The landscape of pay transparency laws in the United States is developing rapidly, requiring employers to scramble to keep up. Keeping track of these changes can be confusing and costly, especially since there is no single comprehensive federal mandate governing pay transparency.
But with calls for equality and fairness in the workplace only growing louder with time, the pay transparency movement is accelerating. These laws, now more than ever, aim to create fairness in the workplace. They require employers to be open about salary ranges and benefits, promoting equity and reducing wage gaps.
Since current pay transparency laws can vary between states, it’s up to each employer to stay abreast of the changes that affect them and their employees. As a PEO working with numerous multi-state employers, Aspen HR is dedicated to helping our clients stay informed and compliant no matter where they do business.
Understanding the Importance of Pay Transparency Laws
Once regarded as confidential, salary information is now becoming more accessible due to pay transparency laws, which are designed to ensure fair treatment in the workplace. These laws provide employees with the information necessary to comprehend their pay scales, keeping them informed as they navigate the job market.
Of course, pay transparency can have big implications for your company, even if your state has yet to implement any laws mandating it. In a digital world, information flows quickly and freely, and workers are beginning to expect pay transparency, even if working remotely. If you’re looking to attract talent from states where pay transparency laws are in place, it can be beneficial to adopt similar practices proactively.
However, there are still instances when keeping salary information confidential is appropriate and even advantageous to employers. Operating in a competitive environment often necessitates keeping salaries proprietary, and pay opacity during negotiation is commonplace as well. And when it comes to employee morale, pay transparency can be a double-edged sword: while it does promote fairness, it can also lead to uncomfortable discussions if managed inappropriately.
Pay Transparency: Statutes & Compliance
Pay transparency laws continue to pop up across the country. They require employers to share salary ranges at various points, such as during the hiring process or upon an employee’s request. As a result, the share of US job postings that contain salary ranges has more than doubled since 2020.
These laws stem from equal pay laws, the first of which was passed by Congress in 1963. Now, those laws are evolving to meet the contemporary need for transparency, providing job seekers and current employees with clearer insights into their potential or existing income. They also necessitate that employers modify their recruitment procedures and their approach to managing salary information.
For example, a position’s salary may have to be disclosed during the hiring process, which can affect how an applicant navigates it. Alternatively, a higher level of pay transparency with existing employees can affect their morale and ongoing salary negotiations.
Pay Transparency Laws by State: An Overview
These laws can vary from state to state. Let’s take a brief tour across the country:
- California: Starting in 2023, employers with at least 15 employees need to share pay scales in job postings. They must also share salary and wage information with current employees upon request.
- Colorado: This state requires employers to include compensation in job postings and to notify employees about promotion opportunities.
- Connecticut: In Connecticut, employers must disclose salary ranges to applicants and employees upon request or before an offer is made.
- Maryland: Employers are required to provide a wage range for a position when a job applicant requests it.
- Nevada: Employers need to disclose salary or wage ranges to job applicants after an interview, and to current employees who apply for or are offered a promotion or transfer.
There are also several large cities and localities that have enacted wage transparency laws, such as Cincinnati, Jersey City, Ithaca, New York City, Toledo, and Westchester County.
Penalties for compliance violations can vary widely. In some jurisdictions, employers who do not comply with pay transparency laws can face fines that range from $500 to as much as $10,000 for each violation. The risk of these penalties can escalate depending on the frequency of the violations and the number of employees or prospective employees affected.
In certain states, employers may also expose themselves to civil liability, meaning they could face civil lawsuits. Some of these jurisdictions might even impose additional civil penalties, which could amount to up to 10% of the damages determined in a civil suit.
The Benefits of Pay Transparency for Your Company
Despite its compliance risks, embracing pay transparency can offer significant upside. By sending a clear message that your company values fairness and equality, it can boost employee engagement, satisfaction, and retention.
That same message can also positively affect recruitment, attracting talent who values openness around pay scales and compensation. As younger workers enter the job market, their generational values do as well, and the shift among Millennials and Gen Z is a clear one: between 40-42% of them are significantly more open about their salaries than previous generations. So if your company prioritizes hiring younger high performers, the choice to embrace pay transparency will likely pay off well for you.
Aspen HR Can Help You Navigate Pay Transparency Laws
As a national PEO, Aspen HR grasps the complexities of pay transparency laws across various states. Our aim is to ease the compliance burden for our clients, keeping you informed about state, federal, and local laws as they change. We perform compensation audits that identify any areas of concern in regards to pay transparency. A best practice we recommend to our clients is to establish salary bands for each position in their company.
Pay transparency laws are evolving, yes. But they’re also here to stay. And while they do pose certain challenges, they also present exciting opportunities to promote fairness and equality in the workplace and transform recruiting opportunities for the companies who embrace them.
If you’re interested in learning more about how Aspen HR can help your company navigate this dynamic aspect of the labor landscape, contact us today.