- New pay transparency legislation. California, Rhode Island and Washington have pay transparency legislation that will take effect on Jan. 1, 2023.
- Nuances between the laws. California and Washington’s law requires employers to post salary ranges on job postings, while Rhode Island requires employers to provide a salary range to applicants or existing employees upon request.
- Move beyond compliance. Given the increasing volume of employees covered under pay transparency legislation across the U.S., various compensation experts have implored organizations that operate in any of these jurisdictions to move toward a nationwide approach.
- Increase trust. For external candidates, providing an accurate salary range on the job postings is likely to yield more motivated and relevant candidates, which saves time and resources during the hiring process. For existing employees, understanding where they sit in a pay range and why helps build trust.
Pay transparency legislation took hold in New York in November and now similar legislation will take effect farther up the coast in Rhode Island and across the country in California and Washington at the start of 2023.
California was the most recent jurisdiction to pass pay transparency legislation, which signaled a tipping point in the ongoing movement to ensure existing and prospective employees are informed of the salary range for the position they hold or are applying for.
When California’s law became official, Christine Hendrickson, vice president of strategic initiatives at Syndio, said, “Employers are going to have to start looking at having a nationwide approach to pay transparency.”
Many multistate and multinational organizations have spent the past three-to-six months doing just that, rather than attempt to navigate the tangled web of pay transparency laws across the U.S. However, there are important nuances within each law, including those set to go into effect on Jan. 1, so it’s important to ensure any nationwide approach covers all state requirements ahead of 2023.
New Pay Transparency Law Specifics
While the crux of each new pay transparency law involves providing internal and external candidates pay ranges for jobs, there are subtle differences.
California
The Pay Transparency for Pay Equity Act requires employers with 15 or more employees to include pay scale or hourly wage ranges in job postings. In addition, covered employers must provide the pay scale for the position to applicants upon request after an interview and upon request to current employees. Before Jan. 1, 2023, covered employers must include salary or hourly wage scales to applicants upon request after the applicant has completed an initial interview.
Rhode Island
Employers must provide the wage range for a position to an applicant upon request or prior to discussing compensation. With respect to employees, employers must provide the wage range at time of hire, when employee moves into a new position, or upon request.
Washington
Employers with 15 or more employees must provide applicants with the minimum wage or salary for the position sought upon request but after receiving an initial offer. The same information must be provided to employees who have received an internal transfer or a promotion. Effective Jan. 1, 2023, covered employers must include the applicable wage scale or salary range and a general description of benefits and other compensation in job postings. Employers must provide wage scale or salary range to employees upon request or when offered an internal transfer to a new position or a promotion.
Moving Beyond Compliance
California, Rhode Island and Washington join Nevada, Connecticut, Maryland and Colorado as states that will have some form of a pay transparency law in effect in 2023. New York City, Jersey City, Westchester County, Cincinatti and Toledo, Ohio are other noteworthy jurisdictions where a compensation transparency law is already in effect.
With that in mind, various compensation experts have implored organizations that operate in any of these jurisdictions to move toward a nationwide approach.
“Organizations need to come up with a national plan if they haven’t yet,” said Tauseef Rahman, partner and career business leader at Mercer. “It is imperative to go beyond just meeting the legislative requirements, and make sure the foundational elements of pay transparency are strong.”
Beyond simply complying with applicable legislation to the business, those in the compensation and talent management space are noting the tangible benefits of becoming a more transparent organization.
For external candidates, providing an accurate salary range on the job postings is likely to yield more motivated and relevant candidates, which saves time and resources during the hiring process. For existing employees, understanding where they sit in a pay range and why helps build trust, said Tanya Jansen, cofounder of beqom.
“When employers take time to discuss their pay practices with their employees, workers are more likely to believe they are being paid fairly and feel comfortable raising potential pay concerns internally, instead of turning externally to outside offers,” she said.
Owning the narrative around how pay works is essential, said Nicole Bufanio, senior change and communication consultant at Mercer. That includes what the company’s performance philosophy is, what factors into an employee’s pay such as performance and the local market for talent, and how the pay progression happens.
Given the volatile economic environment where inflation is still top of mind for many employees, organizations that have a comprehensive and effective pay transparency strategy in place will have an advantage in the talent market. As salary increase budgets are set to come in below inflation figures in 2023, with a 4.3% mean projected in WorldatWork’s latest update, employers must be prepared to have open lines of communication with employees concerning their current and prospective pay.
“Employers must be confident in their pay strategy before entering discussions around compensation with their staff,” Jansen said. “To prepare for those talks, employers need to be ready to share how factors like budget and performance can impact an employee’s pay, as well as how their benefits and other perks contribute to their total compensation.
“By being able to discuss the exact factors that contribute to an employees’ total compensation (for example, factors like tenure, skill sets or location) and the reasoning behind their organization’s salary ranges, employers will be able to thoroughly address any questions or concerns.”
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