything, but it’s a spectrum, right? I mean, I think you’ve shared that with me before. What is the pay transparency spectrum, if you will?
Shari Kalsta
Well, you have companies that are incredibly open and they’re doing things like, well, on the most dramatic side, sharing everybody’s actual pay to everybody in the company. Now, there’s not a lot of those, but there are some of those. I consider that the very top of that spectrum. As you go down that spectrum, you’re talking about providing employees. Here’s your job grade, and here’s the pay range that goes along with it. And here’s where you fall within that range and why you fall there. And then they may even publish pay ranges of other jobs so that they can kind of correlate where they are in the career development. If I applied to this internal job, would that be a step up for me? I can tell that by looking at the pay grade of that job, taking another step down, you might just say, here is what you pay. We’ve come up with a process to make sure that it’s fair, trust us, and that’s it. And then kind of at the bottom of that spectrum is really, here’s what you’re paid and no other information. So this pay transparency thing really kind of pushes those employers that are just telling employees what they’re paid and no other information to kind of share more. And that’s working towards sharing pay ranges and maybe where they fall within it and why.
Sarah Wilkins
Yeah, that’s great. Thank you. So it’s kind of starting somewhere, right? Not that you need to be sharing nothing to sharing everything, but you can work your way across that spectrum to what works best for you and your company.
Sarah Wilkins
As we mentioned in the beginning, there are at least eight states with pay transparency laws in place. Do you think we’ll continue to see states follow the same trend? And how can companies best prepare and roll out pay transparency, if they haven’t already?
Shari Kalsta
Oh, absolutely. There’s a few things pushing this, and the main thing is really the candidates because they don’t want to waste their time applying and interviewing for a job and find out later that the pay range is lower than where they currently are, and recruiters also don’t want to attract candidates that aren’t really what they’re looking for. A pay range can help the recruiters, the employers, the candidates, all of them really match the expectation to the job before the application even happens. So it’s a really great thing, I think. So there was a SHRM article that said when looking at a job posting, compensation and benefits are primary things that most candidates are looking for. It’s a motivating factor that one shouldn’t easily ignored. And in fact, LinkedIn said that 70% of professionals will want to hear about salary in the first message from a recruiter. So in the end, cut out the middleman and include it in the job posting. It saves you time and simultaneously gives great information to potentially interested candidates. So in the end, states are going to continue to roll out these pay transparency laws. And the thing that starts making it really difficult is we have a really remote workforce now, and you have to address all these laws with your remote workforce. So if you’re posting a job and somebody from Washington may happen to apply to it, you have to follow those Washington rules. So it just kind of forces a lot of these other states and companies that operate in multiple states to just go for the easier direction and start posting pay ranges for everything. That’s my opinion, anyway.
Sarah Wilkins
Yeah, that’s a really great point around the remote workforce. I know people have asked questions. Well, we don’t have any employees in Colorado or we only have one employee in Colorado for example, righ, but it’s still required. Or we’re not hiring in Colorado, but we’re hiring anywhere. So you’re saying, we still need to comply by these laws unless you are specifically excluding any of these states.
Shari Kalsta
Correct. Yeah. There’s a guideline that was just published in November from Department of Labor and Industries for Washington State that talks about how to post for remote, and it really calls out being very careful about any kind of exclusion of a pay range if there is a remote possibility that somebody from Washington would apply. So I just encourage people to maybe go out and read that document. It’s department of labor and Industry Policy Guidelines published in November of this year.
Sarah Wilkins
You’ve shared so much great information, Shari. Any final bullets or thoughts that you would leave us with to sum up what you were sharing today?
Shari Kalsta
So I think the one thing that I am really encouraged about that although companies are kind of freaked out by this pay transparency thing, what it does is it really helps solidify so many other things that aren’t just tied to pay transparency. So it’s an opportunity to really clear some things up on your HR side. So when you’re doing this, you’re clarifying your compensation philosophy and your strategy. You’re providing clear and understandable guidelines that everybody will work from. And I know no matter what company I ever worked in, clear and understandable guidelines weren’t necessarily the things that we always had. Right? It’s going to address pay equity, which reduces legal risk for the company. It defines comp processes. It defines terminology for compensation. It removes stress and discomfort when having pay conversations, which I think is huge. It also builds a culture of career development and succession planning. If you’re starting to build out and really understand your levels of jobs, and in the end, it builds trust and confidence in the company and its leaders, which I think is so important. And that piece really can be driven by your change management and communication strategy around all of this work.
Sarah Wilkins
Yeah, those are great. I think we can’t discount the trust that this puts in people for their company whenever these things are done well and communicated well and very open and transparent with the communication around how it was developed and how they approach pay.
Sarah Wilkins
We really want people to be able to take practical actions away, and you shared so many, but what is one action you would take today if you are a company that is in one of the panic, no action, or analysis paralysis phases to set yourself up for success?
Shari Kalsta
I think the one thing that people forget to do almost every single time is really analyze your current employee pay situation. Often we just go to well, we have to have ranges for our jobs to post, but they’re not really analyzing how are our current employees looking in comparison to those ranges, but also in comparison to each other? And are there any immediate discrepancies or outliers that you should address before rolling out any kind of communication that really helps with the initial communication? Because if you haven’t addressed any obvious issues, you’re going to hear about them and probably hear about them in a negative way. And I know you asked for one thing, but I have two. Create a frequently asked questions document now. So walk through and try to figure out what questions employees are going to ask. The harder the better. Really figure out your honest and true answer to that question, and get those all in one document. You’ll continue to add to those as people start asking questions. Of Course. But I would also, as you’re building this, have it shared with your managers and maybe even employees, depending on your pay transparency level within the company. Just make sure that builds that trust and confidence and make sure everybody’s on the same page and saying the same thing.
Sarah Wilkins
That’s Great. Thank you. And I’m sure you could share more, many more, but thank you.
Shari Kalsta
It’s so hard to stop talking about this.
Sarah Wilkins
I know. You’ve got so much expertise and passion for it as well, right?
Sarah Wilkins
We so appreciate everything you shared with us today. I really hope companies are able to take this information and apply it to their specific situation. Thanks so much, Shari.
Shari Kalsta
Yeah. Don’t panic, everybody. It’s going to be okay.
Sarah Wilkins
I like that. It’s going to be okay.
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