Author: Tom Wardrip
January 2023 brought more states to the forefront of the move toward better pay equity through pay transparency. California, Rhode Island and Washington have joined other states, cities and counties to enact salary transparency laws.1 The new rules are designed to help employees understand more about how their pay is determined and how their employers are looking out for them.
Compelling reasons to proactively and strategically address pay equity and transparency include:
- Improve an organization's ability to attract and retain key and diverse talent in a competitive labor market.
- Support individual employee career wellbeing as well as organizational performance.
- Help to create and promote a destination workplace.
- Achieve maximum effectiveness from rewards programs.
Now is the time for employers to determine their level of pay transparency and understand what they can do to better attract and retain talent in this evolving environment.
Background on pay equity and pay transparency legislation
Pay equity and pay transparency legislation aims to close the pay gap between genders and races. While there are similarities in the laws across state statutes, differences also exist. Multi-state employers are transitioning towards adherence to the most far-reaching laws to cover themselves in this dynamic environment.
Further, remote work has strained employers' ability to comply with local laws. For example, Colorado's pay transparency law requires all job postings to provide expected reasonable salary ranges. Some out-of-state employers not wishing to comply chose to exclude remote workers located in Colorado. After this short-term tactic came to light, employers adjusted to the law by providing reasonable salary ranges for the listed job in Colorado as well as ranges for all new remote jobs that might be filled in Colorado.2
Drawing back the pay transparency curtain can be a challenge
While a difficult realization for some, employers are acknowledging that providing current and future employees with pay transparency is a prudent practice. The transparency process has caused many employers to recognize that their compensation administration policies and procedures lack thoughtful design. As a result, pulling the curtain back on the process can expose deficiencies.
Many employers still rely on asking job candidates for their current pay or salary history. A number of states have banned employers from making inquiries into salary history during the hiring process. States vary regarding compliance restrictions, such as whether to allow employers to ask for previous salary information after pay negotiations or specifying at what point to consider previous salary information when a candidate voluntarily offers pay details.
New pay transparency requirements may catch employers off-guard
Each state has enacted various aspects into their pay equity and pay transparency legislation. The core of the legislation is clear to HR professionals: thoughtfully consider compensation in your organization and use a fair, legal approach that treats everyone the same based on their experience and performance.
Employers should be able to explain to employees how the organization identifies and corrects wage and benefit disparities, how it evaluates compliance with wage laws, and how often if makes those evaluations. In addition, employers should disclose the methods they use to determine employee compensation and benefits. Illinois, for example, has set the stage for pay transparency by allowing existing employees to request data for the pay rates of others in their job classifications employed by their organizations.3
Partner with Gallagher to design a total rewards philosophy to guide your action
If your business hasn't strategically addressed pay equity and pay transparency, or if you're wondering whether your pay transparency methods are sufficient in today's tight labor market, Gallagher can help. Our team can define a compensation and total rewards philosophy tailored to your organization to guide your actions.
This philosophy defines program goals while adhering to applicable laws and regulations. A well-defined philosophy and set of total rewards guidelines allow leaders to understand how to prevent wage disparities based on race, gender and other protected classes. Further, the philosophy and guidelines help leaders determine how to set a standard practice to measure and correct potential disparities when they arise. This guidance defines the approach to review the compensation and benefits offered to employees, whether through market pricing, a performance pay system, collective bargaining agreement or an alternative approach.
Contact Gallagher to perform a compensation assessment for your organization. This detailed, actionable assessment guides your business through the implications of your current program, ascertains your market position and defines a compensation and total rewards philosophy. Using this foundation, Gallagher works with you to build a compensation program that allows you to see the design of the compensation philosophy in action as you strive to meet strategic human resource goals.
Let Gallagher demonstrate how data drives decisions to help your organization to face the future with confidence.
