The job market has been going through a particularly dynamic phase in the past couple of years, thanks to recent technological advances and trends that have changed the way we live and work. While there is a lot of buzz around AI and how it will affect the job market, another trend is laying firm roots in organizations across the US. That trend is pay transparency, and it is here to stay. Pay transparency refers to a set of practices that allows employers to be transparent about salaries and pay-related information to current and prospective employees.
A 2024 Robert Half Report confirms this – Around 60% of managers feel that being transparent about salaries helps attract the best candidates and gives companies a competitive edge. The same report finds that more than 40% of applicants expect to see a salary range in the job posting, and nearly 60% would not pursue a job if salary details were not provided upon request. In keeping with the realities of the job market, states like California, Connecticut, Colorado, Maryland, Nevada, Rhode Island, and Washington, as well as cities such as New York City, Jersey City, and Cincinnati, have passed pay transparency laws.
Implementing pay transparency practices in your organization has many benefits, including greater employee retention, a more positive work culture, and helping to bridge the pay discrepancy between men and women.
Establishing and putting pay transparency guidelines and processes into practice requires senior management and HR departments to strategize on three important aspects:
- Ensuring compliance with pay transparency laws
- Establishing pay transparency practices
- Creating job postings compliant with pay transparency laws and practices
1. Ensuring Compliance with Pay Transparency Laws
Gaining an understanding of state and local pay transparency laws and specific rules and regulations relevant to your industry is a critical first step to drafting pay transparency guidelines for your organization. This can be done in consultation with the firm’s legal team. This is necessary because laws differ from state to state. For example, Nevada pay transparency laws require companies to provide salary information to job applications and current employees seeking a promotion or internal transfer. Non-compliance could result in fines of $5,000 per violation. In Maryland, employers must provide prospective employees with wage scales upon request, and non-compliance results in a warning for the first violation and $300 for the second violation.
Once your team understands the state laws and industry-specific requirements, the next step is to review the organization’s current recruiting and compensation practices to ensure they meet all applicable state and local pay transparency guidelines. This also includes ensuring job postings comply with all applicable state and local pay transparency laws. The company’s HR department or personnel responsible for managing and executing recruitment and compensation practices must be trained on pay transparency requirements. This is critical so that job descriptions created include relevant details on pay ranges and in keeping with pay transparency laws. Companies must also proactively review set policies and practices periodically and update them as required per applicable state and local laws, ensuring they are always in compliance.
Many firms enlist the services of third parties to recruit talent and even outsource payroll and other HR duties. It’s crucial that the organization’s pay transparency policies and practices are communicated clearly so that all those working on behalf of the company adhere to relevant local and state laws.
2. Establishing pay transparency practices
The second step to creating a sound pay transparency policy is establishing well-researched and proven practices. This includes reviewing existing pay structures based on job titles, experience, and geography and correcting inconsistencies. While deciding pay scales for different positions and roles, it’s important that senior management and the HR department consider industry standards and other benchmarking data. This is not only to ensure compliance with state and local laws but also to attract the right kind of talent, ensuring a fair and equitable pay structure for all.
Organizations must set up practices and processes that ensure pay ranges for every position are well-defined and decided based on objective, measurable data. Doing so ensures that your company is able to offer compensation packages that match industry standards to prospective employees. It also allows for pay scales for current employees to be adjusted so that they are aligned with their roles, experience, performance, and other contributing factors. Offering current employees compensation packages that are on par with other comparable organizations helps in employee retention.
Having a well-defined set of rules and norms also helps companies communicate effectively with all stakeholders, including recruiters, hiring managers, interviewers, and other HR personnel. This encourages those involved in the hiring and recruitment process to familiarize themselves with pay transparency laws, legal frameworks, and practices. Having solid knowledge about the organization’s policies and practices for establishing salary bands helps recruiters and hiring managers communicate clearly and effectively with current and prospective employees.
Familiarizing and educating employees on the organization’s pay transparency messaging and strategies ensures that communication is consistent across stakeholders and mediums. It also gives recruiting and interviewing personnel the know-how and tools to handle difficult compensation conversations with prospective candidates and current employees with ease and sensitivity.
Establishing a formal, step-by-step process for salary negotiations removes ambiguity and makes the process fair and transparent for current and prospective employees. To ensure consistency, training material and resources on topics such as pay ranges, career paths, and interview scripts need to be made available to recruiters, hiring managers, and other related personnel.
3. Creating Job Postings compliant with Pay transparency laws and practices
The third aspect of integrating pay transparency practices into your organization is creating job postings compliant with state and local laws. Every new job posting must follow the organization’s pay transparency guidelines and include information such as pay scale, bonuses, commissions, and minimum and maximum hourly rates, as required. Additionally, benefits-related information should also be communicated for each job posting.
Organizations should also strive to create a process for sharing pay-related information with prospective applicants during the interview or job offer and current employees during their appraisal or promotion. Companies should also maintain employee records with details such as job titles, wage history, appraisals, and promotions. Making data-driven decisions will ensure that employees feel confident that salary, promotion, and other compensation-related discussions will be a fair and objective process.
Implementing well-thought-out pay transparency practices and processes will help attract the right kind of talent and increase employee retention. However, for that to happen, senior management and the HR department must understand the organization’s specific needs and relevant legal requirements. Before rolling out any of these practices, it is best to refer to area-specific and industry-specific requirements or consult with a professional employer organization. With over 30 years of experience, AdvanStaff HR is uniquely positioned to help small and medium-sized businesses implement and maintain a sound pay transparency program. Find out more about Nevada pay transparency laws and the AdvanStaff HR advantage here.
