You’ve probably heard about the new pay transparency laws passing around the country - including California’s which will take effect January 1, 2023.
Continuum hosted an in-depth panel discussion on November 29 to discuss the impact of these new laws. Special guests included:
Gerald Lou Former Head of Global Rewards @Carta
Meghana Reddy former VP, People & Operations @Loom
Dan McCoy Employment Department Chair @Fenwick&West
The conversation provides great context on the new laws as well as answers to common questions.
✔ What are the consequences of not being in compliance on Jan.1?
✔ Do these laws affect contractors/subcontractors?
✔ How are companies handling current employees asking for salary and band information?
We hope you enjoy!
Nolan Church 00:00
All right. So good morning, everybody. My name is Nolan church. I'm the CEO of continuum continuum with talent marketplace for executives, we connect execs to venture backed companies for fractional opportunities. Today, we are talking about potentially the hottest topic that we have talked about all year, which is pay transparency. I've been getting an unbelievable amount of inbound requests from customers and even from executives on our platform about this topic. And so what we've decided to do today is to put together some of the smartest people that we know, that have deep relevant experience, on compensation, on pay transparency and on the laws associated for a webinar for you all today. So I'm going to kick in, and we're going to do some quick intros. So Gerald, can you tell the group about yourself real fast?
Gerald Lou 00:50
Yeah. Hi, everyone. I'm Gerald. Currently, I'm a compensation consultant. I've kind of lived a compensation life and my career thus far, I've seen the whole gambit though, I've worked at kind of the bid thing, companies I started off at Google. I've been at Tesla and Netflix. And then I've also been on the on the startup side where I was headed total rewards at Carta. And I worked out 23 of me. And so you know, I've kind of seen the full gambit, and now I'm just working as an independent consultant. Awesome, Magna. Hi,
Meghana Reddy 01:20
I'm Magna. I've led people, teams at startups, both in US and Europe. Right now I'm working with a lot of startups, helping them get ready for pay transparency, both with setting up their compensation strategy, that approach training. And what makes me experienced in this is I've actually done it before. So both at both NerdWallet and Loom, we experimented with allowing employees to see their salary bands and learn a lot. So I'll talk a little bit about our experience and what I've learned from that.
Nolan Church 01:49
Awesome. And then the obligatory lawyer, Dan.
Dan McCoy 01:52
Yes, the obligatory last but not least, lawyer. Good morning, and good afternoon, everybody. I'm Dan McCoy. I'm a partner at Fenwick and West and the chair of the firm's employment practices group. My area of expertise is labor and employment law, practicing for 26 years. And as of tomorrow, 23 of those 26 Here at Fenwick, working with technology and life sciences companies, from multi 1000s, including 10s of 1000s of employee companies down to two folks in a garage, getting off the ground, and everybody in between. And this is an area like Nolan, and like the others are of great interest to me, and great interest to our clients. More importantly. And so I'm happy to be here today to talk with you a little bit about the wall.
Nolan Church 02:35
Awesome. Thank you all again, for being here. And let's, let's get into this thing. So, Dan, I want to start with you. And I just like I think it'd be helpful for the group to understand like, where are these laws coming from? Like, why are states like continuing to enact them? And where do you think like this puck is going?
Dan McCoy 02:54
You bet, let me start and zoom out just for the moment. And I know what I'm about to say is obvious to most if not everybody on this call, but not necessarily. And it's really important when you're advising clients on this to keep this in mind. pay discrimination is not new. There are pay discrimination, and pay anti discrimination laws, I should say on the books that have been on the books for decades, Title Seven, the Equal Pay Act under federal law and various state laws that have put in place equal tax laws. There's nothing new about those laws, and they have always prohibited pay discrimination in the workplace. And what these newer or new ish laws and a few different jurisdictions and likely more jurisdictions to come meeting states and cities, what they are intending to do is to discourage pay discrimination by making more explicit and transparent what a company is gonna pay people to come in and do the job. And the reality today with many of my clients, frankly, is that they're upside down with respect to pay discrimination. That is to say they do have disparities in their workforces that they cannot justify or non discriminatory grounds. It happens every day all day long. And and there's nothing new or unique about that. But these laws are designed again to discourage black boxes with respect to pay and compensation and in some cases, benefits and to make more transparent the process to ideally and hopefully, reduce pay discrimination in the workplace. Will that bear fruit will these laws become succeed in their purpose? Time will tell of course. And I think it'll be not months but years before you can really thoughtfully assess whether these laws have a meaningful impact on pay gaps, both of the gender and race and other levels and other contexts, I should say. But we'll see in any events. These laws are here. They're here to stay and we're going to talk about a few of them in a few different states and jurisdictions, but I suspect strongly worrying. We're going to see more states put these in place in sort of a meeting situation, if you will.
Nolan Church 05:07
Yep. Makes sense. All right. Well, let's get into the the state by state laws, Dan. And so credit to Magna who is graciously put this slide together and is letting us use it. Dan, can you give us like the quick rundown this started with Colorado, right. And and so give us the rundown on like, where this started, and then compliance as it relates to each state?
Dan McCoy 05:28
Yeah, you bet. So it started with laws being put in place, and they're in place right now. And about six or seven states, requiring certain employers, not everyone, but certain employers with certain employment threshold or employer threshold employee thresholds to provide pay information upon request from an applicant or employee, so not necessarily to affirmatively place pay bans and pay scales, if you will, in job postings and job advertisements with a bunch of provided upon request. So in about six or seven states in the country right now, California, Washington, Rhode Island, Maryland, a few other states, those laws are on the books. And that's sort of that's sort of that's where this started, really, it's now expanded into an affirmative obligation. And yes, Nolan, you're right. It started with Colorado a couple of years ago, where they put in places requirements to disclose pay ranges, and salary, whether it's salary or hourly rate ranges, in job postings and job advertisement, both for internal hires, as well as for traditional external hires, if you will, it then has expanded to, as you can see on this chart is very helpful chart to no less than three other jurisdictions, California and Washington State and then New York City, there's actually a New York State piece of legislation that has not been signed into law yet, but that likely will, it will like they will largely mirror what the New York City Law provides. But it's interestingly, that's a New York City ordinance that's in place that went into effect just a few weeks ago, the California and Washington laws go into effect on January one. And as I said, the Colorado law has been in place for a couple of years now. And the chart is self explanatory. But as you can see, it requires certain employers and there's an employee threshold, as you can see in the second column, to disclose on job postings and job advertisements, the salary ranges, the real, actual ranges that you expect to compensate this person for whether it's on a salary or hourly basis. Under Colorado Law, you're also required to disclose or provide, I should say, a reasonable description of the benefits that are available, in addition to base compensation, 401k, health insurance, bonus and other variable compensation opportunities, and things of that sort. You don't need to go into exhaustive detail and a job advertisement to provide a reasonable description of those things. So Colorado is unique relative to the other jurisdictions here, in terms of that benefits disclosure obligation, the other states will require simply disclosing the pay ranges, again, the reasonable accurate ranges of what somebody is willing to pay under the circumstances. So there's
Nolan Church 08:12
so Daniel, Daniel said, reasonable, inaccurate, like, twice. So you're saying like, you know, if I have, you know, in our company, we have multiple levels of software engineers. You know, and I think a lot of like the CEOs, I've been talking to think that they can do like this gigantic range of somewhere between like 50k and 300k. Is that like, that's not going to work? That's what you're saying.
Dan McCoy 08:35
I think everybody on this call intuitively has a sense for what the answer to that question is? And the answer is, that's probably very risky. To do it that way. I acknowledged that you have a software engineer, Roman, one, Roman, two, Roman, three, Roman, four, Roman five, and an organization not necessarily ever organization. And if you take the low end for Roman one, and the high end for Roman five, and put that in your job advertisement, you're asking for trouble is the short answer. And I Well, the laws are not monuments of clarity, it is highly likely that the entities that will enforce these laws would say that is too cute by half and it is too broad and is not ingredient it is a completely contrary to what was intended by these laws. In other words, the correct technical legal answer would be have a job posting for Roman one that says one out of 25 to 145. And then a job posting for Roman Jude it says 135 to 155, or whatever it may be easier said than done, I realized and that means more work. And man, we're rolling up the sleeves, but that's from a compliance standpoint, that's probably the right answer.
Nolan Church 09:41
Got it? Okay, helpful. So the next thing I want to get into is I think a lot of companies in
Dan McCoy 09:52
Nolan Church 09:53
that are either fully remote or in this like remote slash hybrid place How do these laws apply to those types of companies?
Dan McCoy 10:03
Yeah, this is why I have a job is because the laws are a bit vague and a bit opaque in this area. So I'm only half joking when I say that, but it is it is somewhat unclear. By way of specific example, the New York City ordinance makes very clear that you are obliged to disclose pay ranges on a job of their descent or a job posting for a position, not only that will be performed in New York City, but that could be performed in New York City. What does that mean? That means if I'm hiring a mid atlantic based salesperson, and I put out a job posting to hire someone to cover my mid Atlantic region to sell my products or services, that's a job that can theoretically be performed in New York City, I might ultimately hire somebody in Raleigh, North Carolina, to fill the opening. But if it's a job that can be performed in New York City, and I have four or more employees, at least one of whom is based in New York City, then I'm subject to that new law, that's a painful reality and a painful specific reality. But that's the bottom line, if you will, as it relates to that kind of remote person in that context. Conversely, if I, you know, make very clear in a job posting, I am hiring an Atlanta based salesperson to cover the southeast region of my business. And I want that person in Atlanta, because that's where our se sales offices. I know, that's an obvious example. But that would be an example of where that's not a job that can be performed or would be performed in York City. So you're not subject to that law. So with those two somewhat rudimentary hypotheticals in mind, that's how to think about remote workers. But there's a lot of other vagary around this, the Colorado law is not entirely clear about, well, if you have somebody based in New Mexico, buddy's reporting into somebody in Colorado, reports into an office in Colorado travels to Colorado periodically for training for meetings, for sales, kickoffs, and things of that sort. Are they a Colorado employee? Or are they you know, a non Colorado employee not subject this law? The law is not entirely clear on that. And welcome to my world if you
Nolan Church 12:23
got it. Got it. Yeah, so super clear. That's very helpful for everybody. Gerald, I want to I want to turn it over to you, because you and I have talked about this, these laws rolling out like you keep telling me like, the best way to think about getting into a company getting into shape for this is having really strong comp fundamentals. And so can you give the group a rundown on what you mean by that? And and like how companies should be preparing from a fundamental standpoint?
Gerald Lou 12:53
Yeah, for sure. So I think about pay transparency, like, imagine, pay transparency is a window into, you know, a room, your room, the room is theoretically your comp, your company's comp practices, or, you know, in, in this case, comp fundamentals. So let's say this room is really dirty, you might choose to close the blinds, you don't want people to look into your dirty room, right? Alternatively, let's say the rooms really clean, you just cleaned it, you might leave the blinds open and get some sunlight in. This is how I think about pay transparency for companies. The more the better your comp fundamentals are in place, the more transparent you can be. So if you look at this, you know, kind of four box here. People who are most the companies that are most at risk are the most transparent, but don't have any comp fundamentals. Right? These are, they're just kind of hoping that things go well for them. That if you're in this box, I would recommend probably you'll probably want I mean, in an ideal world, everyone could just go to the top right box, high transparency, high Caitlyn metals, I think a lot of a lot of companies are probably going to have to shift down first. So you know, you see the in the lower left box, or someone kind of pulling down their blinds, this might be in the appropriate box while you're working on your comp fundamentals. So companies here are, you know, prepping, they're getting their benchmarking in order, they're getting their market data in order. They're prepping so that they can end up in the top right corner, which is, you know, high transparency, high component Mills, companies who have high confidence fundamentals, but low transparency, I think, what will ultimately happen, and I've seen this a lot, like really high talent, really top talent is, you know, seeing this as a trend are really starting to demand more pay transparency and to the black box called compensation. And, you know, what I find is if you don't end up becoming more transparent, the trend will be that a lot of top talent will choose not to come to that company. You'll want to go to the companies who are transparent with what their comp philosophies are. So that's my general perspective on you know, lately Is this this kind of example? But, you know, you might ask, okay, what what do you mean by comp fundamentals? This is a kind of obscure thing. So what are the fundamentals that I'm talking about? This is just an example. So like, if you look at the right side, these would be kind of what I consider some of the major building blocks for comp fundamentals. These are going to include things like your comp philosophy, your job architecture, your benchmarking, your location, strategy, your annual review processes, and what your pay equity is going to be. And so all of these are kind of the building blocks into you know, how and why you pay what you do. Really, what you'll need to be able to do is answer some of these fundamental questions with these building blocks. So why am I paid what I am? You should be able to answer this, you know, and it's gonna be different for every company. But you could, for example, say why am I paid what I am? Well, are confident, lots of fees that we pay, you know, based on the job that you're doing great. Okay, so the job architecture, I appropriately matched the person to a job. Okay, maybe their software engineer three, and great also, for benchmarking, we've decided to pay 75th percentile appears. Okay, so I know what the market data looks like. And then also this person might be in Detroit. Okay. So what does Detroit get paid in this, you know, kind of theoretical scenario, right? So you can see how, you know, what am I why am I paid what I am? It's not a simple answer, right? It's actually a combination of all these different kind of processes and policies, and you need to be able to have a strong fundamental to be able to pull from all of those to answer these questions. The next one is even tougher, because you're not like the next question, which is, why am I paid differently than others? In my role? This is going to be the tough question. I think a lot of people are going to ask it. And you need to be not only be able to do what you did in the first question, which is like, Hey, why am I paid what I am, but you only be explained why it's different between two individuals, right? So same thing, bottom the top, you'll have to answer that. And then you'll have to add in the other two blocks, which are okay, during annual review, is, our two people paid differently, because one is a higher performer, you need to be able to answer that they're paid differently, because, you know, Bob got a five out of five, and George got a one out of five. Okay, that makes sense. Do you have the backing to say why they're paid differently. And then also, you know, maybe they shouldn't be paid differently, and you need pay equity, you need to have a strong pay equity philosophy to make sure you're catching this, this, this scenario, so that you can make sure you kind of, you know, write the kind of pay equity issues you have right now. And then finally, the last question is, what can I expect to get paid in the future? And let's say you have a good perspective of why am I getting paid what I am today, you'll want to have, you know, the current fundamentals, your comp philosophy needs to have a good perspective on how you're going to kind of fix things over time, let's say things are, you know, really good, that's great things can go out of whack if you don't have the right fundamentals to make sure that you're pulling them back into kind of a healthy kind of compensation state, right. So things like, you know, if you're doing annual reviews, and people are, you know, low in a range versus high in a range, but they have the same performance, what would you do, you would probably give someone who has lower in the range, a larger increase compared to someone who is higher than range, they get a smaller increase for a given, you know, similar performance, and over time, they would kind of equalize, right, these are the fundamentals that you would put in place to make sure over time, you're reaching a state where you can kind of have pay equity.
Nolan Church 18:35
Got it. And then we talked a little bit about kind of like preparedness and how we can get there walk us through this place.
Gerald Lou 18:41
Yeah. So the first thing you want to do to make sure that you're you're prepared is first you want to review your internal processes, right? So evaluate, and clean up your structures, look for any biases in these structures, and then also review how you're kind of delivering these kind of these compensation processes. Yep. Look for any bias, but honestly, a lot of my clients right now, as I'm working through some of these, you know, pay equity projects, or the the pay transparency projects right now is a lot of startups, you know, you're just running really fast, you might not even have a structure or a policy in place. So even getting to a point where you just have a have like a point of view on it, like just building your fundamentals. Like, that's where a lot of my companies are at right now. They're like, hey, we actually just need to build processes, like we don't even have it, you know, and so, that's kind of step one. The next step is determining your approach. And these are going to be very different for every company, right? But some things you might want to ask yourself and it was kind of like hit on earlier in the in the presentation, but, you know, do you want to have a national or a local approach, right, and this, this could be like, you know, a fan company probably needs to have a national approach because you could hire a software engineer theoretically in any state right? So you want to make sure you have like the most stringent compliance across all the different states you need to know all Have them. But let's say you're a small startup in Detroit and you only plan on being in Detroit, maybe you just look at the Detroit local laws, right? Like, these are some of the things to think through. Another one is how do you determine your range? And so we talked about range. What does that mean, right? To kind of ways I've seen it is like, let's say you have a benchmark, let's say you target software engineers to make 100k a year. And you might show in that case, plus or minus 20%, my range is 80 to 120k, that might be one perspective, showing how you give them a range, another perspective would be based off of your current employee base. So you could say, actually, the range is between the minimum I would pay for this range. So let's say it's 80k. And let's say I show the 90th percentile of the current employee base. So if I look at the employees for this range, what is the 90th percentile make? That's the range I'm going to show right? You have different kinds of ways to show rage as well, you want to come up with a way to do that as well. And finally, another perspective would be, do you want to be proactive or reactive with some of these ranges, and a lot of this is going to be how good your fundamentals are. And like you know what you can like, the more proactive you are, the good thing about that is less work. So like you can imagine a HR team just getting bombarded with a bunch of questions. But if you're proactive, then you know, you can show some of these things. But let's say you don't have a kind of fundamentals in place, maybe you want to be reactive, because you know, you want to control that messaging a little bit more, right. So these are kind of thoughts that everyone will have to go through. And then just to kind of wrap up, you also want to be able to assess your risk, make sure you're partnering with everyone. So legal leadership, you know, HR, making sure you're thinking through all of the kinds of side cases. And then finally, I think maybe the most important would be training, training is going to be super important, not just for your HR people, but for all of your managers for all the leaders, because they're your first line of defense, you're gonna have a lot more managers and leaders, and you're gonna have HR people, you can imagine everyone's bombarding, you know, some poor HR ops person with like, hundreds of questions like that's not going to be a scalable solution. Everyone needs to understand their comp fundamentals.
Nolan Church 22:10
On Well, Bejeweled, and it's actually like the perfect time for us, I think, to launch our first poll. So the the poll that I'm most interested in getting some feedback on from folks is our preparedness. So on a scale of one to 10. Oh, prepared, do people feel, please take like five seconds to fill this out. And as we do this, like the the questions that I want people to think about is like, you know, to Gerald's point, I think a lot of companies do have like that core HR person that's going to be bombarded because they aren't prepared. And like, you know, these employees are going to be asking very, very challenging questions. And so like, it is going to be very critical, not only for the HR person, and the entire people team to be able to respond to them, but also for managers. And specifically, like, you know, when these these laws actually come into effect, I think a lot of employees are going to come like armed, ready to say, like, Hey, I know, you have to give me this information, how are we going to present that? Are we going to do it proactively, and make sure it's available for everybody? Or are we going to do it reactively. So let me share the results of this poll that people have to say. So it looks like most folks are in the collet like six and under bucket. Some are actually like doing quite well. But I'm curious Meghna transitioning over to you. I think there's a huge communication aspect to this. And so as you're helping companies starting to get prepared for these types of laws, how are you advising them? And what is the guidance that you're giving?
Meghana Reddy 23:48
Yeah, absolutely. I mean, these questions have been asked before these laws happened. So I saw in the chat, Olivia, your question about location based pay, people hate it, especially internationally. You know, we've had to have these conversations before, but it tended to be you know, it would kind of trickle up to you in the people leadership, maybe people chatted about, you know, amongst themselves, but you had to be able to explain and say, Look, yeah, we pay differently by location. Here's why, you know, it's fundamentally different to live in a different country. It's just it's not equivalent to B, you can't just say $1 in the US is the same as dollar new payroll taxes, the different social security's different like the the country is different. And so part of what's hard is not just getting some of these fundamentals in place, but it's actually being able to answer these questions much more often and a lot better. Because now candidates are going to ask and people are going to start at get, you know, employees are going to get better at asking these questions. Ultimately, I think that's a good thing, because we move away from this kind of black box, no one talks about it part of salary. And this is why you know, I mentioned initially, there were a couple of times when the talent market was so hot. So if you think about anyone remember 2021, which is kind of in Same. And so we ran an experiment said, All right, you people are worried that we are hiring at rates that are higher. Everyone was like, I'm not getting paid enough. And it's like, Fine. Let's talk about compensation. Let's talk about how we do it, why we do it. And you can find out your salary band if you want to. Right. And a lot of it's actually people are assessing you not on the number, but how good your responses are. And if your responses are, it's because market data said that, I don't think it's going to fly. And I think really kind of coming down to the emotion. So coming down to the like, location based thing is I tell people, yes, it seems unfair, but that is how different countries are paid. And what's fair is I will, if you live in the US, I will pay you us wages, you know, it's not like it's exclusionary. And I think you have to really be able to answer that question. So if we go to the next slide now that I can talk through, you know, just what I've learned from it. So I think there's three components to it. There's part of its compensation philosophy, which I'll did a great job of explaining, like, how to pay reregister for what happens by geography? How do you pay within the salary range? Like, you know, why don't I get the top of the range? Who gets the top of the range? Happy changes over time, like all of those things, it's important to do that and do the analysis. That's before make sure you know, if you put out a salary band that people are paid within the salary band right now it looks at it and says, Wait a minute, why am I not paid the salary band? I think that's step one. Step two, and these are bits that a lot of people haven't thought about is, how are people going to find out? You know, is there going to be a spreadsheet? Who's going to request and request it? Like, can you ask about any band? Or just your band? Who's going to like, Can I ask about my team's band? Can I know someone else's band. And I think these are all choices that are important for you to make, and important for you to like, let everyone know why you're making those choices. So for example, I've always said, look, there's a balance between knowing being informed about your compensation and being kind of and privacy, which is like, you don't need to know someone else's band, but you need to know your band, right. And that's something you're going to know, if you're a manager on your team, you should know your team's fans important for you to be able to have that conversation with everyone in your team. So it's making those choices. I think something Gerald unknown brought up like, are we going to do this practically, or reactively. And I'll say this after having done twice, it is way better to do it proactively. If you go out there, and you're like, here's the six things we do for salary, here's why you may not agree with it. But it makes sense. Like this is not this is how we do it. And it's consistent for everyone. And so that's the third bucket, which is like, have you explained to your people team, what to say? Like, is everyone saying the same thing? Do your managers understand this? And then, right now, actually, I'm working with a lot of people to just create videos for the wiki, because they'll agree, how many times am I gonna give this presentation, I'm just gonna do it once, and then put on the wiki, and I'm gonna just be really open about all the different things that went into how we make these changes. So part of what's hard, I think is not is not just, Hey, we have a deadline, we need to get everything out there. It's also I think, the bar for how you explain salary, because it's no longer a black box has gone up, right. And so everyone's game has to kind of go up with it to be able to explain in a satisfying way. And if you know if anyone's interested, you can throw some at me and I'll try to, it's hard to do. It's not easy it is. And so I can try a few different questions that I've gotten and how I've explained it. I'm happy to do that, if that's helpful.
Nolan Church 28:27
Well, I have one for you immediately. So I do like the idea of transparency on this gradient of like, completely opaque and nobody knows what's going on to like ultra transparent. But I think that that transparency gradient is somewhat correlated to distractions. And so like, I think that sometimes that companies that I know, a lot of companies have tried to do, like the ultra transparent of like, here's what everyone's paid. But I think that that that leads to other sorts of issues in the company. So how do you like, how are you recommending companies think about this? Like, is it specific by the company? Or do you have a preference like talk? Talk us through that?
Meghana Reddy 29:09
Yeah, I mean, I have a preference, it actually depends on how comfortable the leadership and people team fields being open. Like, it's really about your ability to explain everything. Right. So my suggestion is things you can't explain, right? Maybe I'll walk if I walk through the choices here. And I'll tell you what I would do. There's a lot of questions there of like, does this apply to this employee that employee this candidate? I think that's actually the wrong question, which is when a candidate asks you, Hey, what is your salary range? If your answer is, I don't want to see it, because you don't you're not I'm not legally required to do it. Like, you know, are you building or losing trust there? And I think every one of these questions is either a trust building or trust losing exercise. So I would care less about what the legal issues are. And more about, is that an outcome that you want, right and so my suggestion is Do it for everyone. Because at this point, if you're doing it for it, some of them, you're gonna have to do it. Now, if you're like a fully Texas based company, that might not be a problem for you, but like, if you have employees in California, in Washington, in New York City, I think you just have to go all the way. What is shared? I think, in here's where I think people are not ready for full transparency, because it is unfair, like it is completely unfair that software engineers get paid what they do, and public school teachers get paid what they do. It is completely unfair. But it's also very consistent. And so I think that sort of transparency, people sort of generally get it but don't have the cannot emotion. It's not an it's a distraction to your point. It's a genuinely what I do share is people's own bands are the band about them, because they want to know, like, what can I get promoted to with managers, I do tend to share all the bands below them. So like all the below director, I tend to have, like, if it's a good manager group, I think it's important for them to know and have the conversations I do that. And recruiters, you know, the recruiters we share all the bands, except executive bands tend to be kind of out of bounds. So they're sort of like, so I tend to be more open with my people teams. But that's how I do it. When will this be shared proactively upon request? This is a little bit of like, if you're willing to go out there and kind of do the presentation, you can be proactive. But I would do it right before performance review processes. There's a manager conversation, because like right after that, but I think it's also fine to say upon request, as long as your HR team or your manager team has, like, don't just open the door to like 20 people calling them the next day. So So I think you have to kind of know which one is going to work for you. And then who will share the chat or bands, HR business partner or manager? It depends a little bit like do you feel like your managers have the ability to explain it? You know, did you do the training with them, than the managers? If not, you know, do the training with the HR business partners and have the HR business partners do it? So? So the answer is a bit of both.
Nolan Church 31:57
Got it? That makes sense. And then Dan, I want to tap you back in really fast, because I think you know, many, many of the attendees today are working at tech companies. And one of the biggest components as it relates to compensation to tech companies is equity. And so how much of these laws apply to the equity compensation piece?
Dan McCoy 32:17
None of them do except for Colorado, Colorado requires the description not only of the pay scale, and to be clear, and there's a few questions in the chat, pay scale means base salary or base hourly rate, it does not include on target earnings, variable compensation, etc. Except for Colorado, which does require a description of the quote unquote, benefits that attend to the position. And that would include equity, of course, and a reasonable description of what we get what the package would look like, its RSUs, or its options. And if it's options, here's the range of the equity grants. I would suspect, I don't have statistics on this, that with respect to Colorado's law, companies are likely not getting into granular detail about the size of an equity grants, or the range of equity grants that are publicly describing in more general terms, this job includes equity, as well as health insurance 401, K, et cetera, et cetera. So that's a long answer. The short answer is other than Colorado, the laws technically only apply to the base pay scale.
Nolan Church 33:26
Got it? So So folks, we've carved out about 20 minutes for questions, because we know that this is a super hot topic, and we got three amazing people that we can we can get them answers from. Olivia asked a question that's getting plus one in the chat, which is around being fully remote. Throughout both North and South America, they use location based adjustments for compensation. And so she's asking what is the guidance for the appropriate range to share? Should they break out specific location bands for those areas that require it? Or should they share the full range and say it's location dependent? They're nervous about how folks in different pay locations will respond to each strategy when it comes to the other to the offer stage. So So Megan, I think that this one's for you. This is the communication question, right? This is the kind of thing especially when you are, you know, many of these studies now are global, if not, at least having some remote presence, like North and South America are very different labor markets. And now we're going to be able to we have to communicate this. How would you recommend communicating if you're in Alivia shoes? Yeah,
Meghana Reddy 34:33
so I've been in your shoes with a fully distributed team. And international folks, there's two options. You can kind of, you've seen this now with a lot of the you just put in the zone a zone B, zombie Zone C zone D, and you put all the bands, but that requires you to have had really with your existing employees in real heart to heart about like, what it how you set it, why it's consistent and why This way, it's the way that you're going to go forward with it. Not everyone loves it. But if you've kind of had that conversation, then I think you can be that because here's where like, I would worry more about your existing employees than the candidates or candidates. This is clarity right there kind of looking at it and saying, This is the clarity that I need. And this is great. And you'll have candidates that will try to negotiate and say, Well, why can't I be Zone A and not Zone C or whatever? Like, things like that. But generally, I think it's really more about the employees. But it's also, you know, you could also make the argument, I've also seen this as people do us bands, and not the other ones, not the other international ones. And sometimes it's for very good reasons. Because they say, look, things change a lot internationally, which is true exchange rates change the way we set, our national comp is very much in flux, it's not as easy to do it as in the US. There's, you know, I mean, look, look at the exchange rates over the last year, like there is a lot more movement in international exchange rates. So I think it would be very fair to say, Hey, these are North America bands, you know, we hire lots of different countries, you know, GitLab, used to open sources, but even they've kind of closed it up, because they've realized it's actually a competitive advantage. And it's true, I used to go look at good labs, to sort of figure out what other competitors are paying. And so there is a competitive issue with that, to be honest. So I think if you're international, honestly, I would actually right now do the latter, because I'd be really worried about the competitive issue, because people will use that to kind of be you. But from kind of a fairness perspective, I would have the conversation with employees internally that says, how did we determine it? This is market? And I'm sorry, it is not practical or consistent for us to be paying the same rate across all countries. So just kind of what they want.
Nolan Church 36:42
Yep. Yep. Makes total sense. Dan, one for you. There's a lot of questions on, on your recommendation on whether or not companies should be especially if they have a distributed component should be just trying to think about the most stringent laws and and trying to be compliant with those, or should they be trying to navigate this gray area of could a job be done in that state? Like, how are you thinking about this? And how are you advising clients
Dan McCoy 37:11
on that? I'm advising clients to be practical about this. And I candidly, I think clients are fussing about this more than they need to in terms of what these disclosure obligations mean. And I don't mean that in a critical way at all. I think there's some overthinking going on on this. I don't I don't necessarily advocate going to the Colorado default and having every job posting in the United States, subject to the Colorado law where you're worrying about how to describe benefits and like that, including on things like equity and, and what level of depth to go into with equity. But I think it's reasonable to say, look, if you are a fully distributed workforce, you do not have regional sales offices and engineering offices in Austin, Texas, etc, you are GitLab, you are fully remote, you literally don't have a headquarters, you may all get together for a sales offer or for an all hands once a year in the Bahamas. In that context, I recommend, you know, consistent approach, where you disclose the pay scale ranges compliant with the New York and California and Washington State and Colorado laws for that matter. And it would be reasonable to stop there. And to not go into the benefits context, unless you in fact, have Colorado based employees. The law in Colorado kicks in if you in fact have at the time of the posting a Colorado based employee. So if you're a distributed workforce, and you have no one in Colorado, you can very confidently and lawfully say we're not we're going to disregard Colorado law for now and just focus on those others. That's what I in general, not it's not a one size fits all approach recommend for most clients in that context.
Nolan Church 38:55
I think that makes sense. And then a follow up there from Chris, around the Colorado Law, specifically with equity is how detailed do we need to be in communicating equity.
Dan McCoy 39:06
So the law is not clear on that. And I think it's important to be practical here and to keep in mind that information around equity, like the fair market value of the stock and fair price, that's confidential business information for privately held companies, for sure. And so, you know, the law doesn't require employers to disclose, you know, confidential equity information that you wouldn't otherwise make public. That said, the law is not clear. I think, again, a reasonable approach right now would be to have a general description. Here's the pay range. And what we also offer in this role was health insurance 401k stock options and leave it at that and not get into and I'm not seeing clients describe equity grant numbers, you know, 5000 to 15,000 stock options, vesting over four years with a one year cliff, I'm not seeing that level of depth and detail Could you do that conservatively? Sure, especially if you were not troubled by disclosing that, from a competitive standpoint, and from a confidentiality standpoint, but I'm not seeing companies do that. And I don't think the law compels it.
Nolan Church 40:14
I think that makes sense. Gerald, you know, asking you just a round equity, you and I have worked together on on putting together equity plans for companies. You know, I think a lot of this stuff like happens behind the scenes, there are not currently laws that require companies to disclose, you know, what is their annual merit cycle increase looking like and how they come out those numbers? Are you still recommending that companies keep that information closer to the vest?
Gerald Lou 40:46
I don't know, in terms of like, Mara numbers, all that stuff, I think it's less like I'm recommending them to keep it close to the vest, because I don't know that they're getting advantage, anything advantageous out of keeping it close to the vest, other than maybe some, some kind of like, you know, maybe your competitors are looking at these numbers, I do think that you should keep it close to your vest, because what I've noticed recently, and I've gotten through this with a lot of my clients currently is those numbers can change wildly in a very short amount of time, if you're talking about, you know, like compensation, like salary numbers, like one month, I'm working with budgets with the CFO, and we've set the budgets for the program, like a month in, you know, something happens, a deal doesn't close or like, you know, in, you know, the inflation is rising. And you know, they've cut budgets, like 50%. And so if you've kind of outwardly communicated some of these budgets already, and you have to walk back and say, Actually, we're cutting them by half, it's a lot worse than just saying, you know, hey, like we're are by the time you launch, you're saying this is what the compensation, you know, budget is going to be, I think it's worse to be like, hey, it was at 10%. Now we're cutting it down to five, now we're putting it down to three. So I think that's the only reason is because I think things change really quickly. Ideally, you know, finances setting a budget the beginning of the year, but I've never seen anyone hold to that budget. By the end.
Nolan Church 42:06
Yeah. And I mean, if one thing we've learned this year, as it relates to equity is that, like, everything's changed. And it's changed a lot faster than I think many of us like had ever expected that to happen. Make that, you know, one of the things I just want to do a quick double click on that you mentioned that I believe strongly in is that I think that, that there is an opportunity for companies to be on the offense here. And specifically, like if you actually have really strong confident fundamentals, if you are okay, communicating those, I think it could be advantageous in not only going in recruiting new employees, but also retaining your existing employees. Do you agree with that?
Meghana Reddy 42:48
100%. I mean, I've done this twice. And I've not regretted it, because I think the trust that had built just like made it so much easier for every other, you know, for anything else. And this is why I will say it's not easy, I think trying to describe this, and I do this a lot with clients, it takes like it's work. Like we have to sit down, we have to figure out like, what is the philosophy? How are we going to defend it? How are we going to kind of how are we going to explain this in a way that's compelling to our audience, you know, and, you know, we have clients that are like, we're not going to be we're not going to be the highest cash pay, like, how do we make this compelling? And I think you have to really work at it. But here's the thing, the work is so worth it. Because once you have it, everything gets easier recruiting conversations, retention conversations, promotion conversations. I mean, my favorite thing about doing this and why I did this a second time, but like, it just stopped managers from asking for exceptions, because they're like, oh, not gonna ask exceptions, because people are, they're bad. And they're gonna, I'm gonna have to explain it. And it just kind of, I mean, in some ways, like, I really love these changes, because it does ultimately bring pay equity because people realize that, okay, like, I can just like do one offs here. And I'm like, Yeah, I'll just pay over, you know, over this person over and that person over. And each one seems okay, but overall, it just ends up being like, you end up with pay inequity, right. And this is me on the people side, looking at that being like, oh, you know, this isn't great. Let's fix that. Right. And so I think there's a way in which, if you can put in the work to explain it and do this upfront, it actually really does. Some makes compensation a lot smoother, right? And what I love is like, the people that know the most about compensation are software engineers, if you look at any of those websites, I mean, they lay out all of this, like, you can find out everything. I'm just amazed. It's like I always run anything by the software engineering team first because I'm like, if I get past you, like everyone's gonna leave me if people are talking about this, so like, on the narrative, don't let you know, don't let people kind of make something up. That wasn't your intention. Right.
Nolan Church 44:51
Totally. And I think it's like a you know, you and Gerald both do this work because I think many competent companies either don't have a head of total reward or it's or don't have like, ahead of people. And often like, you know, they're in this like early stage or growth stage where they're still trying to like figure this stuff out. And this is exactly the work that you do and where you can help them and where it could be. A lot of companies are coming to us today saying, like, hey, how do we comply? And I actually think the better question is, is like, how can we take this, these laws and then make them a competitive advantage to us as we are competing for talent in the marketplace, that's where I think like the best companies are thinking about this to your point around like, GitLab. Like, I used to look at them all the time. Because like, they're just out there with everything. And they're so codified with the way that they think about their philosophy on things. And it's going to recruit and retain a certain type of employee, and then it's going to deter a different type. And I think that is the that is the world in which we are moving towards, as it relates to the way that we think about the employee lifecycle as as as it relates to the way we think about retention, just kind of a general. Gerald, last one for you is just, you know, when you're when you're coming into one of these companies, and you start thinking about like, what, what is your process for when you come in of setting up like, alright, so like, they're coming to you for pay transparency, but really, you need to go through the full process of getting like, hey, we need to get your comp fundamentals in place. Like, who's involved in that? And just like really high level, how do you go about like setting up, you know, a comp philosophy and executing like a merit cycle?
Gerald Lou 46:30
Yeah, so this is a really good question. I mean, I there's not a perfect, like, you know, one fit one size fits all answer, but typically, where I start, and where all compensation should really start is the philosophy. So always start the compensation philosophy, what are you intend to do with this comp compensation program, started the philosophy, and then, you know, they'll kind of state their attention. And then each of these intentions should have some kind of backing on how you're kind of making this intention happen if our intention and our comp philosophy is to retain the best talent, okay? What are the programs at which you know, that you haven't placed to retain your talent, and then you kind of follow the tree, the compensation, philosophy should be the basis, they kind of tell you what they're going to be doing. And then you follow each branch down to the end, to see how these programs are fitting? And are they doing what you're intending them to do? I think what what I see a lot of times is you say these things like the compensation philosophy will say the compensation, compensation philosophy, and then when you keep on kind of pulling the thread, pulling a thread pulling through it, by the time you get to the end of like, how this program is supposed to work isn't actually doing what you're intending it to do. And often the case a lot of times it's not not because they don't, they're not trying to do that thing. It's because they don't realize they're not doing that thing, right. And this is why the comp fundamentals really make sense. So you start with a composite V, you kind of pull on all the branches all the way to the core to make sure that they're doing what they're intending to do. And then you kind of review all of the different building blocks of what makes makes up, you know, and I stated some of those building blocks right now. In the presentation, I go through those comp fundamentals. And I'm like, Hey, does your job architecture makes sense? Does your you know pay equity? Philosophy makes sense? Does your location strategy makes sense? And then I kind of review each of those independently, and see how well it fits into their compensation philosophy.
Dan McCoy 48:20
Yep, makes total sense.
Nolan Church 48:22
All right, everybody, this was amazing. So we want to just be really clear that Meghna and Gerald have actually set up like Calendly is, which we will send out to the group if you want to spend additional time with them. Going deep into these topics both of them are available for for consulting through continuum. We also have a number of other execs that are available on both the people side as well as the compensation side. Because Meghna and Gerald are very busy, they're in high demand. If you are looking to work with somebody to get these, these philosophies in place, and to make sure that you're compliant for the new rules. Chauncy actually just dropped in both of the colonies there if you're interested in spending some time with either Magna or with Gerald. But I just want to thank everyone for showing up here. If you have any additional questions, you can email me directly at Nolan joined continuum.com And a huge shout out to our panel. Dan Magna. Gerald, thank you guys so much for taking the time and for educating us on this very important topic.
Dan McCoy 49:22
Thanks so much, everybody. Welcome. Thank you. Thanks. Cheers.