Four Steps To Effectively Use Pay Ranges In Your Business


Thanh Nguyen is co-founder & CEO of OpenComp, which later-stage growth companies use to conserve cash, retain talent and adhere to pay laws.

The push to include salary ranges in hiring posts is a growing trend. States and cities, including New York City, have introduced new laws that mandate pay ranges be included in job posts in order to balance the power imbalance between employers and candidates. Companies like Microsoft have publically committed to institutionalizing fair pay by sharing pay ranges for every role. This makes sense since two of every three employees are searching for new work, and their top reasons for leaving past jobs include lack of compensation, opportunities and respect. Leading employers are getting out in front of this issue now.

What Are Pay Ranges And Why Do They Matter?

I see salary or pay ranges as a central tactic for companies to advance the interests of their organizations, employees and communities. Pay ranges define the minimum to maximum that someone makes for a particular job, including total cash, equity and bonus. The factors that influence what employees are offered within the range can include employee experience and education.

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When Pay Ranges Aren’t Reliable

While many organizations say they’ve created ranges, many simply select the amount they want to pay for a job and build a range around it. But don’t be fooled.

A pay range is not a sliding scale. Unless pay ranges aggregate like-for-like jobs, they are inaccurate and actually perpetuate the very pay inconsistencies that they seek to solve. Sliding scale pay ranges will never pass a compliance test at the state or local level.

Pay ranges are also not reliable if they are based on employee-reported data instead of employer data or if the data is from more than a quarter ago. Think about how much has shifted in the economy and market in just the last few weeks.

Pay Ranges Reimagine The Employer-Employee Relationship

We’ve known for many years about the chronic pay disparities that afflict underrepresented groups, but these gaps have hardly shifted over the last few decades despite some good intentions. Many recruiting pools remain homogenous with bias tarnishing the hiring process and riddling company culture.

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By assigning shared ranges to particular roles, pay ranges help eliminate wage inequality and discrimination. When shared in job posts, they put the same information in employers’ and employees’ hands, leveling power imbalances and abolishing pay secrecy. Especially when built on accurate, relevant compensation data, pay ranges also empower businesses to model different headcount scenarios and confidently plan a data-driven path forward.

Pay Ranges Disrupt Every Conversation About Compensation

Compensation constitutes a business’s largest source of spend, and yet it’s lived in a black box for ages, complicating headcount planning, budget setting and scenario modeling—all of which negatively impact employees’ experiences and aspirations toward pay consistency.

You can make sure to change the culture at your workplace and include vulnerable workers by disclosing compensation information at the start of the hiring process as well as during merit cycles and promotions.

I also recommend you automate many of the payment processes. Once automated, pay ranges also greatly benefit employers by simplifying compensation decisions and improving recruitment and retention. One study found that attrition decreases by 87% when employees trust their employers’ diversity, equity and inclusion (DEI) commitments.

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Four Steps To Use Pay Ranges To Reimagine Smart Business

When creating pay ranges and evaluating tools, I recommend you look to complete the following four steps:

1. Avoid tools that digitize existing standard operating procedures. They’ll only perpetuate today’s problems. Instead, prioritize platforms that design new, simpler workflows.

2. Secure real-time market data reported by employers and make sure it is no more than three months old. Otherwise, you set yourself up for a potential compensation nightmare.

3. Filter the compensation data your ranges use, ensuring the information is relevant to your exact industry, business size, growth stage and available jobs.

4. When applying your compensation strategy make sure to purposefully select how wide or narrow your ranges are. Balance cash versus equity and apply your organization’s remote pay policies.

It is time to disrupt and redefine pay transparency for the sake of good business and in order to reimagine the employer-employee relationship. By following the above steps, you can help change the conversation about compensation.


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