Employers recognize salary transparency as a trend even though it is not yet mandated in the vast majority of states. According to research from the Society of Human Resource Management issued on Equal Wage Day, March 14, 2023, at least 42% of the more than 1,300 human resources professionals surveyed work for firms that must disclose wage ranges in job ads. But what exactly is salary transparency in the first place? Well, this article will discuss what salary transparency is and who requires it.
What is Salary Transparency?
Salary transparency is the practice of disclosing openly wage information to prospective hires and current employees. While some firms might only notify staff within a specific department or candidates at a specific point in the interview process. Some businesses may openly share this information in job advertisements.
When an employer divulges information regarding pay, salary transparency happens. In the United States, laws mandating companies to adhere to pay transparency requirements are now gaining ground. With eight states and six localities passing legislation since 2020.
What Possible Advantages Could Salary Transparency Offer
According to a study published in the Harvard Business Review in February 2023, salary transparency lowers pay disparities. Which, in turn, could stop salary discrimination based on gender, sexual orientation, age, religion, and other factors. The idea is straightforward. This information could be useful for both potential hiring and current workers when negotiating salaries.
What States have Legislation Requiring Salary Transparency
According to official websites, press releases, and other documentation maintained by state and local governments, the following states and localities have pay transparency rules in place:
#1. California
Effective as of: January 1, 2023.
Due to a reform in the California Equal Pay Act, firms with 15 or more employees are now required to disclose the pay scale in any job postings. If the position could possibly be filled in California. This means that remote workers are also taken into account. Infraction repercussions: civil fines of at least $100 and at most $10,000 are imposed for each infraction.
#2. Colorado
Effective as of: January 1, 2021.
Employers are required to notify all workers of any job openings, advancement prospects, and pay scales under Colorado’s Equal Pay for Equal Work Act. Infraction repercussions: $500 to $10,000 in penalties for each infraction.
#3. Connecticut
Effective as of: October 1, 2021.
Employers are required by Public Act No. 21-30 to give any candidate or worker the salary range for a position upon request.
#4. Maryland
Effective as of: October 1, 2020.
Employers are obligated to give applicants who ask for one a salary range for a position under Maryland’s Equal Pay for Equal Work Law.
Civil fines are imposed after the second offense. Starting at $300 per applicant for the first offense and rising to $600 per application for subsequent offenses.
#5. Nevada
Effective as of: October 1, 2021.
Employers are required by Nevada state law to disclose the wage or compensation range or rate for any newly created positions, promotions, or position transfers.
Consequences for violations include attorney’s fees and a $5,000 fine for each offense.
#6. New York
Effective as of: September 17, 2023.
The statewide pay transparency statute in New York State is anticipated to go into effect in September. Employers are required by law to declare the wage or compensation range in every employment, promotion, or internal transfer advertisement.
Consequences of infractions include civil fines of $1,000 for a first offense, $2,000 for a second, and $3,000 for a third violation or any subsequent ones.
#7. Providence, RI
Effective as of: January 1, 2023.
Penalties for violations include fines that start at $1,000 for a first offense and $2,500 for a second offense within five years of the first. And $5,000 for three or more offenses in a seven-year period.
#8. Washington
Effective as of: January 1, 2023.
Only businesses with 15 or more employees are subject to this.
Civil penalties of up to $500 for a first offense and up to $1,000 or 10% of damages (whichever is larger) for any future offenses are the results of violations.
Local Governments That have Laws Requiring Salary Transparency
#1. Cleveland, Ohio
Effective as of March 13, 2020.
The city of Cincinnati Ordinance No. 83 forbids firms with 15 or more employees from asking job applicants about their wage history and mandates that if an applicant is given a job offer, employers must disclose the pay scale for the position.
Job candidates have a private cause of action for compensatory damages and attorney fees in the event of a violation.
#2. New York’s Ithaca
Effective as of September 1, 2022.
In addition to the future New York state law, employers in Ithaca are required to disclose the minimum and maximum pay for positions as well as prospects for advancement and transfer.
#3. The city of Jersey City
Effective as of April 13, 2022.
The minimum and maximum pay and/or hourly compensation for all open positions must be provided, according to an addition to Chapter 148 of the Jersey City code, for employers or independent contractors who operate in Jersey City and have five or more employees.
Consequences of violations: The maximum punishment for any offense is a fine of up to $2,000, 90 days in jail, or 90 days of community service.
#4. New York
Effective as of November 1, 2022. First-time complaints of violations won’t result in fines as long as the employer corrects the issue within 30 days.
#5. Tokyo, Japan
Effective as of: June 25, 2020.
Employers with 15 or more employees are not allowed to inquire about an applicant’s past salaries due to the Pay Equity Act. If the candidate is given a job offer, those employers are required to disclose the wage scale for the employment.
Job candidates have a private cause of action for compensatory damages and attorney fees in the event of a violation.
#6. New York’s Westchester County
Effective as of November 6, 2022.
This applies to any positions that must be filled entirely or partially inside Westchester County.
This modification to a Westchester County statute requires employers with four or more employees to provide wage ranges on job advertising in addition to the future New York state law.
How to Successfully Implement Salary Transparency
Although each firm may have a different perspective on salary transparency and what works for them, there are several straightforward measures businesses can take to adopt pay transparency.
#1. Identify the Appearance of Salary Transparency for Your Company.
Holt is aware that not every business should use an open-wage model. PayScale views the spectrum of salary transparency as having five levels. The first step is explaining to employees their starting pay, which is the bare minimum.
Companies provide employees with information about their pay plans in the third step. Along with the company’s pay philosophy and compensation ranges for available positions. Generally speaking, Colorado’s Equal Pay for Equal Work Act mandates third-stage wage disclosure.
#2. Identify Salary Discrepancies by Conducting a Pay Analysis
Pay inconsistencies frequently surface when a corporation pledges pay transparency. This is especially true for businesses with rapid expansion. For each function, conducting a compensation study first and looking for “red-circle” individuals. These are employees who earn materially more or less than other persons in comparable positions.
The next stage is to investigate the reasons for the stark salary disparity. It’s possible that the individual’s duties don’t correspond to their job description. Or that they switched roles but their salary remained the same. The manager or HR leader needs to make the necessary adjustments if there isn’t an unbiased explanation for the discrepancy.
#3. To Determine Salary, Use Objective Data
Spends a lot of time considering fairness at Buffer. Develops the methodology and concept for Buffer’s approach to employee compensation in collaboration with the director of business operations. The methodology has undergone a number of revisions, and Hubbard continues to assess it and re-benchmark roles in light of updated information. The current version takes into account a person’s role’s market rate, their level of expertise, and their location’s cost of living.
#4. Get Managers and Employees to Buy in
The leadership team was the first group Holt and her colleagues targeted when implementing PayScale’s pay transparency strategy. They engaged in lengthy discussions about performance management, the new pay philosophy, and the career framework. This included discussions about how to coach staff members and assist their professional development, as well as how to help them define goals. The goal was to provide managers with the knowledge and resources they need to have essential discussions with their staff members about pay transparency.
#5. Discuss the Policy with the Employees
Communicate your policy to your staff when you’ve established a clear one. This can be accomplished by presenting the compensation philosophy and performance framework to the entire organization, but it should also be reemphasized in one-on-one meetings with managers. Since managers are the ones who decide on promotions and individual compensation, they must be taught how to respond to inquiries about pay and engage in ongoing discussions about employee performance.
The Advantages of Salary Transparency
#1. Helps to Strengthen Corporate Culture
In the end, a wage is much more than just a sum of money. People officers at PayScale, salaries represent the values of an organization and are typically based on job titles, expectations, and performance. Pay transparency forces an organization to analyze how each of these elements affects wage decisions, which can assist in exposing bias and creating a more welcoming workplace.
#2. Tasks Aim at the Gender Salary Gap
The gender pay gap is perpetuated by the secrecy surrounding compensation, which can make it particularly challenging for female employees to determine whether they are underpaid in comparison to their male coworkers. When employees and candidates are aware of the pay range for their positions, biases that contribute to wage inequalities are less likely to take hold.
#3. Better Candidates Experience is Offered
It can be stressful and even time-consuming to apply for a job without knowing your earning potential for the position. In fact, when it comes to job postings, 79 percent of both job seekers and workers say they desire some level of wage transparency. An additional 32% desire complete disclosure of salaries in job postings and other employment-related information.
Disadvantages of Salary Transparency
#1. It is Hard to Implement
Nothing is kept secret from employees, so if someone receives a raise or a promotion, other employees will naturally wonder why they weren’t given the same consideration. Additionally, people have their own ideas on what issues the pay formula should address. Although having these discussions can be challenging.
#2. Opens the Door to Traitors
Companies that fall behind may see top personnel leave for positions with more transparency and pay as candidates and workers seek opportunities with defined earning potential. Even businesses that are very open about their pay policies risk losing employees if rival businesses can pay more for comparable work.
NYC Salary Transparency Law
Governor Hochul signed Senate Bill S9427A, which changes the New York Labor Law to require covered firms to provide pay ranges in job ads and advertisements, into law on December 21, 2022. However, there are some significant changes.
#1. Employers Covered
The law applies to New York employers with four or more employees, however, it is unclear whether all employees or just those working in New York count toward the requirement. Significantly, independent contractors are not taken into account, unlike the New York City ordinance.
#2. Paid Positions
Jobs that can or will be performed, at least partially, in New York State are covered by the statute. Job ads for remote employment carried out from New York are probably covered by the legislation. It does not, however, go into detail about how much it relates to distant positions that might theoretically be carried out from New York, even if they are eventually carried out from other states.
As opposed to the City statute, the State law further mandates that covered employers: (1) include the job description in the posting or advertisement if one exists; and (2) keep a record of the ranges of pay for covered occupations, if such a record exists. The length of time that companies must keep these records is not specified by law.
#3. Penalties and Enforcement
The NYDOL, which has the exclusive authority to apply civil fines for violations of the pay transparency rules, is the State law’s lone enforcement agency. The maximum fine levied by the NYDOL is $1,000 for a first offense, $2,000 for a second offense, and $3,000 for a third or subsequent offense. Notably, the State law does not afford employers the chance to correct first-time infractions prior to the enforcement of any civil penalties, in contrast to the City statute.
In contrast, the City’s legislation allows employees to sue their employers in civil court, but not job applicants.
#4. Observing the Varying Laws Regarding Pay Transparency
A recent wave of laws requiring pay disclosure at the state and local levels includes New York’s law. However, since the Westchester pay transparency statute stipulates that it “shall be null and void on the day that State-wide legislation goes into effect” that is “either the same or substantially comparable” to the local code,” employers in Westchester County are probably only subject to the State law.
#6. Main Points
Guidance may be forthcoming since the State statute requires the NYDOL to establish all pertinent rules and regulations. In the interim, New York State’s covered businesses should take action to assure compliance with the new pay transparency rules that go into effect in September.
California Salary Transparency Law
The law has already had an effect: California, at the beginning of December, included wage ranges disclosed by the business. By December’s end, it had increased to 54%. It increased to 61% by January 8, after the law had been in place for slightly more than a week.
Colorado Salary Transparency
The pay transparency laws in the US state of Colorado are progressive. Since 2021, its laws have demanded equal pay, called for pay transparency in job ads and hiring/promotion procedures, and safeguarded workers’ ability to inquire about their salary.
The state was one of the first to establish a law requiring pay-scale publishing and a statute promoting pay transparency. Since then, a number of additional states and regions have adopted legislation that mandates firms reveal wage ranges in job advertising or upon request from job hopefuls.
Equal Pay For Equal Work Act (EPEWA), or SB19-085, is the name of Colorado’s pay transparency statute. It tries to lessen pay inequities based on sex or other protected characteristics and to encourage openness and fairness in the employment process.
What Employers Does it Apply to?
Any organization with at least one employee working in Colorado is subject to the Act.
Key prerequisites. The equal pay for equal labor, pay scale openness, salary history ban, freedom to discuss earnings with others without fear of reprisal, and recordkeeping requirements are the five key parts of Colorado’s pay transparency statute.
Is Salary Transparency a Good Thing?
Employers and employees can develop trust by being transparent about compensation. Employees are more likely to feel appreciated and engaged when they understand how their pay is set and think the process is fair. As a result, morale, output, and general job satisfaction may all increase.
What is the Pay Transparency Law in the US?
In response to a request from a job applicant or employee, employers are required to provide compensation rates and salary ranges. Employers are required to submit yearly reports that include information on wages and salaries. Pay ranges must be disclosed by employers in job postings to both internal and external candidates.
What States Requires Pay Transparency?
Map displaying the states that have passed or are debating salary transparency legislation. California, Colorado, Connecticut*, Maryland*, Nevada, New York, Rhode Island, and Washington are among the states that have passed legislation.
What is the Pay transparency in 2023?
The median and mean hourly rates broken down by job category, color, ethnicity, and gender are among the new additional requirements for 2023. Employers with 100 or more labor contractors must file a supplemental report containing compensation information on those workers, which should be prepared in collaboration with their staffing firms.
Can I Discuss my Salary with my Coworker?
Employees have the right to discuss their pay with other employees at their place of employment in accordance with the National Labor Relations Act (NLRA or the Act).
Conclusion
Salary transparency is fundamentally a method of discussing employee compensation within the organization. Although this concept may appear unpopular, it has gained popularity as legislation to make pay transparency mandatory has increased over time.
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