Last May 18, 2016 could mark the seminal moment for pay transparency to become commonplace in the United States. On this date, the Department of Labor (DOL) announced new overtime pay rules that may signal the beginning of a new era when it comes to people sharing information about their pay. There are a number of circumstances that are converging and could be fueled by these new rules.
“How much do you make?”
The most significant change in the rules is the doubling of the exempt salary threshold from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). DOL estimates this change will make 4 to 5 million workers eligible for overtime pay if their work status changes from exempt to nonexempt. Employees may begin to ask each other if they are affected by the change, which will be followed by the logical question, “Well, how much do you make?” As this occurs, the private conversations about pay that have always taken place among employees may become much more public.
In 2014, President Obama issued Executive Order 13665 that promoted pay transparency and allowed workers to share pay information without fear of retribution. On September 11, 2015, the Department of Labor issued a Final Rule implementing that order, which took effect on January 11, 2016. EO 13665 prohibits federal contractors from discriminating or retaliating against employees who discuss pay.
The gender gap
Another circumstance – the gender pay gap – is likely to become a prominent issue in the 2016 presidential race and could become an even greater priority depending on the outcome of the election. The Lilly Ledbetter Act has been in place for seven years and the proposed Paycheck Fairness Act may finally get the congressional support it needs to pass. The DOL has already issued proposed pay equity reporting rules. States, such as California, have passed, or are working to pass new legislation to close the gender pay gap.
The U.S. Women’s Soccer Team recently filed a claim with the Equal Employment Opportunity Commission demanding they be paid as much as their male counterparts. And who can argue that, given their performance compared to the men!? Robin Wright, star of the HBO series “House of Cards”, recently announced she demanded and received pay equal to her co-star Kevin Spacey. The pay levels of athletes, celebrities, executives, and government officials are regularly talked about and disclosed. This soon could become the norm across all industries and levels of the workforce.
A number of internet-based companies have created viable business models using crowd sourcing to collect information on what people say they are paid and converting that data into what jobs are worth. The job search site Glassdoor has taken it a step forward and is calling for pay transparency as a way to close the gender pay gap. In April, it held a pay equality roundtable to draw greater attention to this issue. Among the speakers were Hilary Clinton and Megan Rapinoe of the U.S. Women’s Soccer Team.
Social media plays a major role in the ability to more easily share private information with the entire world. Twitter searches of #shareyourpay and #talkpay produce thousands of tweets. Google and other online search engines enable users to search for anything. Texting makes it possible to send and receive information instantly.
It’s only a matter of time until an employee’s pay becomes a fact for all to see. Recent stories about employees sharing spreadsheets with their pay information have emerged. Perhaps we will reach a time when some employees will post their pay stubs as a proud accomplishment, while others will use their pittance to cry foul.
Doing the right things
The logical endpoint to all of these developments is pay transparency among all employees. What should employers do to prepare for the inevitable?
- Face reality. Now is the time to be proactive and think ahead of how to handle pay transparency rather than worrying about if it will occur. It’s a matter of when, not if.
- Develop a pay transparency policy. Make it clear what information will be published and what information will remain confidential.
- Review current pay programs and practices. Fix anything that is broken and update anything that is antiquated.
- Formulate a communication strategy. Craft the key messages that you want employees to hear and understand. Failing to communicate leads to suspicion and can result in employees making up their own versions of stories that may not be true.
If employers hide or fail to disclose how pay is determined, doing so could contribute to a culture of distrust and result in lower employee engagement. Greater transparency, however, requires sound compensation policies and programs. Employers should have confidence they are doing the right things when it comes to pay. The sooner employers are upfront about their pay policies and practices, the better off they and their employees will be.