Pay Transparency Making Its Way To Legislation

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The urgency for pay equity has allowed the movement toward salary transparency to gain more and more momentum over the last few years. It’s not just forward-thinking organizations looking to make a change; state governments are also joining the movement.

States like California, Washington, and Rhode Island already have legislation in effect. The City of New York also passed a pay transparency bill, and the governor of New York followed suit and signed a bill to cover the entire state in December 2022, which will be effective in September 2023.

If organizations don’t take action on pay transparency now, they’ll be forced to later. It’s time for employers to put away the poker face when it comes to pay conversations and be open and fair about what each position pays regardless of gender, race, ethnicity, or status.

Transparency forces companies to look at pay inequities, pay philosophy, and the bias pay secrecy allows to seep in.

But first…

What Is Pay Transparency?

Pay transparency is about how openly a company shares pay-related information. How transparency looks depends on the organization. Companies can:

  • Display pay ranges on the company website and in job listings (This may include company benefits).
  • Share pay scales for every role within the company and how salaries are calculated.
  • Provide information on the company pay system process.
  • Create an environment that encourages salary discussion.

The policy aims to diminish gender disparity in salaries and close the gender and racial pay gap. There’s no debate that men make more than women; once race is thrown into the equation, the pay gap widens.

ThisWay® Global spoke with the CEO & Co-Founder of SpeakTU Analytics, Norma Márquez-Barahona, and she gave us the hard truth about the severity of the pay gap. White women make $0.83 on the dollar compared to white males, black women earn $0.64, and Latina women only receive $0.54 on the dollar for the same position.

The ultimate goal of salary transparency is to give employees and potential candidates an honest look into why they’re earning a particular amount if it’s equitable, and how to achieve the next step on the pay scale.

Pros & Cons Of Pay Transparency

Pros

Pay transparency builds trust, creates positive work environments, attracts diverse candidates, and retains employees. It can make executives and business owners more aware of the pay inequities and biases in the company.

Once the secrecy is discarded, conversations surrounding pay have a chance to relax and become second nature. With more job seekers and employees demanding transparency concerning compensation, it won’t be phasing out anytime soon.

Especially as the younger generations (millennials, born: 1981-1996 & generation Y, born: 1997-2005) filter into the workforce, pay equity will be imperative. Both generations feel underpaid compared to their peers with the same qualifications and experience, according to 57% of millennials and 45% of generation Y.

Millennials already make up the bulk of the workforce, and Generation Y is coming in right behind them, so this could be the temperature of the recruiting pool when the time comes. It’s better to consider salary transparency sooner rather than later. 

Transparency will be vital to recruiting diverse candidates and attracting more qualified candidates, helping to give recruitment teams access to an abundance of candidate profiles.

Companies that may not be ready to take the plunge may encounter different experiences,

Cons

Pay transparency can be quite jolting if a company’s pay isn’t evenly distributed. The negative impact can be:

  • An increase in employee complaints regarding pay.
  • An influx in raise requests to match what’s displayed.
  • A decrease in employee productivity because employees make less than their peers.
  • Disgruntled supervisors and managers because, after all, they’re the ones in direct contact with employees.
  • The loss of employees due to pay inequities.

Some employees may not be ready for this shift either. Not everyone wants their salary to be displayed loud and clear. Plan the transition, lead with empathy and make sure to have patience if a transition is underway.

States With Active Pay Transparency Laws

There are a few states already putting forth the effort to address pay inequity. Each law varies by state.

California: 

Requires employers with 15 or more employees to state salary ranges on any job posting listed on the company website and third-party candidate sourcing websites (e.g., LinkedIn, Indeed, ZipRecruiter, etc.).

If an employee requests to view the pay scale, the employer must oblige as soon as possible. 

Washington:

Like California, they also require employers with 15 or more employees to share the pay scale on job postings listed on the website and third-party recruiting sites. 

The only difference, this also applies to any company with at least one Washington-based employee, conducts business within the state, or is actively recruiting to fill positions remotely by an employee residing in the state.

Rhode Island:

Rhode Island takes a slightly different approach. They don’t require employers to list salary ranges on job ads or the company website, but they are required to provide the pay scale immediately if the employee requests it.

New York:

New York’s salary transparency bill will mirror New York City’s. Employers with four or more employees must state salary ranges for all advertised jobs and promotions.

Other states with pay transparency laws: Colorado, Nevada, Connecticut, and Maryland.

States with pending legislation: Massachusetts & South Carolina.

The Use Of Broad Salary Ranges

Many employers are putting their best foot forward now that laws are in place, but a few organizations are doing just enough to meet state requirements, sometimes causing more harm than good, such as broad salary ranges.

Broad salary ranges are being used just to meet compliance requirements, ranging from $50,000 to $150,000 for the same position or job level. Some job postings listed ranges as absurd as $0-$2 million, states Márquez-Barahona.

Broad pay scales may seem like they’d attract more candidates, but they can adversely deter potential candidates from applying.

Why? Because it’s not realistic.

Imagine how the candidate feels when they thought they’d be in the upper range yet received an offer far lower than their expectations. It can make them second-guess their skills or wonder if they’re inadequate.

Using broad salary ranges isn’t sustainable in the long run for recruitment or retention. Instead, each position or job level should be broken down to determine a realistic salary range.

Broad pay scales can result in less qualified candidates or damage the company’s reputation (maybe even both).

How Quickly A Bad Reputation Develops

In the world of social media, all it takes is one bad post, and bad publicity ensues.

This happened to the travel website, The Points Guy, when their senior reporter made a tweet advising anyone applying for the job to request at least $115,000/year, relocation expenses, and a sign-on bonus. The senior reporter only made $107,000/year and felt that particular position should entitle more.

The Tweet went viral, landing on the Wall Street Journal, The Washington Post, and even National Public Radio (NPR), deteriorating the company’s reputation.

What we’re seeing now is the beginning of a long journey. Of course, the current pay transparency laws will have to be fine-tuned to evolve with the demands of employees and to better adhere to the goal at hand, minimizing pay inequities and closing the pay gap.

ThisWay Global makes transparency a priority in candidate sourcing and recruitment. For any questions or assistance, reach out today!

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