As Pay is Revealed, Will Conflicts Rise?

With new pay-disclosure laws going into effect, firms may face some uncomfortable conversations.

The new job the manager posted came with a salary range of $120,000 to $160,000, roughly 20% above what competitors were offering for similar positions. So the manager was surprised when a high performer appeared in his office the next day, upset to be earning only $128,000—objectively, a wonderful pay rate for the region.

Experts say firms may begin seeing such scenarios increasingly often now that the age of corporate pay transparency has arrived. Starting this week, New York City is requiring salaries to be disclosed in job postings. California has its own pay-transparency law which will go into effect January 1st. Even as leaders publicly post salaries with the expectation that more states will follow, a serious threat looms from employees seeking higher pay. “People are going to be coming out of the woodwork with questions,” says Tom McMullen, senior client partner for ESG and inclusive rewards at Korn Ferry. “I would not underestimate the impact.”

Prior to the institution of the new laws, fewer than 1 in 5 organizations posted salary ranges. As a result, many firms are poorly positioned for the coming months. Some don’t have salary bands at all. Many more have bands, but do not enforce or maintain them. Given that employees have long worked in an information vacuum when it comes to compensation, they are likely to have questions about why some roles and employees are compensated much more highly than others. “The HR challenge is, how do you provide salary information, but also context?” says Dan Kaplan, senior client partner for Korn Ferry’s CHRO practice.

McMullen says that companies need to adopt a game plan for posting salary ranges. Firms have usually taken one of three approaches: posting the actual salary range, posting the lower half of the salary range, or posting something else, depending on the position and labor market—perhaps a much wider range or higher point on the band. “It’s a balancing act to show a range that attracts talent, but doesn’t raise eyebrows with internal employees,” he says.

The balance is a high-wire act in conditions where tens of thousands of workers can be hired for retail or trucking in a week. “If they see $65,000 to $95,000, you better believe the majority will say, ‘I want at least $90,000,’” says Jacob Zabkowicz, vice president for global RPO at Korn Ferry. He’s advising leaders to handle internal salary concerns now, before employees see job postings, by talking to them about career paths and opportunities, as well as the company’s approach to factors like experience, location, and diversity.

Additional turmoil can be avoided with more precise job definitions that clearly signal the justifications for higher pay, says McMullen. For example, if a position in the tech department earns $700,000, the job description should clearly articulate that it requires extensive management and P&L responsibilities.

Experts say that it’s important for leaders to know that employees put a high premium on fairness—more than they do on a particular compensation figure. “It’s really critical for employees,” says Nathan Blain, global lead for optimizing people costs at Korn Ferry. “If you double someone’s salary, but they’re making $20,000 less than a peer, they’re still going to be unhappy.”