Pay Transparency Legislation – What You Need to Know

by | Jun 30, 2022 | HR Legislation

Ancillary Benefits Attract & Retain Employees

The United States’ largest city passed legislation this year requiring employers to post a salary range of any job posting beginning in May 2022. New York City requires employers who have four or more employees (including independent contractors) to post a salary range for any job posting.  Colorado is currently the only other state to require the salary range in the job posting. Other states/cities that have a requirement, typically require disclosure of a salary range if asked by an applicant, or upon offer of employment.

However, Massachusetts, Virginia, New York State, South Carolina, Washington, and California are currently considering pay transparency laws.  As organizations are increasingly hiring remote employees across the country, it is important to consider the current legislation for where you are posting your job vacancies.

While this idea is relatively new to the United States many countries in Europe have reporting regimes that require employers to publish pay gap data, and the European Union is set to introduce further pay transparency laws this year.  This “pay gap data” helps identify discrepancies in pay between genders and ethnicities.

Requiring a pay range in a job posting makes employers determine the value of the position based on market data and internal company equity. Many employers in the past have asked the current salary of a candidate to determine an offer but using the current salary as a starting point allows pay gaps between genders and ethnicities to continue to grow.

The candidate can speak openly about their expectations of pay when employers are transparent about the salary range. Interview time is more streamlined as both parties know it is time well spent as the compensation range is already on the table. The employers has the burden to determine the pay range and the candidate no longer has to stress about initially sharing an expectation that may lead to less pay.

These new pay transparency laws mean employers need to spend some time evaluating and standardizing pay practices and philosophies. Make sure your current employees already in similar roles you will be posting are within the salary range as you do not want to lose valued members of your team. Salary ranges should be competitive and posting benefits could give you another edge to recruit top talent. Here are some recommended tips to help you succeed in adjusting to a pay scale transparency practice:

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Find Solid Market Data to Competitively Scale Salary Ranges

Find a data source that is specific to your talent market. Remember to review job descriptions for accuracy and/or talk to employees in their current role to make sure you are accurately benchmarking based on the work they are doing.

Create Pay Structures

Combine all the positions that are in a similar job family and level and use the market data to create pay structures. This brings together substantially similar jobs into structures. You can do this by location as well, if you have a policy of paying employees differently depending on where they, or the office is located.

Communicate Pay Ranges with Current Employees

Proactively communicate with employees letting them know their current pay range. This will give employees a deeper understanding of how pay decisions are made and how they can interpret new job postings. Some companies only share the pay range that the employee is in, while others share pay scale data for the whole organization.

Pay transparency is about having the structures and frameworks in place that ultimately help to reduce bias, and reducing bias helps you to close pay gaps. Fair pay structures and employee perception helps increase retention and reduce turnover. *