What do pay transparency laws mean for me?

A question submitted to our Ask Me Anything sessions.

Barak: Essentially the question boils down to, "What do pay transparency laws mean for me?" And I think the "me" could be your average hiring manager in America right now, potentially in any city or state. What are some of the dimensions of these new laws that they should be aware of? Marta?

Marta: Yeah. So pay transparency is blowing up everywhere. You will find different things but, for sure, at least 17 states have some type of pay transparency laws in one way or another, currently in place. And together with certain states, there are also specific cities that have some laws related to pay transparency. If you are a small employer, even in a state that currently doesn't require any pay transparency laws, it's time to get prepared for this because it's going to come your way. The sooner you get prepared and be proactive, the better it's going to be for you as an employer and less headache.

I'm a resident of Colorado. Colorado was the first state–very, proud of my state–that implemented a pay transparency law. In the old days, it used to be that all these new laws, the more progressive laws, were either California or New York. So that was new. Also pay transparency law is not just a US thing. This is also a global trend. Maybe somebody is interested in doing business abroad, why not? The European community is also looking into legislation to have that, because there are a lot of reasons why people are doing these pay transparency laws.

And one of the main things it's to avoid disparity and have equality between gender and race and a variety of things.

I feel like it's a good tool to attract new hires, too. If I'm going to apply for a job, I want to know a little bit about the salary. My husband is in the public sector. He's a teacher. All of the public institutions by law need to publish the ranges.

I know it's a big deal because you have to be set up and do an analysis of your workforce to be sure that you aren’t actually paying, potentially, males more than females, for example.

In the public sector, they've been displaying salary ranges forever. If you're a teacher, it's like if you have a bachelors, this. A masters degree, this. A language, this. To me, it makes sense that we're disclaiming this.

If you're going to apply for a job, you want to get an idea of what the range is so you don't waste either party's time, right? If you have a target of making $100-140,000 and this just pays $50,000? Thank you, but no thank you!

Barak: Just to make sure we're totally clear on what we're talking about, when we're talking about salary transparency, we're saying publishing the pay in the job…and what else? What else are we talking about?

Elena: In some areas, if an employee inquires about the salary range of a certain position, then you have to tell them. There are variations of how pay transparency manifests itself. But like Marta said it's coming for all of the states now and I imagine that in the next couple of years, all of them are probably going to be very similar to one another.

Barak: So there are external and internal dimensions of salary transparency. Just want to make sure that's clear.

Marta: I cannot speak for all the states, but in Colorado you also have to post the jobs when promotions are happening and display the salary ranges for promotions. So not only for new hires, but also, to avoid discrimination like Elena was saying before, somebody might be interested in a job and they are not being considered. So, if you're going to promote a senior director to a creative director, you also have to post it. Somebody internally might be interested in applying for that. You have to go through the process of interviewing them, in Colorado.

Barak: Yeah. Elena you want to add anything to that?

Elena: It's a scary topic to talk to business leaders about. Basically, people have to prepare to defend why they're paying one person something versus another. Start looking at your job descriptions and the roles a little bit more critically to decide whether or not certain requirements are really needed. Do I need a masters degree to be the receptionist? Pay transparency plays into that. It's really important to prepare ahead of time so that by the time you hire five people in the same role, you're not course correcting, and people are mad and quitting. So it's definitely time to prepare. And not that hard if you prepare now.

Marta: Yeah. Like you were saying, Elena, it's a good time even now, even if might not have openings right now. Just do an inventory of your current workforce and see where everybody is in salary ranges. Do a deep analysis and if you're a small company, you don't even need any fancy software. You can even have a simple spreadsheet. Have the different fields by age, gender and race. Are you discriminating because of age, gender, or race? Obviously if those people are doing a good job and you have those disparities already, you can start to prepare for that and say, "Okay, when the next cycle comes, I'm going to take care of this employee. Instead of giving this person a 3 or 4% raise, I'm going to give this person a 6% raise so I can catch them up". Even with no openings, it's good to start to prepare now so that you can be ahead of the game, if you will.

Barak: I appreciate that note. When we were talking, I was thinking about the process a business leader would have to take to consult with a compensation analyst and then start to benchmark new roles against current marketplaces and things like this. But to your point, Marta, you can actually make a relative internal salary band comparison where you're saying, "Here are the highs and lows of my current workforce. Here's some demographic data that overlays on that and helps me see where I'm maybe treating some people unfairly–for the same job or relative to where they are in their career." It sounds like a lot of these laws are the heavy-handed way of enforcing equitable treatment and compensation inside of an organization. But you can accomplish that without the law telling you to do it.

Marta: This is another thing–why the salary ranges in the job postings also help. Before, recruiters would have more leeway to negotiate salaries with new hires. Some new employees would be better negotiators than others. So it's not even a discrimination thing. It ended up being an unfair situation because somebody was a better negotiator than another. Let's say your CFO gave you a little leeway on salaries–you had a range of $40-50,000 and then you ended up paying a new person $55,000 because you're having a hard time filling the role. But your other people are at $40,000 and $45,000. You have created this gap just by doing this. So by having this in place you don't have these disparities as well.

Elena:

Yeah, that's a good point, Marta. It does take away some of the negotiating leverage that candidates have and makes the negotiation process a lot easier on our end because you have these guardrails in there. I imagine that we're going to be breaking that mold every once in a while but that should be the exception more than the rule. And again, it should be justifiable. There are some little silver linings in there on how pay transparency is good for you. You won't be held hostage as much as you were before by employees demanding huge pay increases.

Disclaimer:

The content present in this recording and transcript is for informational purposes only, designed to improve your general understanding and does not constitute legal advice. Before taking any action based or relying on the content provided you should always seek legal advice from a qualified attorney authorized to practice law in your jurisdiction.