Pay Transparency is on the Horizon — Here's What You Need to Know - Senior Executive
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Pay Transparency is on the Horizon — Here’s What You Need to Know

Employers — no matter where they’re physically located — must track legal developments related to pay transparency. See how you can prepare and the benefits of a proactive approach.

by Adam Perrotta on April 15, 2022

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  • Starting in May 2022, New York City employers must list salary ranges for open roles — the latest in a nationwide push to increase pay transparency

  • Prepare by documenting how your team makes decisions related to salary and updating internal documents to reflect new laws

  • If pay varies widely at your company, conduct an internal audit of salaries and close gaps

  • Proactively disclosing pay range can help attract and retain talent

Starting in May 2022, New York City job hunters will notice a new section in job postings. Along with descriptions of roles and responsibilities, employers will be mandated to include a salary range for open positions. 

The Big Apple is the latest jurisdiction to join a nationwide legislative push to increase clarity around salary. These initiatives seek to close wage gaps, which often disproportionately affect people of color and women. Pay transparency laws give rise to significant compliance responsibilities for employers, especially those with remote roles open to applicants across multiple states. 

Employers — no matter where they’re physically located — must track legal developments and enact well-thought-out compliance programs if new laws arise in their area. Even beyond legal obligations, companies can reap significant benefits from taking a proactive approach to pay transparency. 

To guide you, we gathered the pay transparency trends you need to know. 

Pay Transparency is on the Rise 

New York’s pay transparency law is neither new nor novel. Other states and jurisdictions require employers to disclose pay. However, these laws vary significantly in when the salary talk must occur and often require candidates to proactively ask for a pay range. 

  • California requires employers to disclose a pay range at the request of a candidate after the first interview.
  • Connecticut and Maryland employers must disclose pay upon a candidate’s request at any time. Rhode Island will also enact these requirements in 2023. 
  • Nevada employers must proactively disclose pay after an initial candidate interview.
  • Washington requires disclosure upon request after employers make an initial offer.

In 2021, Colorado enacted the “Equal Pay for Equal Work Act,” the first state-wide piece of legislation that requires employers to include salary ranges in listings for open roles. New York City will soon follow suit, becoming the second U.S. jurisdiction to require posting salaries. 

Set to go into effect on May 15, the New York City requirement applies to all employers and employment agencies with at least four employees located in the area. Fines for violations of the rule can run as high as $250,000 per listing. 

Meanwhile, more employers are voluntarily including pay information in job postings to attract candidates in today’s competitive talent marketplace. In fact, 13% of job postings across all occupations offered pay information in the second quarter of 2021, according to data analytics provider Emsi Burning Glass. That’s up from 8% a year earlier. 

Savvy leaders have a game plan on how to approach pay transparency, allowing them to pivot quickly when facing legislative mandates or keep up with transparency trends in their industries.  

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Best Practices to Address the Big Concerns

For employers operating within the scope of existing or impending pay transparency laws, it’s crucial to establish a methodical compliance strategy, notes Nicole Haff, a litigation partner with New York City-based Romano Law. That starts with formally documenting how companies determine pay scales for open positions.

“Employers should document internal discussions or valuations concerning how salary decisions are made to support their good faith [determinations of] salary minimums and maximums,” Haff notes. Variables that may affect how much an individual candidate may be offered within that range include the cost of living for a particular market or a candidate’s experience level. 

The attorney also advises “updating employee handbooks” to codify how salary ranges are set and reviewing “internal policies to reflect the new law and any newly adopted documentation policies.”

For laws requiring in-listing wage disclosures, Haff cautions employers to avoid a potential pitfall that could be overlooked: Existing job postings that were created before the implementation of such a law but that may still be accessible to potential candidates.

“Employers should be conscious to update any existing job ads listed anywhere by the law’s effective date,” Haff says, as “even one” such posting that is not updated could result in the employer being found in violation of the law, she notes.  Teams should also revamp job posting templates that will be used to advertise new openings to ensure pay ranges are included in those listings. 

Companies preparing pay transparency efforts also should keep in mind that their existing employees will now have a clearer picture of what new hires would earn for the same or similar positions. “If you’re posting a job with the salary listed, that means your current employees can see it,” notes Richard Deosingh, district president in the Manhattan office of human resources consultancy Robert Half. “What will their reaction be if their salary doesn’t line up?” 

Fumbling the transition to pay transparency may leave you with increased attrition, Deosingh warns. If dissatisfied with their jobs in today’s pro-candidate market, more employees are willing to walk away from their employers. “If your existing employees are upset about how their salary stacks up against an external posting, you make the process of retaining employees that much more difficult,” he says

To mitigate that risk, Deosingh advises companies to undertake an internal salary audit to ensure their current pay structures are competitive with current market conditions — which likely will mean paying more both to retain existing employees and attract new hires. 

“Right now, in a tight, candidate-driven market…employers are having to pay at the high end of the pay scale for positions in demand,” Deosingh notes.  

The Remote Wrinkle

The rise of remote work can create complications for your legal department. If you’re advertising open roles to candidates in areas with pay disclosure rules, you will have to comply. 

Discrimination can be a costly faux pas. When Colorado’s pay transparency law was enacted in early 2021, some remote employers began expressly disqualifying job candidates from the  state. That approach sparked significant blowback from labor advocates and workers. And in July 2021, a notice from the Colorado Department of Labor and Employment clarified that even job listings expressly excluding Colorado-based employees from consideration still must include pay ranges, so long as the employer has at least one employee located in the state.

Since then, companies hiring for remote positions seem to have received the message, notes Haff. “The trend has been [that] companies are complying with the most stringent pay transparency laws when advertising nationally for remote positions,” she says. 

As for the upcoming New York City law, Haff says the details of how remote openings will be treated remain somewhat murky.

“When the law was introduced, the bill summary stated that this law applies to job listings ‘for any position located within New York City,’ so it’s unclear if and how it will apply to remote workers,” says Haff — adding that additional clarification about the law’s graphic scope “hopefully” will be forthcoming prior to its implementation.

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Clear Benefits 

As the patchwork of pay transparency laws grows larger and more complex, companies taking the proactive approach can reap big benefits. 

Buffer, a San Francisco-based social media management company, was a pioneer in pay transparency, making employees’ salaries available both internally and externally in 2013. Buffer subsequently expanded its transparency efforts by launching a pay calculator for employees and candidates to see how their salaries could grow as they advance through the company’s ranks. 

“In many ways, pay transparency answers the question for our team members of what could be,” says Jenny Terry, Buffer’s director of business operations. “They’re able to look at… teammates who are more advanced in their careers and they’re able to see exactly what they have the potential to make, so no one is left wondering what will happen at their next promotion or what it will look like when they advance — and that’s a huge part of retention.”

The enhanced transparency also has helped Buffer fulfill its commitment to pay equity. Listing salaries ensures that both new hires and existing employees are paid fairly based upon their positions and experiences, Terry adds. 

Increased transparency around salary also makes the hiring process more efficient, notes Deosingh. 

“When listing a salary, you’re going to attract candidates who are serious about the role,” Deosingh says. “And you’re also telling applicants…how serious you are as an organization looking to fill that role.”

Keep in mind, even when posting a range is legally mandated, employers still have wiggle room when determining a final number — both within the given range and outside it. 

“It certainly does not eliminate negotiation,” notes Deosingh of the New York City and Colorado disclosure requirement. That’s because companies covered by such laws still can decide to pay above that range for a particularly attractive candidate, provided it can prove the original pay range determination was made in good faith, notes Haff. 

“The employer’s good faith belief is examined at the time of making the post,” the attorney says. “So they can still pay more to hire an employee.”

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