Pay Transparency Laws – State & Federal 2023
In the past couple of years, an important issue has come to the forefront in Human Resources: pay transparency.
About one third of employees in the US don’t feel they are compensated fairly, according to a Beqom survey, and over half of employed adults said they would change jobs to work at a company with more pay transparency.
Why State & Federal Pay Transparency Law Is a Hot Topic
You might recognize why employees value pay transparency, but why is it such a hot topic at the moment?
First, it comes amidst a number of other issues which have been in public awareness and discussion for a while now: how do we fight discrimination in the workplace? One main issue of inequality is unequal pay. If companies can keep salaries a secret, there’s no accountability for equal pay.
The push for businesses to share more information about salaries and benefits stems from a desire for more pay equality, especially between persons of different genders, races, and backgrounds.
For example, for every dollar a man earns, women earn 82 cents, according to Payscale. There are gaps between white employees and those of color, too, with black men earning 90 cents for every dollar white men are paid, Hispanic men earning 91 cents, and American Indian men earning 88 cents.
Pay transparency can help level the playing field within a company and assure employees they are being paid a fair market wage.
What is Pay Transparency?
With everyone throwing around the term pay transparency, there is some understandable confusion about what it means.
Is pay transparency posting a salary in a public place? Or is it laying out all the particulars of a salary and benefits for a job opening in a private interview?
The answer is, it depends. Companies and employees parse out the meaning of ‘pay transparency’ differently, and it can be interpreted in various ways.
Some employees will only feel comfortable if they can know the salary of all employees, while others are comfortable with knowing the salary for the position of interest to them.
Think about pay transparency like a spectrum: on the low end of transparency, an employee should know their own salary, and on the high end they would know all employees salaries and how they were determined (ie, skill based, number of years worked, etc).
New Pay Transparency Laws by State in 2023
As an employer, you should know that not only is pay transparency a good idea to build trust with your employees, but it is unlawful to have secrecy policies that restrict pay discussions.
You need to be aware of new pay transparency laws in any states and cities you have employees.
Starting in 2021, Colorado started prioritizing pay transparency laws by passing laws requiring businesses to be forthcoming about pay in job listings. New York City followed suit in November 2022, followed by a number of other states and cities. The laws stated that jobs had to be listed with a full salary range.
Now, new laws in California state that businesses with 15 or more employees must include salary ranges on job listings and provide a pay scale to employees who request it for their current job.
Washington state recently passed an Equal Pay and Opportunities Act stating similar stipulations to those above, and Rhode Island amended their Pay Equity Act to require businesses to provide a salary range to job applicants who request it.
There are more pay transparency laws in the works, too.
Federal Employee Pay Transparency Rights
Not only is there a push for more pay transparency, but also protections for employees against being fired or discriminated against because they ask about compensation.
Executive Order 11246 states that employees have the right to ask about, discuss, or share about their pay or other employees without being disciplined, harassed, terminated, or discriminated against.
Benefits and Challenges for Companies
As an employer, you are likely wondering how to navigate these waters. One challenge you’ll face is how to explain differences in wages across job positions over time.
The simplest way to do this is to create a system of principles and practices linking performance and pay which avoids potential for discrimination. The sooner you become more transparent about pay, the more secure your employees will feel and the better your reputation.
How HR Firms Can Help
If you’re feeling stuck about how to explain the salaries in your company and are not sure what level of pay transparency is best at the moment, consider getting some outside help from an HR firm like Flex HR.
We can help you hash out the particulars of your pay philosophy and identify ways to fight pay discrimination in your company.
Contact us now to discuss your HR needs.