Pay transparency has always been a fear of employers, likely because they did not or do not have a comprehensive pay plan that provides for pay equality. Employers don’t want this chink to be shown in their proverbial armor.
Negotiations of compensation, either for hire, raise, or promotion, is such a challenge that many books, blogs, and training materials exist to teach us how to properly negotiate for a higher salary. In fact, a Google search shows anywhere from 2,640,000,000 to 377,000,000 results, depending on your search terms.
The lingering effects of the pandemic on workforce dynamics are influencing employers to rethink their business design and pay practices. A new employment model is evolving as companies continue to face the challenges of a tight labor market. In this environment, total rewards incentives now include the creation of alternative employment relationships, flexible work plans, contingent staff, and nonlinear careers. Optimizing this new model, for the purpose of protecting their organization’s institutional knowledge, requires organizations to customize their approaches to attract and retain their workers.
In spite of the new developments, pay discrepancies still exist, particularly during employment negotiations. The disparity in pay has resulted in inequality across genders and races. State laws prohibit employers from disciplining employees for discussing pay with each other. Yet, with continuously developing legal requirements, return in strength of unions, and difficulty in competition for applicants, the practice of negotiating compensation individual by individual is being rethought.
For decades equal pay has been in a statutory requirement under federal laws such as the Equal Pay Act and the Civil Rights Act. New state laws in California will require greater pay transparency as a compliance requirement, and companies will need to rewrite policies and train hiring managers to negotiate to a properly constructed range in order to strive for the goal of pay equality. The states have been and continue to be providing the momentum toward equity and equality. Below is a list of states that mandate pay transparency for private employers.
California
California was the first state in the U.S. to legally require employers to provide the pay range for a job—if the candidate asks for it after the first interview. Passed in 2016, and updated annually, California’s Equal Pay Act prevents employers from asking about candidates’ previous salaries, and was the first law to use the phrase “substantially similar work” in regard to gender pay parity.
New York City
The law was originally set to take effect on April 28, 2022, but the City Council passed and Mayor Eric
Adams signed an amended version that delayed the effective date and made additional clarifications
to some of the law’s provisions to November 1, 2022.
Employers must disclose the minimum and maximum salary, or hourly wage, and benefits for each job,
promotion, or transfer opportunity. The range may extend from the lowest to the highest salary that
the employer in good faith believes at the time of the posting it would pay. The law does not cover jobs
that cannot or will not be performed, at least in part, in the city.
Colorado
In effect since January 2021, Colorado’s Equal Pay for Equal Work Act requires employers to list the
pay range and beneits for every job opening.
New York
As of September 1, 2022, Employers must disclose the minimum and maximum hourly or salary
compensation for each job, promotion, or transfer opportunity. The range may extend from the lowest
to the highest hourly wage or salary that the employer in good faith believes at the time of the posting
it would pay. The law does not cover advertisements for temporary employment at a temporary help
firm.
Connecticut
Connecticut passed a bill that took effect in October 2021, requiring employers to provide a salary
range for all extended offers, or before then, if the candidate asks for them.
This applies to transfers and promotions, too. Employers in Connecticut have to provide a pay range
for any instance where someone is moving into a new role.
Nevada
Effective October 2021, Nevada employers must provide a salary range to candidates after the first
interview automatically. (It’s essentially California’s law, but compulsory for the employer.)
Rhode Island
Starting in January of 2023, to adhere to the Rhode Island Equal Pay Law, employers must provide
candidates with a pay range if the interviewee requests it. This will apply to transfers and promotions
as well.
Maryland
Originally passed its Equal Pay for Equal Work Act in 2016, but updated it in 2020 with language that
requires employers to provide pay ranges to candidates upon request. Employers in Maryland are also
prohibited from asking candidates about their previous salary history.
Maryland employees should make a consistent practice of asking potential employers for pay ranges
prior to accepting an offer.
Washington
Washington amended its Equal Pay and Opportunities Act in 2019 to require employers to provide a
salary range after they’ve made an offer to a candidate if the candidate requests it. The same goes for
transfers and promos.
New Jersey
Employers must disclose the minimum and maximum salary, hourly wage, and benefits for each job,
promotion, or transfer opportunity. The range may extend from the lowest to the highest salary that
the employer in good faith believes at the time of the posting it would pay.
The Future of Compensation
A company’s leadership culture determines its policy decisions and how they structure its
compensation strategies. The goal should be to deliver a compensation plan design that includes a
combination of base pay, annual incentives, and long-term incentives while striving for consistency, pay
equity, and equality.
A compensation program not riddled with mystery or enigma will inspire over-achievement and guard
against under-achievement. Communication efforts educate all stakeholders on the totality of the
compensation package. Less informed job candidates tend to focus on base pay only, and this is what they traditionally negotiate during an employment offer. However, more informed job candidates understand the complete pay package combines fixed (i.e., salary + benefits such as health care + any housing, per diem) and variable pay (i.e. bonus, incentives, and other non-traditional benefits).
The deliverable is most effective when transparent, and the overall plan design should attempt to
determine the following:
• How the individual employee should be compensated based on their current and future value to
the organization.
• The total pay target for each component of the pay mix (base salary, annual incentives, and longterm
incentives), based on qualifications/experience, their ability to achieve business goals, and
not gender and race.
• Balancing over-reliance on market data versus the organization’s budget and compensation
philosophy, particularly when a job applicant’s future performance is still an unknown entity.
Transparency, communication, and customization are the factors needed to achieve common ground in
the employee/employer relationship when attempting to create a performance culture based on
competencies, potential and pay equality. The compensation practitioner’s purpose is to create a pay
package that is unambiguous, disciplined, explainable in thought processes, and based on coherent
business and human resources strategy.