First, let’s go back to 2021 when Colorado’s new fair labor law required employers to provide salary ranges in job postings. Since then, several states have followed suit. Our workforce is growing increasingly diverse and empowered, and the demand for equitable compensation and open communication about salaries is more pronounced. In response, states are adopting pay transparency laws that mandate including salary information in job postings. This shift is not just a regulatory change; it’s a transformative move towards fairness and inclusivity in the workplace.
Several decades ago, I started my corporate career as a human resource assistant for a company placing educators in schools where crime rates were high, student attendance was low, and resources were scarce. These hard-to-fill positions often resulted in pay ranges that varied greatly. We were making offers to fulfill our contractual obligations desperately, and when someone asked for more than another person, we often gave it to them. Some of the staff began discussing their pay rates, and when they found that there were significant gaps, one of our VPs suggested putting something in the offer letter that would prevent them from discussing their pay rates in the future. This was the early 2000s, but even then, those of us in human resources said no.
Pay transparency laws are designed to combat wage gaps, foster a more equitable job market, and enhance overall trust between employers and employees.
Here are some states and their current pay transparency laws:
- Maryland: Maryland’s current law requires employers to provide an applicant’s wage range for a position upon request. Beginning October 1, 2024, employers with job postings for positions that will be physically performed at least in part in Maryland must disclose in each internal and public posting the wage range for the position, a general description of benefits, and any other compensation offered for the position.
- D.C. passed a new pay transparency law in early 2024. Beginning June 30, 2024, employers of any size in D.C. must include the minimum and maximum projected salary or hourly pay for a position in all job postings. Information about healthcare benefits associated with the position must be disclosed to the applicant before the first interview.
- New York City: In 2022, New York City enacted a law requiring employers to list salary ranges in job ads. This measure aims to reduce wage disparities and empower job seekers with essential compensation information before they apply.
- Hawaii: Under the Hawaii pay transparency law, job postings must include an hourly rate or salary range that “reasonably reflects the actual expected compensation.” However, there are exceptions (see link above).
- Colorado was the first state to pass a pay transparency law regarding job postings. It applies to Colorado employers with at least one employee and out-of-state employers, which has become an issue for some companies. There has been pushback among some employers that have decided not to consider applicants in Colorado for remote jobs specifically because of the law. In addition to including pay ranges in job postings, Colorado employers must give formal notice of internal opportunities for promotion to employees in the state on the day the opening occurs.
- California updated its pay transparency law to include salary ranges in job postings in September 2022. The law applies to employers with 15 or more workers. “Pay scale” means the salary or hourly wage range that the employer reasonably expects to pay for the position. The law also applies to third parties that post jobs on behalf of the employer.
What are some concerns?
While pay transparency offers numerous benefits, it also presents some challenges. Employers may face difficulties in determining appropriate salary ranges and may worry about the potential for salary disputes. Additionally, careful implementation is needed to avoid unintended consequences, such as driving up salary expectations or leading to an oversimplified view of compensation.
A common concern I hear from companies is that the ranges feel limiting. Some mid-size and smaller companies base salaries on the electives candidates choose to add to their total compensation package, such as PTO, benefits, and 401k matches. This often means a salary range can be flexible based not only on experience and background but also on the elective needs of each employee. Pay Transparency Laws require companies to put a good faith range for each position. This means pay scales will need to be analyzed and worked according to the “wiggle room” the company has.
Posting wide pay ranges may seem like a good resolution. However, it may be considered off-putting to job seekers and can raise concerns with current staff.
Furthermore, there is concern that competitors will identify the ranges for similar positions on their staff and then poach employees by offering higher pay rates. Companies worry that their rates won’t be competitive, and by outlining them to the public, competition will continue to push up rates to be more appealing to candidates. For smaller companies, that’s a real concern, especially when trying to win bids and bring in new workers.
What do Pay Transparency Laws seek to accomplish?
There are few things certain in life, and change is one of those things. As younger generations enter the workforce and older generations move out, there will continue to be updates to “the way things used to be.” Change can be difficult, especially when companies feel exposed. All that said, there are some really positive directions this law will take us.
- Reducing Pay Gaps
One of the most significant advantages of pay transparency is its potential to narrow wage gaps. By making salary information publicly available, pay transparency helps job seekers gauge whether they are being offered competitive compensation and helps employers align their pay practices with market standards.
- Enhancing Job Seeker Confidence
When job seekers have access to salary information upfront, they can make more informed decisions about whether to apply for a position. This transparency helps set clear expectations and reduces the likelihood of candidates feeling undervalued or misled during the hiring process. It also takes significant pressure off your recruiting team to sift through hundreds of unqualified resumes based on salary requirements.
- Fostering Fairness and Trust
Pay transparency can build trust between employers and employees. Openly shared salary ranges demonstrate a commitment to fairness and can improve morale and job satisfaction. Win! Employees are more likely to feel valued and equitably treated when they understand how their compensation compares to industry standards.
- Improving Recruitment and Retention
Employers who embrace pay transparency may find it easier to attract top talent. Candidates are increasingly seeking employers who prioritize fairness and transparency, and providing salary information can make job postings more attractive. Furthermore, transparent pay practices can aid in retaining employees by minimizing dissatisfaction and turnover related to compensation issues.
What if you don’t comply with the law?
This has been an interesting question and one with mixed findings. However, the best resource I uncovered is this article from SHRM, which outlines the fines other states have utilized. “Colorado imposes fines ranging from $500 to $10,000 per violation for failing to include wages in job ads. For now, there is some leeway. Colorado will waive the fines if an employer corrects the posting after an initial violation. However, in the law’s first two years, Colorado handed out a total of $237,000 in fines against five companies, according to Bloomberg; 14 other companies also received citations.”
The poor publicity, in addition to fines, would be less than ideal. For the state of Maryland, the upcoming fines and warnings are as follows:
- First violation: The commissioner may issue a compliance letter to the employer, demanding adherence to the law.
- Second violation: The employer may be assessed a civil penalty of up to $300 for each employee or applicant affected by the noncompliance.
- Subsequent violations: If further violations occur within three years of a previous violation, the employer may face a civil penalty of up to $600 for each employee or applicant affected.
Maryland’s labor commissioner is tasked with monitoring and doling out fines as they see fit based on company size, good faith, and other circumstances.
Looking Ahead
The effectiveness of pay transparency laws depends on rigorous enforcement and the broader context of an organization’s pay practices. Salary ranges must be realistic and reflect actual compensation practices to ensure transparency leads to genuine fairness rather than mere compliance. This is where Power3 can assist.
We have created a policy for downloading and tailoring for those who want adequate protection in the employee handbook. Here, you will find the processes and practices needed to ensure compliance. This also includes our Compensation template to set pay ranges.
As the workforce landscape evolves, pay transparency laws are a step towards more equitable and open workplaces. By requiring salary information in job postings, these regulations address longstanding issues of pay inequity and contribute to a more transparent and fair job market. If your team needs more assistance with
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Melisa Lewis
