Welcome to TL;DR (Tracy’s Latest Discussion Recap). We’re keeping you up to date on thought leadership from Tracy Lawrence, CEO & Co-Founder of Chewse. Today’s topic: how transparent salaries are the solution to the wage gap, and how you can implement a transparent compensation policy in your office.
Earlier this year, the U.S. House of Representatives passed the Paycheck Fairness Act, an extension to the Equal Pay Act of 1963. The bill increases protections by increasing penalties, establishing stricter laws around what employers can ask employees, and prevents retaliation against employees who disclose wage information. Its supporters cite recent studies, like this 2019 Glassdoor study, which estimate women still make around 79 cents for every dollar men make. Those against the bill claim gender discrimination is already illegal, so the bill is unnecessary.
It remains to be seen if the bill will even become a law, since the U.S. Senate must also pass the bill. So why are we bringing it up?
The Wage Gap Exists
If you clicked on this article, you likely already think that, but it bears repeating. The wage gap is still something we’re talking about in 2019, and in fact, our statistics, if anything, are more optimistic. When we break the categories down further, for every dollar a man makes:
- Black women earn $0.61
- Native American women earn $0.58
- Latina women earn $0.53
- White women earn $0.77
- Asian women earn $0.85
All of this to say: the wage gap matters. And, though legislation is a great step forward, Chewse Founder and CEO, Tracy Lawrence, believes the real change has to come from companies. As Tracy writes:
“Legislation such as the Paycheck Fairness Act signals a shift in cultural awareness around pay disparity. But in my experience, the most substantial change will come from businesses themselves in the form of transparent pay policies.”
Businesses who do succeed in implementing transparent pay policies learn, as Tracy learned, that “Such policies not only drive equality but also improve companies’ overall performances.”
Why bridging the wage gap matters for your company
At Chewse, we frequently write about culture and community, and how you need both to succeed as a company. Employees aren’t just looking for a place to go for 8 hours every day; they’re looking for an office that can feel like a “second family.”
A big part of that connection, and of office culture in general, is creating an atmosphere where your employees feel valued. When your people feel like you trust and care about them, then they trust and care about you in return. It’s this level of connection that allows businesses to move 10x higher, come up with crazy ideas, and really change the world.
The wage gap – and, more generally, the mysticism and confusion surrounding modern wages – reduces trust and slows companies down. Employees might hold back – or worry that you’re holding back – when they aren’t sure what’s happening. It’s like holding one card and trying to figure out what else is on the table. Your job, as an employer, is to put as many cards in their hands as possible.
So bridging the wage gap, at its core, is about creating trust and making all of your people feel cared for. It’s about showing love through your workplace practices – and one of the most visible ways you can do that is with transparent salaries. As Tracy writes:
“When compensation is based on merit, it holds people accountable for their performance. It also levels the playing field for employees who are unlikely to negotiate for higher pay.”
How can you get there?
The Three Pillars of Transparent Salaries
… at Chewse.
This is how we’ve implemented transparent compensation – we’ll walk you through the why and the how, and we think it’s worked. 8 years later, Chewse is still going strong, even though we’ve grown from 12 people with transparent salaries to over 150.
The important thing to highlight, though, is that you can’t – or rather, we don’t think you should – just publish everyone’s salaries. Implementing transparent salaries also means reframing the way you think about compensation at your company – and it requires leader buy-in. There may be some bumps in the road, but you’ll get somewhere you never would have gotten to otherwise.
ONE – Output levels are the heart of transparent compensation
The heart of transparent salaries is equal pay – the only way you can close the wage gap is making sure you’re paying everyone the same. That’s why Chewse, through market wage analysis platforms like PayScale, has established set salaries for every role.
Every role at Chewse has 7 “output levels,” which we’ve mapped to skill at that particular role. For instance, an A output level might mean the employee is still green, maybe just out of college. At C, the employee is consistently meeting the job description – by D, they’re regularly surpassing it. Every role is mapped to an output level (and therefore a salary) and output levels are evaluated every 90 days.
With output levels, compensation is based on performance, rather than age, tenure, race, sex… etc. As Tracy writes, output levels have enabled our leadership team to:
“Set hard limits on the salaries that managers can award, regardless of how hard a candidate or employee negotiates… This way, when others find out what their colleagues make, they won’t be shocked by any significant discrepancies.”
Output levels are just the beginning. You also need to draw the line in the sand of what is and isn’t an acceptable compensation policy, which leads us to…
TWO – Negotiation is out, but communication is in
Once you’ve established the output levels and associated compensation for each level (and for each position), doing away with negotiation is the next step. You’ve done the hard work of figuring out how to fairly pay your people – you can’t turn around and allow some of those people to live outside of your designated practice.
Beyond output levels, negotiation also creates skewed compensation policies because not everyone negotiations at the same level. According to Tracy:
“Women are less inclined than white men to negotiate for higher pay, which perpetuates the pay gap. At the same time, women who negotiate salary are often negatively impacted… A no-negotiation policy helped us create a fair compensation structure and ensures that we hire the best people for the job. Just because someone can advocate well for himself or herself doesn’t mean he or she has the skill set your company needs. Focusing exclusively on merit allows you to cut through the noise and find and reward the best people.”
At the same time, you also need to implement and encourage discussions about compensation. These aren’t negotiations for a higher salary at the same role and output level – rather, these discussions become conversations about why an employee feels their output level has increased (and therefore, their compensation should increase as well).
At Chewse, we do this every 90 days. Employees are required to meet with their managers and check in about their output level, how they’re doing, and what they can do to move to the next output level if they aren’t there already. In Tracy’s experience:
“This reinforces the sense of transparency and encourages people to be candid in salary discussions before it becomes a huge problem and employees have other offers in hand. Such meetings bring dissatisfaction to the surface early.”
THREE – Transparent Salaries have to be transparent
While we don’t recommend making your compensation policies transparent to employees without setting yourself up for success first, this is the final step. That isn’t to say it’s the most important step. Establishing output levels so everyone is on equal footing is the heavy lifting – making salaries transparent just holds everyone accountable to the standards you’ve set for yourself and your company. As Tracy writes:
“Publishing everyone’s compensation makes salary less of a taboo topic, as well. This creates an environment in which women and members of minority groups feel safe raising the issue. A sense of safety and openness is vital to nurturing a culture of belonging and support. Such dialogue alone will reduce the wage gap.”
Transparent salaries empower your employees and bridge the wage gap in every office. Implementing them isn’t easy, and it can feel really scary to do. But by implementing transparent salaries, you’ll not only reinforce to your employees what you value, but also establish in no uncertain terms that bridging the wage gap is something you’re committed to.
Employees have spoken – this is something they care about, too. Tracy has noted the difference during her 8 years at Chewse, and she writes:
“Metrics to note include higher employee retention, increased diversity, and consistency among management… Diverse companies tend to be more profitable than homogenous ones, and consistent management and raise structures make it easier for leaders to reward performance consistently and equitably.”