Pay Transparency: From Buzzword to Reality
Let’s face it, salary talk can be awkward. But what if it didn’t have to be? Enter Pay Transparency (“PT”), a hot topic that’s shaking up the workplace. But what exactly is it, and why is it suddenly everywhere? How have we gone from a tight-lipped paradigm about pay to a sharing-is-caring one? Some may be shaken by the disruption, but this also presents an opportunity to add value if leveraged correctly.
The Value of Pay Transparency:
- Empowered employees: Knowing their worth boosts morale and leads to more informed career decisions and salary negotiations.
- Stronger company culture: Openness fosters trust and fairness, leading to a more positive work environment.
- Competitive edge: Companies with transparent pay practices attract and retain top talent.
- Fairness: Promotes equal pay for equal work and reduces pay inequities that can otherwise lead to wage discrimination.
The Journey so Far:
We did not arrive at Pay Transparency overnight. The internet enabled a new age of data sharing and transparency, which companies like Glassdoor took advantage of by crowdsourcing compensation data that employees started to rely on. States were moving towards a PT framework at least 5 years ago. California passed Assembly Bill 168, which took effect on January 1, 2018. Between this and amendments to their Equal Pay Act, California has been the most active in enacting legislation expanding Pay Transparency (Statutory Disclosure Requirements by state are included at the end of this article).
First of all, new laws made it illegal for an employer to ask job applicants what their salary was in their current role. Despite this appearing to obfuscate employers’ view of pay in the marketplace, it served to help align jobs around actual market pay and give a boost to internal equity. Instead of relying on the arbitrariness of what a single company paid in comparison to another, i.e. current employer vs. prospective employer, market data and analysis would be the common and transparent means by which pay was determined. Compliance is a neutral ground where two parties can be assured of fair play.
Secondly, companies are required to disclose the salary range for employees in their current role upon request. When switching roles, this applies to both internal transfers and promotions. An employee now has the right to know their own salary range and that of any role they are considering.
Lastly, applicants are allowed to ask for job ranges for roles they are applying to. California and Washington, starting January 1, 2023, have gone further and require that every job posting include a salary range. The key nuance now is that California’s disclosure requirements also apply to remote work postings. If a role for a California company can be filled by an applicant anywhere in the country, then California’s laws apply and the salary range is included in the job posting. This blurs the lines of different states’ requirements.
Since there is a patchwork of laws some companies are finding that taking a blanket approach to disclosure requirements serves best. This is especially true for companies with smaller talent acquisition teams. Using the most stringent requirements – California’s – these companies default to the most Pay Transparency. Larger companies can tailor their approach more and fulfill PT requirements by jurisdiction.
How Companies Approach Pay Transparency:
- Large companies: Often implement formal policies, publicly sharing salary ranges for open positions or internally through salary bands.
- Small companies: May be more informal, but still encourage open communication about compensation. Employees might discuss salary ranges with their manager or peers.
Employees and applicants are not aware of all of the laws, but will still expect a new era of Pay Transparency. Companies need to be prepared to meet those expectations. Implementing more transparency laws across the country will take time, but the labor market responds more quickly to disruptions. Workers across the country will demand maximum transparency long before there is a federal law mandating the same. They are also better positioned to do so than ever before.
Companies who have always operated in good faith in their hiring and pay practices may rest assured that their efforts are not only aligned with what is now the law and best practice, but they can communicate that to their employees.
Remember: Pay transparency is a journey, not a destination. It requires ongoing communication, education, and adjustments. But the potential benefits for both employees and companies are undeniable. So, let’s ditch the salary secrecy and embrace a more transparent future!
Statutory Disclosure Requirements:
- Keep in mind: Pay transparency laws are rapidly evolving. As of December 2023, several states have enacted or are considering legislation:
- California: Requires employers with 15+ employees to disclose salary ranges upon request, including for open positions that qualify for remote work.
- Colorado: Requires employers with 100+ employees to disclose salary ranges for open positions.
- Connecticut: Requires employers to disclose salary ranges upon request for existing and open positions.
- Maryland: Requires employers with 15+ employees to disclose salary ranges for open positions upon request.
- Nevada: Requires employers to provide salary range or rate for all new positions, promotions or position transfers.
- New York: Requires employers with 4+ employees to list salary ranges for open positions, transfer, or promotion.
- Rhode Island: Requires employers to disclose salary ranges upon request for existing and prospective employees.
- Washington: Requires employers with 15+ employees to disclose salary ranges for open positions and for internal transfers.
- Cities and Counties with their own pay transparency disclosure requirements:
- Cincinnati, Ohio
- Ithaca, New York
- Jersey City, New Jersey
- New York City, New York
- Toledo, Ohio
- Westchester County, New York
Pay Transparency Jargon:
- Salary ranges: Instead of just a number, companies disclose the minimum and maximum salary for a position, giving you a clearer picture of potential compensation.
- Compensation bands: Similar to salary ranges, but categorize positions based on experience and skill level, providing a broader context for pay.
- Salary comparisons: Tools and resources that allow you to compare your salary to others with similar roles and experience, even across different companies.
- Pay equity: Ensuring everyone is paid fairly based on their role, qualifications, and performance, regardless of factors like gender or race.
Want to learn more? Check out these resources:
- Equal Pay USA: https://www.nbcnews.com/news/us-news/equal-pay-us-soccer-reaches-historic-bargaining-agreement-womens-mens-rcna29365
- National Partnership for Women & Families: https://nationalpartnership.org/
- PayScale: https://www.payscale.com/
- Calmatters: https://calmatters.org/economy/2023/03/california-pay-transparency-law-2/
Let’s keep the conversation going! Share your thoughts and experiences with pay transparency in the comments below.
Disclaimer: This blog post provides general information only and should not be construed as legal advice. Please consult with an attorney for specific legal questions.