The wage gap—the difference between what a woman (particularly a woman of color) makes compared with that of a white man—is one of the most tenacious problems facing employers. Even with Title VII, the Equal Pay Act, and the Lilly Ledbetter Fair Pay Act being in effect for more than a decade, we have only made incremental steps in reducing the wage gap.
One trend that shows promise is pay transparency, which requires employers to disclose what an employee earns instead of keeping it a secret. This trend has been shown to reduce the wage gap in study after study after study. States are paying attention, enacting laws designed to build more transparency into regular human resources operations.
Now, pay transparency is not new. Under the National Labor Relations Act (NLRA), individual contributor employees have been able to talk about their wages without fear of retaliation for decades. Although the answer to whether or not the NLRA has affected pay transparency to bring down the wage gap is a resounding no, the discussions about pay are foundational to reducing the wage gap.
There are three major laws being enacted across the country designed to create more transparency.
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Three pay transparency laws you must know for 2024
1. Including salary ranges in job postings.
The first of these laws requires employers to include a reasonable salary range in job postings for the world to see. The key is the reasonableness of the range. Employers with ranges that span more than $100,000 have been mocked and may bring the spotlight of regulators to their door.
Employers with ranges that span more than $100,000 have been mocked and may bring the spotlight of regulators to their door.
Colorado was first to enact the law with Hawaii, New York, and Washington following suit. New York is the latest state, with this requirement just starting in September 2023. A few employers have tried to work around these requirements by specifically stating they did not want applicants from these states. Yet, many employers, especially those open to remote workers, have started including salary ranges in job postings even though they do not operate in a state that requires it.
2. Providing salary ranges upon request.
While not as dramatic as requiring the ranges in postings, several states have required employers to give salary information to applicants upon their request. Connecticut, Maryland, Nevada, and Rhode Island are included in this group. Practically, this law does not have the same effect as the posting requirement—very few applicants go through the entire recruitment process without knowing anything about the possible salary.
Importantly, telling an applicant a salary range is very different from publicly posting the range for all—including current employees—to see. When the range is posted, employees get to compare what they’re earning to what a new candidate will earn, driving sometimes difficult conversations in an effort to be paid fairly. These difficult conversations are the key to narrowing the wage gap.
3. Banning questions around salary history.
The last major legal trend prohibits employers from asking candidates what they are currently making to assist in determining what they should pay. Using an applicant’s current salary to determine their future pay may perpetuate the wage gap. For instance, if a Native American woman is earning 55 cents on the dollar compared with a white man in the same job, her employer may raise her pay to 59 cents on the dollar. It could still be considered a raise for her, but it still falls short of achieving pay equity and fairness. Twenty-two states have enacted this prohibition.
For employers, the key to complying with these laws is to do research. In these states (and potentially more—looking at you Michigan and Minnesota), employers cannot use the recruitment process to determine what talent is out in the market and then determine the salary they will need to pay. Employers have to know in advance what the salary could be and not wait until they have candidates before making financial budgeting and salary decisions. Knowing who is out there for their positions, what the market is paying, and whether the pay will upset the apple cart among current employees increases the work before the first posting.
But the work is worth it. If transparency reduces the wage gap, then let’s be as transparent as possible.
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