The days of taboo salary discussions are numbered. Pay transparency laws require employers to disclose a wage or wage range to prospective candidates or current employees and are normalizing the sharing of employee salaries at organizations big and small.
For decades, hiring managers and job candidates have spent time dancing around one basic but essential question: how much does this job pay?
Pay transparency laws are bringing salary details out into the open. Whether your business operates in a jurisdiction that requires you to disclose a wage range or not, the trend is growing. Considering what this could mean for your job postings and recruitment is essential. Below are some considerations that can help you prepare.
What is pay transparency? What are the benefits?
Pay transparency is the practice of making employee compensation figures visible to others — internally, externally or both.
Employers have traditionally discouraged or prohibited employees from sharing salary information due to the fear that it might foster resentment among employees or limit the employer's bargaining power during recruitment. However, pay transparency can offer several benefits, including the following:
Higher levels of trust
According to the Society for Human Resource Management (SHRM), 91 percent of employees who believe their organizations are transparent about how pay decisions are made also said they trust that their employers pay people equitably, regardless of gender, race or ethnicity.
Demonstrated commitment to diversity
Making salary data visible prevents businesses from hiding structural inequalities that may be tied to gender, racial or other biases.
"Pay transparency is gaining popularity because it's exactly what people want," says Kiran Contractor, Director of Talent Acquisition at ADP. "More employees and candidates are now calling out pay discrimination as a whole, and with companies as they interview."
Improved talent attraction and recruitment
A LinkedIn study found that including salary ranges in job postings drives more qualified candidates to apply.
As a result, some companies are embracing the shift towards greater transparency, even if they're not required by law to provide salary data.
"I feel like that will be part of their recruiting and retaining process moving forward," Contractor notes.
Emerging trends in pay transparency laws
According to a report from the Institute for Women's Policy Research, only 17 percent of private organizations practiced pay transparency a few years ago. However, that percentage is growing fast, often due to legislation requiring it.
Several jurisdictions have enacted pay transparency laws. These laws broadly govern who must receive wage and other information, what information must be disclosed and when disclosure is required.
The information presented below is accurate as of the date of this publication. Visit adp.com/paytransparency for the latest.
Albany County, New York: Employers with four or more employees are required to state the minimum and maximum salary or hourly wage for a position when advertising a job, promotion or transfer opportunity. This requirement does not apply to temporary jobs at a temporary help firm.
California: Upon request, all employers must provide an applicant with the pay scale for the position they applied for (even before the initial interview) and provide an employee with the pay scale for their current position. An employer with 15 or more employees must include the pay scale for a position in any job posting. If the employer engages a third party to announce, post or publish a job posting, the employer must provide the pay scale to the third party. The third party is required to include the pay scale in the job posting.
Cincinnati, Ohio: Employers with 15 or more employees within Cincinnati must, upon request, provide the pay scale for a position to an applicant who has received a conditional offer of employment.
Colorado: In each posting for each job opening, all employers must disclose the rate of compensation (or a range thereof), including salary and hourly, piece or day rate compensation that the employer is offering for the position; a general description of any bonuses, commissions or other forms of compensation offered for the position; and a general description of all employment benefits offered for the position.
Connecticut: All employers must provide a job applicant with the wage range for a position the applicant is applying for, upon the earliest of the applicant's request or before or at the time the applicant is made an offer of compensation, as well as provide an employee with the wage range for their position upon their hiring, a change in the employee's position with the employer or the employee's first request for a wage range.
Ithaca, New York: Employers with four or more employees whose standard work locations are in the city of Ithaca must include the minimum and maximum hourly or salary compensation in each posting for a job, promotion or transfer opportunity. The ordinance does not apply to job advertisements for temporary employment at a temporary help firm.
Jersey City, New Jersey: Employers with five or more employees that advertise by any means to provide notice of employment opportunities, transfers or promotions must disclose a minimum and maximum annual salary or hourly wage in the posting or advertisement.
Maryland: Upon request, all employers must provide an applicant with the wage range for the job for which the applicant applied.
Nevada: All employers must provide the wage or salary range or rate for a position to a person who has completed an interview for the position and provide the wage or salary range or rate for a promotion or transfer to a new position to an employee who has applied for the promotion or transfer, completed an interview for the position or been offered it and requested the wage or salary range or rate.
New York: Effective Sept. 17, 2023, employers with four or more employees must, when advertising a job, promotion or transfer opportunity, state the minimum and maximum annual salary or hourly wage for the position. For positions compensated solely on a commission basis, employers can comply with the law by including a general statement that compensation will be based on commissions. Employers must also disclose the job description for the position, if one exists. The law applies to advertisements for positions that will physically be performed, at least in part, in New York, as well as jobs that will physically be performed outside of New York but report to a supervisor, office or other work site in New York.
New York City: Employers with four or more employees (including independent contractors but excluding temporary employees hired through temporary help firms) are required to disclose the expected salary range for a position on internal and external job listings. Positions that cannot or will not be performed, at least in part, in the city of New York are excluded.
Rhode Island: All employers must, upon request, provide the wage range for the position for which the applicant is applying and provide an employee the wage range for the employee's position at the time of hire, when the employee moves into a new position and upon request.
Toledo, Ohio: Employers with 15 or more employees within Toledo must, upon request, provide the pay scale for a position to an applicant who has received a conditional offer of employment.
Washington: Employers with 15 or more employees must, in each job posting for each job opening, disclose the wage scale or salary range and a general description of all benefits and other compensation. Upon request of an employee offered an internal transfer to a new position or promotion, the employer must provide the wage scale or salary range for the employee's new position.
Westchester County, New York: Employers with four or more employees must include the minimum and maximum salary in each posting for a job, promotion or transfer opportunity. The law applies to a posting for positions that are required to be performed, in whole or in part, in Westchester County, whether in an office, in the field or remotely. It does not apply to job advertisements for temporary employment at a temporary help firm. The law will become null and void on the day that similar statewide legislation goes into effect. As such, the Westchester County law will no longer apply as of Sept. 17, 2023.
3 ways to prepare for pay transparency
Whether pay transparency laws are already required where you're located or not, there's a good chance they're coming in some form. Below are three methods that can help you prepare:
1. Evaluate your existing compensation structure
Many businesses aren't ready to share salary ranges publicly because they don't have their house in order. Pay discrimination due to gender, race and ethnicity is an obvious issue. However, discrepancies can also stem from a manager favoring one employee over another or giving family members the same job title but a preferential salary. And, of course, there are legitimate reasons for differences in pay, such as different responsibilities, seniority, cost-of-living considerations or giving an employee a raise to dissuade them from accepting a competing job offer.
"Before you start thinking about pay transparency, make sure you're exactly where you need to be from a market standpoint, and make sure the people in your company are being paid fairly," Contractor said. "Otherwise, you're asking for trouble. If you're going to create pay transparency, you need to ensure you're in line internally before you begin promoting it externally."
2. Base compensation on data — not opinions
You need access to reliable benchmarking data to ensure your existing compensation structures are ready for prime time. While you can always look at the job boards to see what other businesses are paying, Contractor said that basing your compensation on anecdotal evidence won't necessarily ensure your pay is where it needs to be.
"Ideally, you want to use a resource that can provide current market data based on your industry, location and role," Contractor said. "At ADP, we have benchmarking data, which our clients can use to see how they stack up against other organizations. Several tools out there can confirm if you are on the right track or not. Just ensure you are looking at true workforce data instead of opinions."
If you realize your organization is paying below market, you may need to create a plan on how you can quickly shift your current pay structure.
3. Prepare managers for questions
Once you start including salary ranges in job postings, expect employees to ask why someone joining the organization at the same level is being offered a higher salary.
"It's understandable why many companies want to avoid having those discussions," Contractor said, "but you're going to have to be prepared to help current employees understand the reasoning behind those decisions. Be prepared to discuss what your organization is doing to make adjustments and promote pay equity. Ensure your leadership team is aligned so that everyone speaks the same language when answering any questions."
Ensure deviations from the standard salary structure are documented and applied consistently. Clear communication and trust are essential to transparency.
Conversations about salary are likely to continue (and expand) in the coming months and years, so it's wise to prepare your organization to adhere to the legislation being enacted. Once you have confidence in your compensation strategy, you'll be well on your way to complying and thriving within the new requirements.
Get up-to-date pay transparency resources and best practices at ADP.com/PayTransparency.