New pay transparency laws across the country, including new legislation in California, are requiring companies to share salary ranges on all new job postings, and in some cases, share salary ranges with current employees for positions they hold.
Although California isn’t the first jurisdiction to enact pay transparency, when Governor Gavin Newsom signed it into law on September 27, the business world took notice. The law, which goes into effect on January 1, 2023, will require all California companies with 15 or more employees — which includes some giants like Wells Fargo and Apple — to include a salary range on all job postings.
It is, though, not the only state or major municipality to have adopted such laws.
What is Pay Transparency?
Pay transparency is the practice of being open about pay, both with candidates and employees, in an effort to reduce pay gaps by gender and race. While the idea of being transparent about pay makes some business leaders squeamish, many companies see it as an opportunity to ensure fair and equitable pay.
Referred to as “the year of pay transparency” by Inc., 2022 is shaping up to be just that with new laws in New York City and California taking effect soon. These laws are being used by other states and regional governments as models, and most human resource leaders believe it will be a matter of time before they are widespread across the country.
Forward-thinking HR professionals are encouraging their leadership teams to fully embrace the intention of pay transparency laws and not just meet the minimum of what’s required by law.
How Pay Transparency Helps with Hiring
Including a salary range on job postings and job descriptions has become an increasingly common practice for some companies, even without pay transparency laws. They say the benefits of doing so far outweigh the initial discomfort many business leaders have.
In addition to authentically demonstrating that a company is committed to fair and equitable pay, being transparent about salary with candidates can dramatically streamline the hiring process. Although the merits of any job can be measured in different ways by candidates — for example, the opportunity to learn new skills — pay is usually a top consideration, and putting off the conversation can not only draw out the process, but create a negative experience for all involved.
There are many benefits to being transparent about pay during the hiring process, including:
- Establishes trust with candidates early in the interview process.
- Saves time for the candidate, the hiring manager, and any other employees involved in the hiring process.
- Shows respect for the candidate.
- Sets realistic expectations for compensation.
- Demonstrates alignment with company values, Diversity Equity and Inclusion (DEI) initiatives, and HR best practices.
- Helps candidates consider total rewards.
- Meets the expectation of younger candidates, who are more open to conversation about pay.
How Pay Transparency Helps with Retention
In addition to requiring salary ranges on job postings, some pay transparency laws also require companies to share a range of pay with any employee who asks for it. For HR leaders of large companies, the idea of ad hoc conversations about pay, employee-by-employee, can be daunting.
Instead, many companies are taking the opportunity to openly share the pay range of an employee’s job with that employee as part of their pay transparency practices, usually through an established procedure, like performance reviews.
Not only does this help a company show its commitment to equity, but it also includes employees in the conversation about compensation, especially if they will see a pay range for a job similar to theirs in a job posting.
As with the hiring process, being open about pay internally has many positive outcomes:
- Shows respect for the employee.
- Helps managers level up employees who may deserve more pay.
- Opens conversations about pay that can help motivate employees.
- Reinforces DEI initiatives.
- Acknowledges that younger generations of employees talk about pay openly.
- Helps employees consider total rewards.
How to Prepare
Meeting pay transparency requirements — and maybe taking the opportunity to be proactive before laws affect your hiring practices — involves updating processes and mindsets. Here are a few things to consider as you prepare for pay transparency:
- Involve leadership.
- Share best practices for successful pay transparency initiatives.
- Stay current with pay transparency legislation.
- Partner with key allies, like DEI leaders, who understand the importance of pay transparency.
- Communicate openly about your pay transparency plan.
- Focus on the positive outcomes, not the short-term discomfort.
“Showing candidates what the pay range is up front will make the interaction between hiring companies and job seekers more efficient.”
John Valentinetti, Senior Recruiter, North Bridge
