(Opinion of Bloomberg) — Recently, my friend’s manager asked what would keep her from leaving the organization. “Higher wages,” she replied.

Her manager was reluctant to talk about compensation because it was “the domain of HR” and admitted that he hoped my friend would ask for more vacation days.

She told me, “Why should I ask for more days off when I’m sure the white man next to me earns more?” She quit immediately afterward to join a competitor for more pay. Like other highly educated and ambitious women of color I know, she has more options than ever to work for an organization that recognizes her worth.

How did she know she was being paid less than the man next to her? She didn’t, not sure – her former manager refused to tell her. But women of color are paid less on average, and for her as a Latina woman, the pay gap can reach 54% of her white male counterpart’s salary.

The problem, she tells me, isn’t just about making more money, but also about the lack of transparency about her former manager’s pay, which made her feel outdated and excluded. She’s not alone: ​​PayScale research has found that even if there isn’t a gender pay gap, the perception of its existence can reduce trust in an employer.

Pay transparency laws could make these types of salary conversations much better for both managers and employees. Such laws are increasingly becoming the norm across the country; a law to publicize pay grades in all job openings in New York City will go into effect in May, and the California State Senate has announced a groundbreaking new bill for wage stocks. If it becomes law, the most detailed payroll transparency from any US state would be required. The public report would require employers with 100 or more employees to disclose the median and average hourly rate by demographics (race, ethnicity, and gender) within each job category. And current employees could ask about the pay scale of their current job as of May 2023, which an employer would be required by law to provide.

Wage transparency reduces wage inequality. A study estimates that the gender pay gap could be reduced by 40% if pay transparency were widespread. Researchers at HEC Paris studied the pay of 100,000 American academics over two decades and concluded that pay transparency could significantly improve pay equality (people are paid equally for equal work regardless of identities such as gender and race) and pay equality (how that pay is structured). relationship) with other roles and organizations). The gender pay gap has narrowed significantly in institutions where salaries are publicly available, such as in federal government jobs.

So why is legislation needed to make this data more available? Because wage secrecy is institutionalized in our culture.

This is what is realistic. When offering salaries and pay increases, managers must offer at least a margin, with clear criteria about what it takes to be on both ends of the margin. To ensure fairness, criteria and salary ranges should be set by senior management and HR rather than on a case-by-case basis.

Managers should have regular payroll interviews with team members. Ask how each person feels about their compensation. Talk honestly about why they make what they are and actionable steps they can take to get to the next level. It might look like this: “The range for your role is $100,000 – $150,000. You’re at $120,000 for this reason, and to get to $150,000, let’s work on these measurable results within this set time.” An employee, especially one from a historically underrated background, would walk away feeling that she has fair access to information.And in a tight labor market like this, employees have options and prefer communication at a regular pace – not during a performance review of once a year.

Managers should try to provide specific criteria on how to move up the pay scale. A team I worked with did a detailed breakdown of what each job required at the “entry point” and specified the output required to progress to the next level. In this way, during salary interviews with employees, managers could point to objective criteria rather than subjective reasons for promotion and higher pay – or the lack thereof. Being intentional in this way also increased the number of women promoted from then on.

Above all, regular payroll checks should be mandatory in every organization. And each manager must evaluate on a quarterly basis how the pay is distributed among his team. In smaller companies, this can be as simple as putting together a spreadsheet. Larger organizations can and should, of course, use more sophisticated software that allows them to see patterns in who gets access to the highest paying jobs and who doesn’t. By being proactive in addressing any imbalances, progress can be made towards increasing trust within the team.

I often come across well-meaning leaders who are shocked to see the data on how wide unchecked wage disparities can be, especially by race and gender. That is why it is always important to review the data.

And in no time, when it becomes law, leaders will have no choice.

Better late than never, I guess.

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This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.

Ruchika Tulshyan is CEO of Candour, an inclusion strategy practice, and the author of “Inclusion on Purpose: An Intersectional Approach to Creating a Culture of Belonging at Work.”

This post Bosses should stop being so secretive about salary

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