Pay transparency not only is becoming more in-demand by current and potential employees, but in many places, it’s becoming the law.
Being open and honest with pay ranges (not sharing specific total compensation numbers publicly without permission…there is a difference) can help your company retain, elevate, recruit, and evolve from individual departments to the company overall.
Advantages for Employees and Employers
Whether you are actively hiring or not, having an open door policy with current employees to discuss pay with them builds trust. (Because you might not be hiring now, but what if someone else has the conversation with them and they leave?)
Recruiting new talent takes a large amount of time and energy. Having that simple conversation (or multiple conversations ideally as the trend would take on) builds trust between employees and leadership and also allows you to see how employees feel.
Stemming problems before they start is a big benefit from this simple conversation. That is an important consideration because yes, there is the potential for how employees react, especially if unintended pay gaps are exposed.
Employees want to know they are being paid what they deserve (and if that number is off or out of alignment with company or management expectations, then again, it provides you a better starting point for quality conversations).
But working with finance or accounting departments to reconcile these potential areas of concern again is easier than the investment into recruiting and training new employees.
If you do find yourself in the position of recruiting new employees (whether to replace or grow the company) studies have shown that job postings that include pay transparency information typically receive more applicants. It also saves you time by ensuring candidates don’t reject job offers due to insufficient pay.
Legal Requirements
Beyond easier recruitment and retention, in a growing number of states, pay transparency is the law.
Start now by researching and reviewing local and state rules and regulations related to pay transparency not just for where your headquarters is located but also for where employees live and work. And even if your area does not require pay transparency, it might be beneficial to provide pay-related information since employees and applicants are more frequently demanding it.
The National Women’s Law Center recently shared data showing that more than 25 percent of workers currently are covered by pay transparency laws. Four states are leading the way with such laws.
Colorado was the first jurisdiction to enact pay transparency laws regarding job postings and there is a new amendment taking effect Jan. 1, 2024, that clarifies how the state’s pay transparency law applies to employers with only remote employees in Colorado. It also redefines job opportunities subject to the notice requirements and enacts additional requirements for job notices.
New York state’s pay transparency law went into effect in September 2023. It covers employers with at least four employees and requires employers to disclose the compensation or range of compensation and job description in any job posting, promotion, or transfer opportunity. It also now covers all jobs that are physically performed, at least in part, in the state of New York.
Hawaii’s new transparency law will require employers with 50 or more employees to include the hourly pay rate or salary range in job listings. It goes into effect Jan. 1, 2024.
Illinois’ pay transparency law will require employers with 15 or more employees who make job postings to begin including pay scale and benefits disclosures on Jan. 1, 2025.
Other states, such as California, are increasing their requirements. If you’re looking to stay compliant with regulations or get ahead of the game, we have a pair of checklists available for download now.
Get Ahead and Stay Ahead
There are many tips HR can implement to embrace this new trend and stay compliant should changes come to your state (or area where employees work). Here is a quick rundown.
- Update pay ranges to attract and retain talent while making consistent pay decisions.
- Include pay ranges for all employees.
- Consider a proactive approach to pay transparency compliance by ensuring job postings comply with the strictest pay transparency requirements.
- Be transparent with the organization’s compensation philosophy and structure.
- Train management for uncomfortable conversations.
- Regularly update employees on compensation.
- Embrace a culture of pay transparency with open dialogue, and regular pay equity audits.
- Avoid unintended consequences. Uncovering all this could cause some business disruptions if employers aren’t careful.
Conclusion
Navigating different pay transparency regulations can be challenging, especially for employers with employees in multiple states. The best approach is a cautious, thoughtful, organizational approach. Employers also should confer with local legal counsel to ensure compliance with applicable laws.
In the meantime, downloading our Pay Transparency Toolkit gives you a gauge of where your company stands, where you can improve, and where you’re already doing well.