Pay Transparency Laws

With several states implementing pay transparency laws and other states following shortly, is your company ready?

Why is Pay Equity so Important?

According to research done by PayScale, women currently earn $0.80 cents for every $1 earned by a man before adjustments are made to control for non-discriminatory differences that impact compensation. When compensable factors are controlled, women are still earning only $0.98 cents to $1 earned by men when doing the same job (equal pay for equal work). This constitutes a $0.02 cent gap on average when all compensable factors are controlled.

A $0.02 difference may seem small, but it is statistically significant, especially when you consider that pay discrimination has been illegal since 1964. Compounded over a lifetime of work, small differences add up. A study by the National Women’s Law Center showed that women stand to lose $406,760 over the course of a 40-year career at the uncontrolled wage gap of $0.80. This estimate more than doubles for women of color.

Add to the fact that research from The World Economic Forum’s Gender Gap Index found that at the current rate of change,  the gender inequality gap won’t close in the U.S. for another 208 years!

Women represent 47 percent of the total labor force. Closing the gender wage gap is important not only in the pursuit of equity and fairness but because women represent a significant portion of the available talent in the marketplace. And with the current war on talent, companies need to make pay equity a top priority going into 2022.

Which States have Pay Transparency Laws?

Below are some states that have enacted or are working toward enacting pay transparency laws. As the trend for pay transparency continues, companies will need to stay vigilant on the new laws, especially when hiring anywhere in the US.

  • California – employers are required to disclose the pay range to applicants upon request.
  • Colorado – with the implemented of the most burdensome requirement with their state transparency laws, employers (with 1 or more employees) are required to disclose the range on the job posting, provide general description of other compensation available for the role, AND provide a general description of the benefits. Additionally, Colorado companies are required to provide written notice to their employees of any “promotional opportunity”
  • Connecticut now requires employers to provide the salary range to applicants (1) upon request and (2) by the time it extends an offer of compensation (if the applicant did not request it).
  • Maryland – employers are required to disclose the pay range to applicants upon request.
  • Nevada – employers are required to provide the pay range to applicants who have completed an interview, even without a request.
  • Rhode Island – employers are required to disclose the pay range to applicants upon request. Employers are also require to provide employees pay range disclosures upon hire, when changing jobs, and if they ask for it.
  • Washington – employers are required to disclose the pay range to applicants upon request. Employers are also required to provide the salary range to employees who are changing roles, if they request it.
  • And other states such as Massachusetts and New York are currently reviewing bills for pay transparency.

Will these types of legal requirements be effective and make an impact on pay equity?

Per Payscale’s research shows that pay transparency closes the gender wage gap completely. The report stated that pay transparency closes the gender wage gap:

  • Completely: Women who feel they ar paid in a transparent way do as well or better than men for every $1 earned.
  • At the Job Level: When women agree their organiation is transparent, the wage gap closes at ALL levels, with Director level and above earning equal pay.
  • For Most Occupations: The occupations that did not fully close the gender wage gap were largely beholden to strong gender norms. However, there were many male-dominated occupations that did achieve pay equity with pay transparency.

According to an article by Chief only time will tell. The biggest challenges to date include:

  • Companies bypassing the law by NOT hiring in Colorado (for remote positions).
  • Companies providing a HUGE salary range, which does not provide the right support and insight.

However, companies are dealing with a major challenge regarding public transparency. Being required to publicly display pay range data on open positions will require companies to get their internal pay structure to be, well, structured. Current employees will now be able to see what their employer is willing to offer for their current (or potential future) role, their boss’ role, their peers, etc. So companies who lack proper compensation structure including salary ranges/bands AND/OR are dealing with a current internal equity of their current workforce better get prepared and have a game plan in place to not lose their current talent while hiring for additional talent.

Is your company ready to publicly display pay ranges on your open positions without upsetting your current staff? Do you have salary ranges for all your jobs and are they updated? Need help evaluating and planning your compensation structure to minimize employee turnover? Reach out to us for support, we can help get you ready.

Additional articles regarding Pay Transparency:
– https://www.natlawreview.com/article/emerging-trend-state-pay-transparency-laws
– https://cdle.colorado.gov/equalpaytransparency