What Do New Pay Transparency Laws Mean for HR?
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Pay transparency laws are on the books in an increasing number of U.S. cities and states, which effects Human Resources management. California, New York City, Colorado, and Washington state have agreed to disclose salary ranges when posting a job listing. Connecticut, Nevada, and Rhode Island, on the other hand, require employees to provide salary ranges to job applicants during the hiring process. Regulators in more places, including New York state, probably will agree to similar laws.
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This push for transparency is relatively new. Previously, employers benefitted from keeping salary ranges vague or even secret. It allowed them to keep compensation stagnant and low. In addition, businesses could hide pay gaps and avoid combatting inequity in their systems. A greater emphasis on diversity, equity, and inclusion (DEI), and the leverage employees gained during the Great Resignation have led to the acceleration of pay transparency.
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Why Now?
What this means for HR leaders in those places is that they must reveal salary ranges for positions when posting jobs or during the hiring process, depending on the law. Some employers are opting to provide this information regardless of whether it is required by the state.
The idea behind transparency is that sunlight is the greatest disinfectant. In other words, being honest means companies must be held accountable. For instance, the BBC reports that women and minority workers tend to ask for less money in salary negotiations. If pay ranges are published, they will know how much to expect and for what to ask.
Making the process fairer is at the core of this movement. Big, well-known companies soon will have no choice but to be honest. California's decision to codify pay transparency means companies like Alphabet Inc., Meta Platforms Inc., Walt Disney Co., and Wells Fargo & Co. soon will share salary ranges.
Recently, Microsoft revealed it will reveal salary ranges in all job postings across the United States even though it is only obliged to do so in its Washington state headquarters. Forbes reported that many experts believe this will pave the way for other organizations to do the same.
A More Just Workplace
This new enlightenment fits into the workplace transformation and response to the record number of quitters in 2021 and the early months of 2022. In these times, companies cannot hide anymore. Former employees are reporting salary and commenting about working in different places on websites like Glassdoor. Gen Z job applicants and employees, who have begun entering the workforce, expect more transparency because of the digital world in which they have grown up.
In fact, the generations have wildly different habits about revealing their salary. More than 30% of Gen Z respondents to a LinkedIn Market Research survey said they would talk about their salary with co-workers or anyone who asks. More than 20% of Millennials agreed. Only 17% of Gen X respondents would do the same with co-workers, and only 7% of them would oblige anyone who asked. The numbers were even lower for Baby Boomers, 9% of whom would talk about it with co-workers, and a measly 4% with anyone who asked.
Clearly, as younger people begin to enter the workforce in larger numbers and Baby Boomers retire, the culture and expectations will continue to change. Human Resources leaders must conform to the new zeitgeist. While revealing pay probably will not eliminate pay gaps based on gender and race, they will help move the needle forward to narrow the gap. As a result, anyone in HR truly committed to DEI goals will appreciate this new fairness in the process.
Photo by Karolina Grabowska for Pexels
