Introduction
The rules of workplace compensation have been undergoing rapid change. With a growing number of states and cities implementing salary transparency laws, understanding how these regulations impact job seekers and employers is crucial. This guide will explore the evolution of salary transparency, its implications, and provide actionable advice for navigating this new landscape.
What is Pay Transparency?
Pay transparency is about a company's commitment to openly sharing its approach to employee pay and compensation. Sharing pay processes and guidelines instills employee and community trust and is expected to contribute to narrowing the gender pay gap. Pay transparency can apply to: stock options, bonuses, commission structures, internal job postings and compensation increases, and sharing salary ranges for specific roles.
A company that is voluntarily transparent with it's compensation practices is:
More trusted and supported by employees
More likely to support competitive pay structures
Better able to drive employee productivity and engagement
Encouraging of pay equity
Generates applicant interest
The Evolution of Salary Transparency
The Rise of Salary Transparency Laws
The federal Equal Pay Act of 1963 prohibits discrimination an requires that men and women in the same workplace receive equal pay for equal work. This was a US equal pay law that was intended to narrow the gender wage gap. It later was expanded into the FLSA (Fair Labor Standards Act) which included making racial and religious discrimination illegal for comparable work. As time went on, it became apparent that these laws were still not strong enough to combat wage inequities.
Pay Transparency: A Growing Trend
Transparency in hiring practices and wage setting has been steadily increasing with the first state (Colorado) in 2019. As of August 2024, 25 states have salary history bans and 10 have laws requiring the sharing of salary ranges with 10 more states with proposed laws on the books. Local municipalities and cities can also have specific guidelines. Each state can have slightly different guidelines and limitations with regards to minimum company size.
Executive Order 14069 (2022): This executive order issued by the Biden Administration prohibits federal contractors from requesting salary history information from job applicants. While it only impacts federal contractors, it sets a precedent for increased transparency in the federal contracting space.
As the practice of pay transparency has grown, many job seekers will bypass jobs without posted salary ranges and will withdraw from job interviews if companies do not freely share proposed salary ranges.
How Salary Transparency Laws Work
Different Types of Salary Transparency
The laws can vary widely by state, municipality, and company for specific guidelines.Take a look at an updated summary of all US salary history laws and a searchable site by the state for salary range laws. Each state can have slightly different guidelines with regards to minimum company size, reporting requirements, and when communication is required.
Salary Range Disclosure Laws - Mandate employers to disclose salary ranges in job postings.
Salary History Ban Laws - Prohibit employers from asking candidates about their previous salaries.
Pay Secrecy Policy Laws - Prohibit employers from implementing policies that restrict employees from discussing their wages.
Promotion Transparency - Employers must notify all employees of advancement opportunities within the organization.
Voluntary Company Pay Transparency - It's estimated that 20-30% of companies (ie Microsoft and Netflix) are voluntarily adopting transparent compensation guidelines for recruitment. Job seekers should check each company's website and posted jobs to confirm.
What Employees/Candidates Should Know
Pay Transparency Brings Opportunities
If the employer shares salary ranges:
Applicants can ask for competitive starting salaries.
Employees can negotiate for market-based increases when being promoted.
Applicants can decide if they want to apply for the posted job (and save time)
Applicants and employees can have insight into what they could earn with the organization (the maximum of the salary range).
If potential employers cannot ask about most previous salary:
Applicants can improve their negotiated salary based on the job's market value.
Challenges for Employers
Wage Equity/Inequities
Internal Equity Can Be Disrupted - As new laws are enacted, they could exacerbate a company's existing internal pay equity issues. New employees could be hired over more experienced ones with higher salaries generating potential employee relations or resignation issues. This places pressure on companies to make wages more equitable and attractive.
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Potential Impact on Recruitment and Retention
Pressure on Companies - Small companies or those without clear compensation ranges and guidelines or where employees' work responsibilities shift frequently may have a much harder time communicating and justifying the salary information they share. This will pressure them to organize their compensation policies to maintain recruitment competitiveness.
Communicating Salary Ranges Effectively
Job Location - Some companies may change the location of the posted job to avoid needing to meet posting guidelines.
Salary Range Reporting - Most companies identify a minimum, midpoint, and maximum salary that will be paid for a job. Minimum represents the salary for the lowest experienced workers and the maximum the highest. Companies usually define a budget and hiring range for the posted job. That range does not usually go past the midpoint of the range. This can confuse job seekers!
***Some companies post the full range, and some only post the hiring range***
How Job Seekers can Leverage Salary Transparency
Best Tips and Practices
Know your salary history, salary range disclosure laws, and legal protections in your state, city local municipality, prospective employer, or government agencies.
Know if your state bans salary transparency or knowing a candidate's salary history.
If you are a remote worker, know your 'home base' or work location that claims you for tax reasons. Know this location and that state or city or municipality laws.
While sharing salary information is becoming more common, consider discussing salaries with co-workers cautiously as you may expose your company's existing pay inequities.
If you are a candidate with a job offer on the table, look at other sources of information to help you analyze the offer.
When job searching, consider whether you want to work for a company that is not fully transparent regarding internal promotions, hiring, and job posting.
If you discover a personal pay inequity, consider your strategy carefully on how to approach your manager and/or HR with any requests or complaints.
Should You Have a Range for a Desired Salary?
Sites that share salary range information vary widely in quality. Start by choosing a job title that best matches the job you are interested in. A few notes on surveys:
The Bureau of Labor Statistics is the best source for salary ranges, average salary, job growth statistics, and more. The salary data is provided by employers annually and is available down to the state and metropolitan level.
Glassdoor relies on crowd-sourcing and self-reported salaries by employees. The resulting salary ranges can vary widely and can be unreliable.
***Check out my blog, '7 Great Salary Surveys' to help you analyze your offer***
How to Negotiate Salary in a Non-Transparent Environment
As of August 2024, it is taking up to an average of six months. While job seekers are looking for transparent companies, it may be necessary to apply for positions where the salary range is unknown. A few tips:
Be prepared for all interviews with an expected salary range
Know the absolute minimum salary you will accept.
If you are asked for an expected salary with no provided range, try and ask the recruiter first. If they don't provide the information, give your range and state that it is backed up with salary survey information.
If you have been advised that there will be a second interview, ask for a salary range.
If you are uncomfortable continuing to interview without knowing the position's salary range, consider withdrawing from consideration. Your time is valuable!
Protection from Pay Discrimination
What's next for Salary Disclosure Laws?
Future Trends in Salary Transparency
As salary transparency laws expand, candidates are pressuring companies in states with no legal requirements or internal practices to become more transparent with their compensation policies.
Sharing salaries has become normalized.
Many job seekers will not apply to jobs without posted salary ranges.
Candidates remove themselves from consideration when they don't receive salary range information early in the recruitment process.
The Proposed Salary Transparency Act
The House of Representatives introduced the Salary Transparency Act bill in March 2023. This national bill aims to mandate salary range disclosure in job postings and indicates interest at the federal level to encourage transparency in companies.
H.R.1599 - 118th Congress (2023-2024): Salary Transparency Act
Conclusion
Salary transparency is changing the employment landscape. By understanding the evolving laws, and company practices, and implementing informed strategies, job seekers can gain control in their job search and compensation negotiations.
Resources:
U.S. Department of Labor with links to state laws.
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