Best practices and biggest pitfalls in pay ranges

Learn how to answer the where, why, and how of your team’s pay ranges.

Angela Lin
Angela is a Data Science and English major at UC Berkeley who juggles interests in machine learning with short fiction. Outside of writing blog posts, she can be found painting Bay Area views or trying new recipes.

New pay laws

2023 is the year of pay transparency. New laws bring potential to improve pay equity, build trust, and attract talent. But at the same time, there’s concern about employee attitudes, difficult conversations, and turnover. Pay transparency can strengthen or hurt your company’s culture and brand – what matters is how you implement it. 

You need a plan. It’s not enough to say what your pay ranges are. You have to also answer when, where, why, and how.

Best practices for pay transparency

How do you make sure your pay ranges are consistent, fair, and resonate with team members?

1. Where: research current market data

So what makes compensation actually competitive? The answer comes from market data. It should be specific, factoring in the relevant industry, position level, and location. An easy and reliable way to stay updated is with salary benchmarking tools.

2. How: build a compensation philosophy

Compensation benchmarking requires a consistent framework. Your compensation philosophy should clearly explain how pay ranges are determined and how it stacks up with the market. This way, you build trust with employees if they know where their salary comes from.

Compensation philosophies have to be easy to access and understand. Different communication channels like company-wide announcements, smaller meetings, and 1-1’s can make conversations more personal and relevant. Educate managers and recruiters so they have the knowledge and confidence to answer questions.

3. Why: culture and values

How a company sets pay ranges sends a message to candidates and employees about their values. Informed, specific pay ranges show you value transparency. On the other hand, broad and unhelpful ranges leave a bad impression. Whatever your company culture is about — trust, communication, etc. — make sure it's reflected where it counts.

Biggest pitfalls

Here’s what to avoid.

1. When: don’t set it and forget it

As the market moves, so should your pay ranges. Data from the consulting firm WTW projects that salary increase budgets will grow by 4.6% in 2023, the highest since 2007. Set a schedule to regularly reassess how you’re benchmarking compensation to ensure it’s aligned with the current market.

2. What: don’t overlook other forms of compensation

Current pay laws only apply to salary, but there’s more to the equation. Competitive compensation also includes stock options, insurance, retirement plans, and more. Make sure these are included in your compensation philosophy.

3. Why: don’t rely on pay ranges to fix inequality

Equity is more than a numbers game. There are also societal and structural factors involved like unconscious hiring biases, the promotion gap, and different responsibilities outside of work. 

Pay ranges won’t magically fix these, but it does start the conversation. The first step is to go beyond the what, and start asking why and how.

About Puck

We believe that leading with transparency is the path for finding the right people for your team. That’s why we built our salary range tool to help teams keep up with the labor market and make the right decisions. Stay up to date on hiring trends by staying in touch.

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At Puck, our mission is to make hiring more human. We believe that people and their stories should be at the center of your employer brand strategy. Ask us how we can help you find your people below.

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