Shawnee Love • April 17, 2023
I often get asked about pay transparency as a compensation practice and the BC Government’s recent announcement that they intend to bring pay transparency into law inspired me to blog again.
I personally have a love-hate relationship with pay transparency. I love the directness that exists when all cards are on the table. I also appreciate the effort to ensure that people making equal contributions are getting paid equally, and in particular that racism, agism, sexism, and all the other isms become easier to notice and thus correct when pay ranges are published. Additionally, I have seen the positive impacts on people’s drive to learn and progress when they know what the positions above them require and earn. If you know where you want to go and what you will receive when you get there, you may be inspired towards that destination. Moreover, I often witness the positive regard employees have for their employers who have clearly laid out the practices for giving raises and how those raises are determined. Trust is higher for those employers who give raises consistently and not just to the squeaky wheel, so I am a fan of communicating your pay practices (and sticking to them).
On the other hand, there are big challenges with pay transparency. Not only is pay transparency misunderstood, but there are many variations of it and it is an approach is far more challenging to practice than the theory indicates.
For example, in my experience, most people believe they individually are better and worth more than the average person. If you don’t believe me, ask 10 people how good of a driver they are (e.g., below average, average and above average). I am confident that you will find more than 5 of the 10 believe they are a better than average driver. It is incredibly difficult to explain to those who believe they are better than the average (and who thus feel entitled to more than the average person), that they are not only wrong, but also, they are not worth as much as someone else (whose overall contributions and performance they may not be privy to because we have privacy regulations which require keeping personal information private). That disconnect does not land well and can require endless time and patience from the poor managers trying to explain this truth (often to no avail).
Unfortunately, the confident individual who cannot believe they aren’t as good (if not better) as their higher paid colleague, often will become disengaged or demotivated with the news they aren’t worthy of more money. Whether they stay or go, disengagement and demotivation are losses for an employer.
Moreover, it is an incredibly tight labour market in BC currently. Employers can’t afford to lose anyone and so oftentimes they will take the path of least resistance and simply increase the wages of these average players. However, doing so reduces the motivation of those who earned their way to the top of the heap.
All of these dynamics create increases in conflict, distraction, and lower productivity which leads to higher costs and lower morale not to mention further turnover and burnout.
The reality is, people with limited knowledge and experience don’t know what they don’t know. It makes sense to give higher pay to employees who have more experience and/or knowledge because they are able to handle any challenge that arises. Their expertise is standing by and ready when needed.
I recently tried to explain this to a junior employee who believed her duties and productivity to be the same as a very experienced senior team member. My analogy went as follows:
When the seas are calm, any sailor can sail. However, navigating a storm is incredibly challenging and requires an experienced sailor. If you have never experienced a storm, you might not know the difference and think you are as good of a sailor as anyone else. It takes the storm to demonstrate the gap.
Needless to say, people who have never navigated a storm find it hard to believe doing so might be beyond their capabilities. Which then feeds into the next problem with pay transparency in that it reduces hiring to a transaction based on mere money.
Companies who pay people to sell their souls (i.e., those with bad cultures and environments) look like stars in this new environment where higher wage ranges are highlighted. Great places to work which offer training, work life balance, positive teams and environments, etc. as well as fair (but not high) pay become less valuable despite being far better places to work.
This whole recruitment process becomes a transaction rather than the beginning of and opportunity to build a relationship.
To use another analogy, think of hiring like dating, and imagine what it would be like to require everyone to publish their own annual salary for potential dates and mates to see before meeting. That number becomes a measure of whether the person is worthy of dating. Is this really the kind of workplace we want to become?
This legislation is still up for debate but if passed:
- Employers must include the expected pay or pay range for jobs they advertise publicly (thereby making jobs transactional and solely about money).
- Employers can’t ask employees regarding their pay history (not sure who is still doing this, but ok).
- Employers cannot punish employees for talking about pay (again, which employers are still doing this anyway?)
- Pay transparency reports will be required as follows:
- November 1, 2023: B.C. government and the six largest Crown corporations, which are BC Hydro, BC Housing, BC Lottery Corp., BC Transit, ICBC, and Work Safe BC
- November 1, 2024: all employers with 1,000 employees or more
- November 1, 2025: all employers with 300 employees or more
- November 1, 2026: all employers with 50 employees or more
The NDP excuses employers with less than 50 people but to be honest that is a nothing gift since all employers are going to have to manage expectations of employees under this new program anyway.
In summary, we should not pay people differently if they add the same value, but this new legislation requires employers to spend more time pointing out the gaps between expectations and reality.
News flash: Since covid, it has been an employee/candidate market, and for the most part, I don’t think they need these new rules. The rules create more bureaucracy and more work for employers who are tapped already. And, it is unlikely they will have any meaningful impact on the wage gap which the new rules propose to address because the context where pay transparency has been effective is different from what we find in BC. (I hope I am wrong about this prediction, but let’s revisit in 3 years to see what has come of pay transparency.)
In any case, the lack of consultation with business implies pay transparency is coming. Come back in a couple weeks for our next blog on how to get ready for this new legislation.