In the last several years, there’s been an increase in focus on the gender and racial pay gap, both internationally and domestically. Despite the growing attention on the pay gap, it’s taken considerable time for companies to be open and honest about worker compensation.
At BeamJobs, we believe in supporting job seekers. We aim to empower you to make the best decisions for your success; that’s why we stand behind pay transparency and happily support this much-needed turn in the employer-employee imbalance of power.
But what exactly is pay transparency? What’s the controversy around it? And what do the changing rules around salary transparency actually mean for most people? In this article, we’ll explain everything you need to know about the impact of pay transparency for businesses and employees alike.
Disclaimer: the information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Pay Transparency Laws by State & City: What You Need to Know
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Quite a few states have codified some level of pay transparency into their legal frameworks. Some cities or localities have also enacted pay transparency laws, even if they’ve not been rolled out on a state level. Here’s the most up-to-date overview of which states have done so and some facts behind the initiatives.
Note: for this section, we have defined pay transparency specifically as “requiring some form of salary transparency for applicants, whether through job descriptions or discussions.”
States with laws solely regarding pay equality or employee-to-employee discussions of compensation are not included.
California: A new law enacted on Sept. 27, 2022 will require nearly 200,000 companies to be upfront about employee compensation, starting Jan. 1st, 2023. Employers with more than 15 employees must include a pay range in their job descriptions, and companies with more than 100 employees must disclose their payroll data to the Business, Consumer Services, and Housing Agency of California.
Businesses must keep this payroll data for all employees while they are employed and for three years after their employment ends. If companies do not comply, they face an investigation from the Labor Commissioner and potentially an additional fine.
The state has already mandated wage equality and the prohibition of retaliation for wage discussions, thanks to the Equal Pay Act and the Fair Pay Act in 2015.
Colorado: Colorado enacted their Equal Pay Act in 2019, which bans employers from basing wages on prior salaries and retaliating against employees who discuss or inquire about wages.
The act also requires employers to disclose salary, benefits, and advancement opportunities for each job opening, except for those out of state. If businesses refuse to comply, they will face an investigation and fines between $500 to $10,000 for each violation.
The results of this act vary; according to data from Aug. 2022, the labor force participation rate in Colorado increased by 1.5%, but the number of job postings (via Indeed) fell 8.2%. The law has also led to some companies excluding Colorado residents from applying to remote positions.
Connecticut: Since Oct. 1, 2021, the state of Connecticut has required employers to disclose wages upon applicant or employee request since the Act Concerning the Disclosure of Salary Range for a Vacant Position was signed into law on June 7, 2022. The act also prohibits employers from asking about past wages or retaliating against employees who have discussed compensation.
The act applies to all employers within the state that have at least two employees, even if their employees work remotely. If employers fail to follow the act, employees may sue the company for up to two years afterwards and receive compensatory damage, attorney’s fees, and punitive damages. Other consequences for noncompliance are not specified.
Regarding the state’s equal pay laws, the Department of Labor says the law applies to every employer in Maryland and prohibits discrimination of all employees. While employers can’t ask employees to not discuss their wages, they can limit the time, day, and manner of these discussions.
Nevada: Senate Bill No. 293 requires all employers within the state to offer a wage or salary range to applicants after an interview, effective Oct. 2021. The bill also specifies that employers must provide salaries for promotions or transfers, if necessary, and may ask about applicant expectations for their pay. However, employers cannot use past salary rates to determine salary offerings or discriminate against certain applicants.
Similar to other pay transparency laws, companies cannot retaliate against an employee if they exercise their rights listed within the law in question. If someone feels their employer has violated the law, they can file a complaint and, after 180 days have passed, file a right-to-sue notice. The company may also have to pay a $5,000 fine.
Interestingly, the law does not apply to certain religious institutions, tax-exempt organizations, and businesses or enterprises near an Indian reservation. The text does not specify what types of businesses are included in these exemptions.
New Jersey: The state at large does not have any pay transparency laws; however, Jersey City does have a pay transparency law, as listed below:
Jersey City: the city council passed a pay transparency ordinance in April 2022 that requires Jersey-City-based employers with more than three employees to post salary or hourly wage ranges. This notice only applies to businesses who had their primary location in Jersey City and who used print or digital media within the city to advertise job vacancies.
The following locations within New York have pay transparency guidelines:
New York City: Starting Nov. 1, 2022, all employers who post a job opening, promotion, or transfer opportunity in NYC must include a salary range. All jobs, including remote jobs that could be performed in NYC, are included. The only companies excluded from this pay tranparency law are temporary employment agencies and businesses with either three or fewer employees, or no domestic workers.
This requirement only applies to monetary compensation, not other benefits, and a specific “good faith” range must be included on all forms of job advertisements, included printed material. Violators will first receive a warning and then up to a $250,000 fine for a second offense. However, there is no specified consequence for not paying employees within the range given.
Ithaca: A new ordinance effective Sept. 1, 2022, amended the city’s human rights protections and requires employers to disclose salary ranges within all job advertisements. It also requires companies to provide salary ranges for promotions or transfers. The ordinance targets employers with at least four employees within Ithaca, and it does not cover independent contractors.
Westchester county: An amendment to the county’s Human Rights Law now requires all employers with at least four employees to post salary ranges on job listings. Much like other pay transparency laws, it does not apply to temporary employment agencies.
Unlike the other laws in Ithaca and NYC, this amendment states the requirements within it will become null and void when statewide pay transparency laws go into effect.
Legislator Colin Smith said the law will help push against the pay gap for women and people of color.
“This legislation is intended to help combat that inequity by creating transparency in the marketplace to level the playing field—all job seekers, regardless of race or gender, will know what the job is worth to any job seeker of any gender identity or race,” Smith said.
Ohio: The state at large does not have any pay transparency laws relating to salary disclosure; however, the following cities do have pay transparency laws:
Cincinnati: Effective March 2020, Ordinance 83 requires businesses with at least 15 employees to disclose salary information. However, there are two caveats to this rule: salary information is only required after both a job offer has been extended and the applicant makes a “reasonable” request. (The term “reasonable request” has not been defined.)
The ordinance also states that companies may not inquire about applicants’ past salaries. They also cannot screen applicants or make hiring decisions based on the applicant’s past or current salaries. While this ordinance includes temporary employment agencies, it doesn’t apply to independent contractors or employees seeking a promotion or internal transfer.
If an employer does not comply with the ordinance, the applicant can sue for compensatory damages, attorney fees, and other costs for up to two years after the violation. However, companies are exempt if the following two situations are true: if the employer has received external certification within the past three years stating their practices won’t include salary history in the hiring process, and if the company hasn’t had a lawsuit filed against them.
Toledo: The Pay Equity Act, effective June 25, 2020, mimics the language in Cincinnati’s ordinance, requiring employers to provide a salary range after extending a job offer if applicants make a “reasonable” request. Same as Cincinnati, the term “reasonable request” has not been defined within the act.
The rest of the restrictions, exemptions, and rules are the same as those in Cincinnati’s ordinance, save for two instances: the certification exemption is not valid in Toledo, and Toledo’s act doesn’t apply to applicants who are rehired within five years.
Pennsylvania: A bill regarding pay transparency had been introduced in 2019, but it did not pass. Thankfully, legislators tried again, and effective Oct. 1, 2021, the Public Act No. 21-30 requires employers to provide salary ranges for open positions, either upon applicant request or prior to/at the time an applicant receives a job offer.
Employers must also provide salary ranges for employees when either they’re hired, their position changes, or they request a wage range. In addition, employers cannot do the following: stop employees from discussing wages, inquire about an applicant’s salary history, or retaliate or penalize employees for discussing wages.
The act also contains several measures relating to pay equality, including preventing employers from paying male and female employees differently for comparable work.
Rhode Island: Employers will soon have to disclose wage ranges and cease from inquiring about an applicant’s wage history after The Act Relating to Labor and Labor Relations – Fair Employment Practices goes into effect on Jan. 1, 2023. However, employers only need to provide compensation ranges upon applicant request, after hiring an applicant, or after a transfer to a new position.
In the event of noncompliance, there are multiple fines an employer might have to pay depending on which sections they violated. For example, if employers violate section 28-6-18(a) more than two times, they may have to pay up to $5,000. The total amount of the fine will depend on the size of the business, the good faith of the employer, the severity of the violation, the employer’s violation history, and whether the violation was intentional or not. The director or the court can also lower the penalty if the business completes a self-evaluation.
This act expands on the state’s Equal Pay Law, which demands equal compensation for men and women in comparable positions. The new act ensures that all employees in comparable positions will be paid the same regardless of sex, race, religion, color, sexual orientation, gender identity/expression, disability, age, or country of origin.
Washington: The “evergreen state” is the third to require compensation information in job postings, after New York City and Colorado. A recent amendment, effective Jan. 1, 2023, will require employers to provide “a general description of all the benefits and other compensation” to applicants for all job postings, including third party or online recruitment postings.
This amendment modifies their Equal Pay and Oportunities Act enacted in 2019, requiring employers with 15 more employees to tell applicants the minimum salaryfor a position after extending a job offer.
Aggrieved individuals may file a complaint if they feel their employer violated the Act, which may require the company to pay for damages.
Pay Transparency 101
We’ve covered which states have enacted pay transparency laws, but what does pay transparency mean on a broad scale? Basically, pay transparency means organizations and businesses must provide open communication on pay-related information.
Although the phrase “pay transparency” is often included in discussions about wage equality, pay tansparency really encompasses the inclusion of pay levels or ranges, how the compensation system works, and any policies that allow employees to speak openly about their salaries (while protecting them from providing past salary information).
These kind of protections might seem like a no-brainer; after all, much of Europe has made pay transparency more commonplace, with many countries having codified it to some extent into their law. (One example is the Netherlands, with its collective labor agreements that require easily accessible information about salaries and other working conditions.) However, that’s not entirely the case within the U.S.
Salary transparency has generated quite some controversy across the country. Detractors say that it can’t take into account the many factors needed to determine someone’s salary, and that implementing pay transparency could lead to open animosity or hostility between employees. Another common argument against pay transparency is that employers may see a drop in applications when other organizations publish higher salaries. However, most of these arguments have been shown to be invalid.
Supporters of pay transparency see it as one of the best tools to help narrow the pay gap. In 2014, data showed that women’s earnings had barely grown in a decade. Per the Global Gender Gap Report, it’s expected to take over 250 years for women to receive equal pay for doing the same job. Clearly, there’s a long way to go for equality.
But in recent years, we’ve seen a pick-up in developments, most recently with California passing legislation that will require pay transparency for most employers in the state, plus requiring better pay reporting standards for larger employers.
Long-term studies over two decades have proven that pay transparency plays a significant role in reducing (gender) inequality. Additionally, academic research shows it helps create a more productive and open working environment. It’s also great for talent acquisition: when employers are forthcoming about their salaries, data has shown that the number ofapplications has increased by over 100%!
From increased employee productivity to a more equitable workplace for all, pay transparency is set to help empower countless Americans in the coming years.
What does pay transparency mean for companies?
Though California is slightly ahead of the curve when it comes to the gender pay gap (women earn 88 cents for each dollar a man receives, versus the national average of 82 cents), the gap for women of color is larger. In total, women lose $87 billion to the pay gap each year. Not great.
But after companies disclose salary ranges, employers are likely to see a sharp increase in applications. It’ll also be useful for employees to know up front if the role meets their salary expectations as they customize their resumes for each vacancy. This means recruiters won’t waste time on applications that won’t go anywhere because of inaccurate assumptions.
Smaller companies are also expected to comply with the evolving pay transparency landscape. For example, California’s pay transparency law will require that all employers provide a pay scale or range if an employee in that position requests it. Additionally, every company must keep track of the job title and salary history for all their employees for up to three years, so outside authorities can determine if there’s been any salary discrepancy.
The law also has some specific data reporting requirements for private companies with at least 100 employees: they’ll need to file yearly pay data reports in May, with expanded information on categories like sex, race, hours worked, job categories, and where employees fall in these categories.
A key disadvantage with laws like this is that managers will often be the ones to deal with any fallout when employees notice an unfair wage gap, even if it’s a company-wide initiative. This can lead to managers having to navigate the difficult territory of irate or disgruntled employees, even if they are rightly frustrated.
While it’s likely that pay transparency will bring many benefits, it’ll undoubtedly involve extra administrative work in the early stages, so companies of all sizes must start immediately to make sure they meet all requirements. However, rolling out these changes may take as long as a year depending on the size and complexity of the company, which could mean legal consequences and potential bias if done incorrectly.
To get around these legal requirements, some companies have discovered loopholes like posting ridiculous ranges, using vague job titles, and leaving old listings up to avoid posting wage information. Some speculate that pay transparency could also result in consequences like pay compression and further challenges for foreign workers.
What does pay transparency mean for job seekers and employees?
We’ll keep this information up-to-date with the latest information for our readers. Stay posted!
Now that you know what salary transparency regulations might mean for employers, you might be wondering what’s in store for employees.
As we’ve touched upon earlier, the biggest benefit for employees is that they’re likely to see the pay gap decrease. Women and POC (people of color) are most disproportionately affected by the pay gap, so being empowered with salary information will make it easier to negotiate for the salary they deserve.
While this is the biggest and most important benefit, pay transparency offers many positive ripple effects. Studies show that employees will ask for help more easily from the right person if they know what their fellow workers make. Anecdotal data from SumAll shows that pay transparency has even increased employee productivity. Employees are also more likely to ask for personalized rewards to compensate for pay inequity, like extra health benefits, more training, or additional PTO.
That said, it’s not all rosy; there will always be some disadvantages. Tension could rise if it’s clear that pay inequity runs rampant in organizations, and employees could feel pitted against each other. They might also take certain pay differences in the wrong context if they’re given insufficient relevant information, leading to decreased employee morale.
As mentioned before, some companies have also discovered loopholes to avoid posting salaries, including listing ridiculous ranges, using vague job titles, and refusing to update old listings.
In situations like these, employers must have an objective way of measuring performance and conducting appraisals. Once they have the proper information, they can equip managers and HR representatives with the right tools and inclusive & understanding language to avoid miscommunications. With some preparation, these disadvantages will quickly shrink compared to the benefits that pay transparency offers.
How to Do Pay Transparency Well
The work culture in the U.S. has made discussing salaries quite taboo. In most companies, It’s more likely that you know your coworker’s birthday or grandparent’s name before knowing their salary!
While this feels completely normal since “that’s the way it’s always been,” keeping your salary hidden can have significant drawbacks within businesses and society at large. It’s clear that salary transparency can play a key role in reducing income inequality, which is crucial for groups that have been historically marginalized, underrepresented, or even shot down when they take risks.
Meanwhile, pay secrecy is shown to lead to “negative perceptions of distributive justice” between employees, and also to “decrease the efficiency of the labor market” due to lack of information. But given the controversy around pay transparency, how can employers ensure smooth sailing and productive employees all around? Here are some of our top tips!
- Try to assume the best. Once companies take the initiative to be transparent about salaries, don’t immediately assume the worst. If you’re unsure that you may have been subjected to pay inequity, have a conversation with your manager or HR rep and ask them to clarify before potentially taking information out of context. Rest on it and try to consider all factors objectively. Are you comparing apples to oranges and drawing false conclusions? If you realize you’re underpaid, have a civil conversation before escalating.
- Avoid the pitfall of ending up in a rat race against your coworkers. If you’re in a healthy work environment, and it’s clear why your coworker is being paid more, it can help to focus on the fact that you work for a company that fosters fairness and trust. You can also consider contacting management to organize an office hour or Q&A session to voice your opinions!
- Be proactive. Anticipate potential issues and provide training on the new policies. Managers and HR employees will often be the ones communicating pay transparency updates. Since this is a top-down initiative, provide them with ample support and resources to ensure they’re well-informed and can provide clear communication to minimize misunderstandings.
- Foster an open and inclusive environment. Despite your best efforts, you can’t account for all variables. When a situation arises and a disgruntled employee speaks their mind, allow them the space to do so instead of brushing it to the side. Listen actively!
The Transparent Pay Path
& Quick Steps for Employers and Job Seekers
Jumping headfirst into the ocean that is pay transparency can feel overwhelming, but it doesn’t have to be. At BeamJobs, we’re fully on board with job hunters, and we support pay transparency in the workplace 100%, so remember that you’re not alone!
As more and more states hop on the salary transparency train, it’s clear that there’s a lot of work ahead to be fully compliant. The most important thing is that employers shouldn’t wait until the last minute to meet all pay equity standards. Sooner is better than later! Not sure where to begin? Here are some high-level checklists for both businesses and job seekers!
For potential job seekers, here are some steps to take:
- Familiarize yourself with your state’s pay transparency laws to know your rights.
- If you’re worried about compensation before accepting a job offer, consider a free consultation with an employment lawyer.
- If you’re hired, be a team player and try to assume the best of your employer. Before going nuclear, have an open conversation with your coworkers, manager, or HR.
- But before you have these conversations, be considerate and schedule them instead of venting here and there with coworkers. Remember that you’re all on the same team!
- Check with your state’s Department of Labor or other governmental authority to ensure what pay transparency regulations are relevant for you.
- Start developing salary bands or scales for your future compensation offers.
- Overhaul any outdated systems to make sure everything is aligned with your updated approach to pay equity.
- Consider hiring a freelance or part-time legal consultant who specializes in pay equity or employment law to help with the fine print.
- Provide company-wide training to HR and management to ensure everyone’s fully on board and can communicate effectively on your new policies.
- Check in regularly to evaluate and make actionable changes based on internal feedback.
As more companies across the country adapt to pay transparency, we fully believe we’ll start seeing meaningful change that will combat and help close the pay gap. Of course, it’s not a one-size-fits-all solution, but it’s a critical step in the process!
By ensuring that employees are treated and compensated fairly, we’ll be well on our way to a more equitable society for all.