Visit a job posting site like Indeed or LinkedIn, and you’ll quickly notice that many job postings include a salary range. This isn’t exactly new. Providing pay ranges up front is a natural progression of pay equity laws. These regulations have been trending at the state level for a decade to help address the wage gaps existing among women, minority groups, and other protected classes.
As companies accommodate pay equity laws, salary ranges are typically known when a position is posted. Pay transparency laws provide further incentives to establish equitable pay practices. Before diving into the implications of salary ranges and pay transparency, let’s first look at the current laws.
What is pay transparency?
Pay transparency laws are unique from state to state, but as a general rule, they involve one or both of the following:
- Requiring employers to disclose pay information to job applicants
- Requiring employers not to restrict employees from requesting or sharing salary information
In some states, like Nevada, companies are required to disclose salary ranges to any applicants they interview. On the other hand, some states only require salary disclosure upon the applicant’s request.
The laws also vary on whether pay transparency applies to current employees requesting or sharing salary information. Check the laws in your state and any states where your employees work to ensure you remain in compliance.
Cities and states with pay transparency law requirements as of July 2022:
- Rhode Island (goes into effect 2023)
- Washington (goes into effect 2023)
- New York City, New York (goes into effect November 1, 2022)
- Toledo, Ohio
- Cincinnati, Ohio
What if your company isn’t in a pay transparency regulated state but hires remote employees?
When recruiting for remote positions available to out-of-state applicants, you should comply with all states where your posting is listed. Because some states, like Colorado, require remote positions to include salary information, an employer would need to include the salary range in the event that it receives applicants from this state.
The bottom line, HR best practice is to disclose salary ranges in all remote job postings.
Why is pay transparency important?
Traditionally, pay was not discussed until the end of the recruiting process. However, disclosing salary ranges from the outset benefits all parties involved.
Exercising salary transparency with both applicants and employees benefits the employer significantly. Establishing pay ranges generally requires a deep dive into pay practices and leveling up the organization’s pay structure. A well-thought-out compensation program prevents gender and racial discrimination, facilitates EEOC compliance, and helps avoid related legal claims.
When salary ranges for positions are out in the open, hiring managers, recruiters, and applicants are all on the same page, there are no uncomfortable surprises, and it is easier to eschew awkward salary negotiations and stay within the budget for the position.
Creating more transparency regarding pay ranges along with how and when pay decisions are made, removes the veil of pay secrecy and creates more trust between employees and the employer. Pay transparency also directly supports an employer’s effort to eliminate discrimination and maintain a respectful and harmonious workplace.
Recruiters and Hiring Managers
When the salary range is disclosed in job postings, it saves hiring managers from having difficult conversations about pay and reduces the likelihood of salary negotiations. These pay-related conversations not only lengthen the hiring process but can create tension between the candidate and the employer.
Pay transparency reduces the time and resource drain of interviewing applicants whose salary requirements do not fit the range budgeted for the position. This gives recruiters and hiring managers more time to interview quality candidates who better align with the organization and will be satisfied with the salary offered.
Job hunting is a stressful and time-consuming process. When applicants know a position’s salary range, they have clear expectations. If the range is below their salary requirement, they won’t apply.
Posting the salary range saves the applicant time and energy and has also been shown to increase trust in the organization. In a market that favors applicants, many job-hunters hold out for companies they can rely on and trust.
Establishing a company’s appropriate degree of transparency about internal salary ranges builds employee confidence in the organization’s pay practices. Knowing how their pay is determined, where they are at in their salary range, and when they can expect a pay increase removes speculation and facilitates greater trust. The organization highlights its commitment to pay equity and creating a respectful workplace. Employees who respect the organization they work for have been shown to have greater longevity and engagement.
How can your company prepare for pay transparency regulations?
The short answer is ensuring you have an equitable and comprehensive compensation program. This is no small feat but will reduce risk and ensure your company is fully prepared to embrace pay equity and transparency regulations. Pay equity laws are complex and vary from state to state; if your organization lacks the appropriate expertise, it is advisable to bring in a third-party compensation consultant to ensure the process is carried out in an effective and compliant manner.
Develop a compensation philosophy
Start by defining your compensation philosophy. Compensation and HR professionals struggle to balance salary trends with the organization’s needs and budget. When you’re looking to restructure your compensation strategy, ask yourself the following questions.
- What are the compensation and equity goals of the organization?
- What role does pay or other aspects of total rewards play in attracting and retaining your workforce?
- How transparent does the organization want to be with its compensation program?
- Is the compensation strategy financially feasible?
Define job classifications and descriptions
After defining your strategy and philosophy, outline job classifications and descriptions. Use Department of Labor and FLSA guidelines to determine if positions are exempt or non-exempt. Conduct salary research in your industry’s local and regional job markets to gain helpful competitive insight. Ensure job descriptions accurately reflect the duties performed to ensure appropriate salaries.
Establish a compensation structure
Once all positions are clearly defined, establish a compensation structure with defined pay ranges for all positions. Ensure salary decisions maintain equitable pay practices and comply with relevant employment laws.
Weigh market salary trends against the company’s budget. Gather comprehensive data on market salary ranges for similar positions in your area, company turnover rates, recruiting and hiring factors, and training of new employees. This information should inform your decisions on each position’s pay range.
Conduct a pay equity analysis
The last step is to conduct a pay equity analysis. Look to answer the following questions.
- Are any employees being paid significantly more or less than colleagues performing similar work (even if their job titles are different)?
- Are there legitimate reasons for these pay differences or do the pay differences need to be addressed?
- Does our new compensation structure and methods for determining employee pay ensure new pay disparities will not be introduced?
After your compensation strategy, structure, and pay equity analysis are complete, it’s time to update job postings. Make sure all information is updated accurately across all platforms and positions.
Stay ahead of the pay transparency trend
Preparing for pay equity and transparency regulations is a necessary step for staying ahead in a competitive market. This process may be long and tedious but provides substantial long-term rewards. Aside from ensuring compliance and preventing fines and lawsuits, a comprehensive and compliant compensation structure showcases a commitment to equity and establishes trust.
Clarifying your compensation strategy establishes a decision framework for setting employee salaries and determining salary changes. A clear strategy and process remove the ambiguity and frustration associated with subjective and unsupported compensation decisions. It also helps the company not only attract but retain top industry talent.