Navigating pay transparency: Addressing title inflation in modern compensation strategies

By Michael Mooney, SPHR, SHRM-CP

In recent years, pay transparency legislation has gained significant traction across the United States. A growing number of states and local municipalities are now mandating organizations to disclose salary ranges in job postings. This shift towards transparency is reshaping the dynamics of hiring and employee management, presenting new challenges for business leaders and HR professionals.

One of the key drivers behind this trend is the unprecedented access employees now have to crowdsourced salary data. Younger generations are particularly adept at leveraging AI tools like ChatGPT to obtain market salary information, perhaps without considering the accuracy of the data. While these advancements empower employees with knowledge, they also pose unique challenges for employers, one of which is “title inflation.”

What is title inflation?

Title inflation occurs when job titles within an organization suggest a higher level of responsibility or expertise than the actual duties of the role warrant. This can complicate compensation strategies and lead to discrepancies in employee expectations. For HR and compensation professionals, it’s well known that market matching should not rely solely on job titles, but rather on the job description and key responsibilities. However, employees and job seekers may not exercise the same caution in their own comparisons.

Consider the example of an employee with the title “Accountant.” Despite holding this title, the individual primarily supports accounts receivable and payable functions alongside payroll processing. The job description aligns more closely with roles such as an Accounting Specialist, Accounts Payable/Receivable Clerk, or Payroll Specialist. The HR department, recognizing this discrepancy, has market-priced the “Accountant” position according to industry survey benchmarks for positions like “AP/AR Associate” blended with “Payroll Coordinator,” thus reflecting the true scope of the employee’s responsibilities, rather than just the title.

In the previous example, however, challenges may arise when this employee seeks a salary increase, armed with data from AI tools and job boards. A quick search on platforms like ChatGPT might suggest that an “Accountant” in Minnesota earns significantly more than the employee’s current compensation. Further investigation on job sites like Indeed.com could reveal postings for “Accountant” positions offering higher pay and reinforcing the employees’ belief that they deserve a raise. The employee may not consider that many “Accountant” job posts or market data actually reflect different duties and may require higher education and/or certifications than their current role, which are driving factors for a higher wage.

In light of these pay transparency trends, it is imperative for organizations to carefully consider the titling of new positions and reevaluate existing titles that may inaccurately reflect the work being performed. Proper job titling not only aids in maintaining equitable compensation structures but also helps manage employee expectations and supports transparent communication.

For business leaders and HR professionals, navigating the complexities of pay transparency and title inflation requires a proactive approach. By aligning job titles with actual job duties and market standards, organizations can foster a culture of fairness and clarity, ultimately enhancing employee satisfaction and retention. If you would like to learn more or have a discussion on how pay transparency affects your organization, contact our Abdo HR Advisory team today.