There’s a hunger among working Americans for pay transparency and some states and businesses are taking action to make salary data more readily available. In 2023 alone, California and Washington’s new wage disclosure laws have already gone into effect, and New York will be following suit later this year. There are also a handful of jurisdictions that have adopted pay disclosure laws of some sort, including (but not limited to) Connecticut, Colorado, Maryland, Rhode Island, Nevada, New York City (NYC), Jersey City, Cincinnati and Toledo.
Pay transparency empowers workers and levels the playing field in salary and raise negotiations. It also helps businesses set boundaries around their open positions and gives them the opportunity to offer up their reasoning on how a role’s pay is structured.
This article will explore evolving state requirements, accounting for remote workers, tips for setting up a successful compensation structure, and how pay transparency promotes pay equity.
Understand state requirements
A growing number of states are implementing pay disclosure laws, but those laws parameters vary by jurisdiction. These types of salary disclosures include:
Affirmative disclosure on job posting, which requires pay range to be listed directly on a job posting. California and Washington’s affirmative disclosure laws went into effect January 1, 2023.
Affirmative disclosure at some point in the process, which doesn’t require pay range to be listed on a job posting, but communicated to the applicant. (E.g. In Nevada, salary range must be disclosed upon completion of an interview)
Upon request, which requires employers to disclose pay range only if an applicant or employee asks. This is the case in Maryland, Cincinnati and Toledo.
The meaning of “job posting” also varies by state, as does “pay scale,” and understanding these jurisdictional nuances is important. If employers don’t follow these laws, there could be severe consequences. For instance, each violation could cost between $500 to $10,000 in Colorado. And in NYC, while there’s no penalty for the first violation if it’s remedied within 30 days, proof of cure “shall be deemed an admission of liability.”
Account for remote roles
Remote employees are also subject to state laws. If your business is based in a jurisdiction like Colorado, NYC or Washington, you’ll need to list a pay range in your job ads if the position could be performed in that jurisdiction. However, in a jurisdiction like Westchester, NY, pay range only needs to be posted if the role is required to be performed in that jurisdiction.
Since their roles can be performed anywhere, there’s also the question of how much to pay remote workers. If your employee search is nationwide, the starting salary for someone based in Houston would be different than for someone based in NYC where cost of living is higher. Ultimately, the posted wage range would reflect that reality (i.e. $70k-$120k/year, depending on location and experience level), and what you end up paying them will depend on the candidate you choose.
Set a winning strategy
If you don’t have any sort of pay structure set up yet, work with your legal counsel and compensation team. Define your pay scale, which should include base wage range (not benefits, bonuses, etc.), should not be open-ended (e.g. “$50k and up” or “$120k max”), and should be based on what you expect to reasonably pay for the role. Start by prioritizing jobs that will be posted in the next 3-6 months, and formulate ranges based on existing data (i.e. current employee pay, market data). Develop language to put in offer letters and job ads to ensure there is not confusion (e.g. “The listed salary range applies to this current posting”).
Once the immediate needs are taken care of, create a long term plan for implementing a compensation structure. Consult with your internal key stakeholders and create a working group of senior leadership, recruiters, and even IT. After a holistic assessment and potential revision of all your company’s current and future roles, their functions and responsibilities, create and refine career tracks. Utilize market data and sample geographical salary ranges and cost of living in cities where your employees are located to ensure their wages are fair. This would also be a good time to conduct an equal pay analysis with your legal and HR teams.
After creating or updating your compensation structure, your current employees will probably have questions about the new salary ranges, especially when it comes time for a promotion. Provide managers with Q&A documents to help them navigate compensation questions from their direct reports. To convey a company culture of openness, consider being transparent about how the pay structure was set up to assuage employees’ questions or concerns (i.e. If an employee/applicant has X years of relevant experience, they will receive Y% additional compensation).
Pay transparency promotes pay equity
Pay transparency not only builds trust between a business and its employees and recruits, it also helps address gender and racial pay inequities.
According to a report by Payscale, women earn 82 cents for every dollar a man makes, and the pay gap widens when comparing white men to women of color. Moreover, Black men earn 90 cents to every dollar a white man makes, Hispanic men make 91 cents, and American Indian and Alaska Native men earn 88 cents.
In my experience, businesses do not usually intentionally pay their employees less based on gender or race, and are more than cooperative in fixing the problem. However, past pay practices have perpetuated the pay disparity among groups. The important thing is to work with your legal counsel and HR teams to create a strategy that will remedy any issues a pay equity analysis may expose and incorporate those learnings into your compensation strategy and program administration.
If you build certain criteria into your compensation philosophy – paying employees a livable wage, ensuring pay equity, using a pay scale formula – you will be empowered to point to your framework when people challenge your rationale. Most importantly, the compensation philosophy (what a company believes how they should pay workers) should include pay equity, meaning fairness, and is to be expected as part of the overall organizational culture.
It’s important that employers have experienced legal and compensation professionals in their corner that understand the nuances of each jurisdiction’s pay transparency laws. If your business is ready to build a compensation structure, needs help creating a pay scale, communicating compensation, or is looking for guidance on state requirements, contact NB Business Solutions today.