In the past, discussing salary at the office and in social settings was considered taboo. However, organizations now realize that today’s workers expect salary information to be easily accessible. Pay transparency is growing in popularity and is now a legal requirement in several states.

What is pay transparency?

Pay transparency is the degree to which an employer shares what, why, how, and how much it compensates its employees. This information is often provided voluntarily on the company’s website, in job postings, or upon request. The type of information shared includes pay rates for specific positions, raises, bonuses, commission structures, benefits, and retirement plans.

What are the benefits of pay transparency?

Pay transparency is beneficial to both employers and employees because:

• It’s meant to help employers detect and avoid discriminatory pay patterns. When conversations around pay are done in secrecy, it’s easier for discrimination and bias to factor into compensation decisions. The goal of pay transparency is to help employers and employees to avoid discrimination for discussing, disclosing, or inquiring about compensation.
• A culture of transparency helps drive better candidate and employee experiences and outcomes. It has been found to have a positive impact on employees’ perceptions of trust, fairness, and job satisfaction and can boost individual task performance.
• It has been found to help close wage gaps and pay inequity. Here’s how:
• If pay transparency was widespread, the gender pay gap could be reduced by 40 percent. It’s a known fact that, on average, women are paid less than men. When the secrecy around salaries is removed, it’s easier for a woman to know if she’s underpaid compared to her male colleagues. As a woman advances in her career, pay discrepancies often widen because employers base salaries on a candidate’s previous pay.
• Payscale found that Black men earn 90 cents for every dollar paid to white men, Hispanic men make 91 cents, and American Indian and Alaska Native men earn 88 cents.
• LinkedIn found that 81 percent of Gen Z (ages 25 or younger) and 75 percent of Millennial (ages 26 to 41) workers view honesty as being good for pay equality. On the opposite end of the spectrum, just 28 percent of Baby Boomers (ages 58 to 76) feel comfortable openly discussing pay.

Are employers required to disclose pay?

Pay disclosure laws vary. Some require employers to provide the minimum and maximum pay, or a pay range, for a given position upon the request of a job applicant. Others mandate this information be provided without requiring candidates to ask first. The most recent set of laws requires employers to include this information on all applicable job postings. Below are the states where pay transparency on job postings is currently or will soon be a legal requirement.

Colorado: On January 1, 2021, Colorado became the first state to enact a pay transparency on job posting law. An employer is required to “disclose in each posting for each job the hourly or salary compensation, or a range of hourly or the salary compensation, and a general description of all of the benefits and other compensation to be offered to the hired applicant.”

California: The largest state to implement a job posting pay transparency law is California—home to some of the most influential organizations in the world, including Apple, Disney, Google, and Meta. Effective January 1, 2023, nearly 200,000 California companies—with 15 or more employees—were required to disclose salary ranges on job postings, including those posted by third parties.

New York City: On November 1, 2022, New York City’s pay transparency law went into effect. This law requires most NYC employers to disclose salary ranges in job postings. The New York State Legislature passed a bill requiring organizations with four or more employees to include salary ranges in their job advertisements.

New York: On September 17, 2023, New York State’s pay transparency law will take effect, requiring “employers to disclose compensation or range of compensation to applicants and employees upon issuing an employment opportunity for internal or public viewing or upon employee request.” This applies to employers with a minimum of four employees. However, unlike New York City, independent contracts are not included in the four-employee count.

Washington: Effective January 1, 2023, the state of Washington required job postings to include “the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered to the hired applicant” for positions with a physical presence in the state. This applies to employers with 15 or more employees. The law does not make any comments about fully remote positions. Therefore, the scope of the law will have to be litigated.

Related: [E-Book] How to Attract the Attention of Qualified Candidates in Your Job Postings

Summary

Whether you agree or disagree with pay transparency, it looks like it’s here to stay. To foster a more equitable workplace and remain compliant, it’s important to be aware of the laws in place. HR Dive has compiled a complete list of states and localities that require employers to disclose pay or pay ranges at various stages of the hiring process or employment.

This blog was written by Aleron Associate General Counsel Earl Cantwell.