Beginning in 2020, many states and cities begin to enact laws requiring more pay transparency for companies when recruiting and hiring for open positions. While these laws are relatively new, they are definitely a trend and worth keeping an eye on how they may affect your organization for your current or future hiring needs.

What is Pay Transparency?

Pay transparency is the act of disclosing annual or hourly pay ranges to potential candidates for a job opening. Laws vary in states, cities, and counties, but those with regulations enacted either require the pay to be disclosed at the time of the job posting, when requested by an applicant, or after an interview.

Benefits

There are many benefits to pay transparency, but the largest by far is that these laws will help to reduce pay inequities and wage discrimination based on gender, sexual orientation, age, religion, etc.

Trust is another large benefit to being up front with salary ranges. SHRM did a study about pay transparency and found that 73% of U.S. workers are more likely to trust an organization that provides pay ranges in the job posting over companies that do not.

Two studies have now demonstrated that pay transparency has led to an increase in productivity by employees. This study analyzed academics and found that those who were overcompensated increase their efforts and on average published 7% more articles. On the other hand, those that were undercompensated either decreased efforts or maintained the status quo.

Another study looked at over 2,000 bank employees after they learned of their manager’s higher than expected salaries. These employees actually worked harder as they saw a path for career advancement.

Disadvantages

Like any controversial issue, there are some downsides to the new transparency laws as well. First and foremost, they may inflate candidate expectations. An employee’s prior experience, education, skills, etc. will factor into where they land within that wage range. However, individual employees tend to not think about those factors, and may set their expectations on the high end of the scale, thus setting themselves up for disappointment if an offer comes in at the low or midpoint of the range.

Additionally, candidates may overlook opportunities that don’t fit into their desired range, but they may not be aware of some additional benefits that may make up for a lower salary. Recruiters can post benefits along with the salary to help minimize this risk.

Why Pay Transparency Matters?

Even if you are not located in an area with pay transparency laws on the books, it is still important to know about them and how they may affect your organization. Even some employers in areas without any regulations are posting salaries to stay ahead of the curve.

This study by SHRM also found these benefits in favor of posting salary ranges:

• 82% of U.S. workers were more likely to apply to a job opening if the salary range was listed versus those that were not.
• 66% of organizations that posted salary ranges noticed an increase in the quality of applicants.

Current Pay Transparency Laws

Here is a general breakdown of the current laws for pay transparency on the books as of July 2023. Please note that new laws are being passed all of the time, so consult your lawyer for any specifics on your state, county, or city regulations. This is purely meant for informative purposes and is not legal advice.

We hope that whether or not you are in a state, city, or county with pay transparency laws, that you can use them to attract the top talent, gain trust with current and potential employees, and overall increase productivity throughout your organization.

If you are struggling to find top talent in your industry, contact us and we can set up time to connect and see if we can help you.

 

Additional Sources:

California | Colorado | Connecticut | Maryland | Nevada | New York | Rhode Island | Washington | Hawaii

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