Saturday, September 23, 2023

Four Steps to Effectively Use Payment Ranges in Your Business

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Thanh Nguyen is co-founder and CEO of OpenCompthat late-growth companies use to save money, retain talent, and comply with wage laws.

The pressure to include salary scales in job vacancies is a growing trend. States and cities, including: New York City, have introduced new laws requiring pay scales to be included in job postings to balance the power imbalance between employers and candidates. Companies like Microsoft have publicly committed to institutionalizing fair pay by sharing reward ranges for each role. Logical, because two out of three employees are looking for new work, and their main reasons for leaving previous jobs include lack of compensation, opportunity and respect. Leading employers are now tackling this problem.

What are payment ranges and why do they matter?

I see salary or pay scales as a central tactic for companies to advance the interests of their organizations, employees and communities. Wage ranges define the minimum to the maximum a person earns for a particular job, including total cash, equity, and bonus. Factors influencing employee offerings within the range may include employee experience and education.

When payment ranges are not reliable

While many organizations say they have created sequences, many simply select the amount they are willing to pay for a job and build a sequence around it. But don’t be fooled.

A pay scale is not a sliding scale. Unless wage ranges aggregate similar jobs, they are imprecise and perpetuate the very wage inconsistencies they are trying to resolve. Decreasing pay scales will never pass a state or local-level compliance test.

Wage ranges are also not reliable if they are based on employee-reported data rather than employer data or if the data is more than a quarter ago. Think about how much has changed in the economy and the market in recent weeks.

Wage ranges rediscover the relationship between employer and employee

We have known for years about the chronic wage differentials that underrepresented groups have to contend with, but despite good intentions, these differences have hardly shifted in recent decades. Many recruiting pools remain homogeneous with biases affecting the hiring process and riddles corporate culture.

By assigning shared ranges to certain roles, pay ranges help to eliminate pay inequality and discrimination. When shared in job postings, they put the same information in the hands of employers and employees, leveling out power inequalities and abolishing the wage secrecy. Especially when based on accurate, relevant compensation data, compensation ranges also enable companies to model different workforce scenarios and confidently plan a data-driven path forward.

Wage ranges disrupt any conversation about compensation

Compensation is a company’s largest source of spending, yet it has lived in a black box for centuries, complicating workforce planning, budgeting and scenario modeling.

You can ensure that you change the culture in your workplace and engage vulnerable employees by disclosing compensation information at the beginning of the hiring process and during merit cycles and promotions.

I also recommend that you automate many of the payment processes. Once automated, employers also reap great benefits by simplifying compensation decisions and improving recruitment and retention. One study found that attrition drops by 87% when employees trust their employers’ Diversity, Equality and Inclusion (DEI) commitments.

Four Steps to Use Payment Ranges to Reinvent Smart Business

When creating pay ranges and evaluating tools, I recommend following four steps:

1. Avoid tools that digitize existing standard operating procedures. They will only perpetuate today’s problems. Instead, prioritize platforms that design new, simpler workflows.

2. Secure real-time market data reported by employers and ensure it is no older than three months. Otherwise, you’re setting yourself up for a potential compensation nightmare.

3. Filter the compensation data your assortments use so that the information is relevant to your exact industry, company size, growth stage and available jobs.

4. When applying your compensation strategy, make sure you deliberately select how wide or narrow your reach is. Balance cash against equity and apply your organization’s remote payment policies.

It’s time to disrupt and redefine pay transparency for the sake of good business and to reshape the employer-employee relationship. By following the steps above, you can help change the conversation about compensation. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?

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