How Pay Transparency Connects with Job Architecture and Employee Trust

In 2021, the state government of Colorado caused a stir when it began requiring employers to disclose pay ranges on job postings. Although the state of Maryland and the cities of Cincinnati and Toledo in Ohio had already enacted pay transparency laws in 2020, they did so without the visibility that Colorado’s law required. Additional states and municipalities have since enacted pay transparency laws or proposed changes that strengthen their existing laws — and the list is growing.

As of the publication of this article, 10 states (plus the District of Columbia) and six municipalities have active pay transparency laws. Four additional states have laws that take effect in late 2024 or in 2025.

Historically, many employers have treated the communication of pay on a “need-to-know” basis. Many also have not had the resources to assess market pay levels and regularly update their pay ranges. With the advent of pay transparency laws, many organizations have struggled with determining the appropriate course of action to ensure compliance.

A recent Pearl Meyer survey found just over 50% of respondents had recently benchmarked market pay levels and/or updated their salary structures in response to changing legislation, and nearly 50% reported conducting a pay equity analysis to mitigate the potential for gender or race bias in pay decisions.

Building Trust

As employers evaluate how to best comply with existing/upcoming/impending legislation, it appears that the focus in pay range disclosure is primarily on external impact (e.g., potential job candidates or competitors). In contrast, the perception is there is very little discussion — or concern — about how this newly public information may impact current employees. However, with law changes, organizations have a renewed chance to be more transparent with the existing workforce beyond disclosing salary structures. Employers that educate their employees on how they can grow and advance their careers and communicate the associated opportunities of working at that organization may gain the workforce’s trust in the process.

With law changes, organizations have a renewed chance to be more transparent [about pay and more] with the existing workforce.

To build — and not erode — trust, organizations should analyze the likely impact of newly disclosed salary information on their current employee population. For example, if an employee sees a posted salary range that is higher than theirs, and the employee believes their job is very similar to the posted job, the employer should be prepared to highlight the factors considered in establishing pay ranges (e.g., job family and subfamily, job content, geographic location).

Benefits of Job Architecture and Pay Communication

An organization’s ability to articulate the rationale for differences in pay ranges is directly linked to the design, quality and clarity of its job architecture, which provides structure and organizational consistency in defining the type and level of work performed across the organization.

An organization’s ability to articulate the rationale for differences in pay ranges is directly linked to the design, quality and clarity of its job architecture.

While compensation is a significant factor in attracting talent, growth opportunities and career advancement also help engage and retain employees and reduce turnover costs. The Pearl Meyer survey showed that since pay transparency laws have gone into effect, only one-fourth of participant organizations have updated or designed a job architecture or defined career levels and then communicated any or all of that to employees.

A significant amount of time and effort can go into the creation and implementation of a job architecture, but the benefits are likely worth it. From a business perspective, such an exercise may help companies “see” the work being performed across the organization — domestically, globally and across business units. It can help managers and leaders determine what levels of work need to be performed, based on business need, and help identify possible skill gaps. For employees, a job architecture can provide transparency around the level of work they’re performing today (which should translate into how they are currently compensated) and the skills they likely need to acquire to advance their career (which should impact how they are eventually compensated).

Practically speaking, for those with constrained time, personnel and/or financial resources, it may not be feasible to design a complete job architecture. When done in a substantial manner, this exercise can involve identifying job families and subfamilies (e.g., finance and accounting), determining career paths for each subfamily (e.g., Accountant I, Accountant II), and quantifying the number of career levels in each path. However, if only a portion of this work can be tackled initially, creating and defining levels is a good starting point for building a sound program.

Employers can take different approaches to identify the career paths needed across the organization. Paraprofessional, professional, management and executive are the most used paths, but others may be needed depending on work design and organization structure. The number of career levels needed in each career path should be based on business need and may not be the same in each family/subfamily. For example, more levels for highly technical skilled jobs such as engineers and scientists are common compared to other jobs.

Definitions of paths and career levels are important, as is maintaining consistency in the descriptions used across the organization. For example, the degree of autonomy for a professional job in Career Level 3 should be the same whether the job is in IT or HR. Developing a job architecture also presents a good opportunity to update the titling structure if the current one has grown out of hand.

In addition, in the spirit of pay transparency, do not overlook communication. Your public disclosures do not serve as employee communications. The success or failure of many HR-related programs likely comes down to communication or the lack thereof, so a strategy should be in order. Most successful communications efforts effectively align with the culture, use multiple media and recognize the need to tailor approaches for different employee groups to aid in their understanding of the pay structure. Consider training managers so they are well versed in conversations with their direct reports. It is yet another step to take, but it’s critical that HR creates, controls and delivers the message. Otherwise, employees will do the communicating for HR and the results may not be optimal.

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