Pay transparency has been getting a lot of attention. Still, many are unclear about what pay transparency actually means, how far it goes or what the results of pay transparency legislation will be.
There are good reasons for this.
For starters, the laws on pay transparency are generally intended to address gender and other forms of bias in the workplace. However, they may cause unintended results instead, such as lower
rates of morale and decreased engagement levels at work.
For example, within one week after New York City's pay transparency law was enacted, Bloomberg News reported that approximately 400 large national employers posted salary ranges, including minimum salary rates.
Surprisingly enough, these minimum salary rates for certain jobs were not even equivalent to 50% of the maximum salaries that were listed. This not only shows that pay rates are objective, but it can make potential employees who are job searching feel disrespected by employers' willingness to pay so little for the work at hand.
As it currently stands, more than 20 states and local jurisdictions have already passed pay transparency laws or disclosure-related rulings. Unfortunately, not all pay transparency laws are consistent across the board.
Some pay transparency laws only require employers to list pay ranges as part of their active job postings, while other laws are only required to disclose pay ranges if applicants or potential hires explicitly ask for this information. Other disparities may impact these laws and what they enforce.
For example, certain pay transparency laws do not require employers to include bonuses, tips, stock options or benefits when disclosing pay opportunities. There are many yet-to-be-answered questions regarding pay transparency laws as well.
For example, under New York state law, the only companies that must comply with the state's pay transparency law are those that employ four workers or more. However, certain questions often arise regarding whether remote employees are included in the calculation of employees under New York state law or if the law only applies to employees who are physically located in the state.
Regulations will typically clarify many of these issues, but that is not helpful for employers who are trying to be compliant in the meantime. While it can be confusing, one thing is clear: Employees and job seekers alike should be able to search the internet to see how much money people in similar positions earn. This is a fact that all employers should keep in mind, whether or not they are located in a state that currently has pay transparency laws in place.
Employers should also understand that they might be exempt from state-related pay transparency rules for now, but their current status does not promise their exemption forever. Employers should think about how they would handle compliance with pay transparency laws, despite how they may affect their business.
This is because employees, as a whole, are more likely to understand what their pay should be, thanks to pay transparency measures being taken across the board. Ultimately, pay transparency is equipping employees with power they did not have before, and it is making it harder to attract talent when the pay is subpar.
Pay transparency as a differentiator
A good way for employers to differentiate themselves from their competition is by recognizing the dollar value of their benefits package. Benefits can make up a significant percentage of an employee's salary.
For example, if an employer offers to pay 100% of their employees' health care costs or 80% of their health care costs in addition to dental or vision coverage, these benefits can total between 10% and 25% of the employees' annual salaries. Ultimately, employers should be very specific about the benefits that they offer.
Benefits like tuition reimbursement, for example, can translate to a dollar amount in the same way health care coverage can. It might also be a benefit that employers in the same field are not offering, which can give you a leg up as an employer and a reason for potential hires to accept your job offer over offers for the same position with other employers.
When speaking to applicants about the benefits you offer as an employer, present the dollar amount of the benefits as well as what that value amounts to as a percentage of the salary being offered.
For instance, someone who has a job offer for a salary of $50,000 and a benefits package worth 25% of that would have a package that amounts to $12,500. This means that the employee would effectively earn $62,500 in total.
Legal concerns about pay transparency
Many state and local pay transparency laws are relatively ambiguous in terms of what they require of employers. For example, employers should consider the following information:
- What do pay transparency laws say about jobs performed remotely?
- What happens if a remote worker needs to work in the jurisdiction a few times each year?
- Do pay transparency laws apply to jobs performed by seasonal workers?
- What about part-time employees, interns and independent contractors?
- How do pay transparency laws affect bonuses, tips and stock options?
- Can an employer ask an applicant about their pay history?
Statistics highlighting the importance of pay transparency
A recent Glassdoor survey revealed that:
- Most employed adults (70%) believe salary transparency is good for employee satisfaction.
- An even larger group (72%) of employed adults believes salary transparency is good for business.
- Most employed adults (69%) want a better understanding of what fair pay is for their position and skill set at their company and in their local market.
Let us know if you have questions about pay transparency.