What Are the Most Common Requirements of Pay Transparency?

National conversations around DE&I continue to increase, which has led to growing importance around the practice of pay transparency. There are a variety of pay transparency laws that differ from state to state, as well as federal laws that apply to organizations across the entire US. It is vital to understand these pay transparency laws and keep track of the legal responsibilities that surround pay transparency.

You’ve likely heard of pay transparency, but do you know what it really means for your organization? In this article, we will look at what pay transparency is, and how different pay transparency laws can affect organizations both regionally and nationally in the US. As well as this, we will introduce you to some of the new laws that have been introduced in 2022 and 2023.

Understanding Pay Transparency

When understanding pay transparency, a great point to start with is the definition. At Salary.com, our definition of pay transparency is as follows: pay transparency is when an employer is open and clear about pay for jobs at the organization and why people are paid what they’re paid. What this definition doesn’t mention, however, is the plethora of pay transparency laws that organizations must comply with.

Historically, many laws have been introduced in the US regarding pay equity, such as the Equal Pay Act of 1963, which prohibits wage discrimination based on sex. As pay transparency can be used to identify pay gaps, the two concepts of pay equity and pay transparency are closely linked. There has been a lot of focus on pay equity laws in the past and although there is still focus on them now, the attention for pay transparency has noticeably risen in recent years.

There are many ways organizations can approach pay transparency, as they can choose to fully disclose the pay, salary range, bonuses, criteria for pay, and more either fully, partially, on request, or not at all. As this is the case, it can be difficult to decide how your organization will implement pay transparency. No matter the route you choose, it is important to consult employment lawyers to help you if you have any doubts – more on this later.

Despite laws existing, a recent Salary.com survey found that an obstacle to achieving pay equity has been a lack of pay transparency for organizations. Out of the companies surveyed, only 35% of them said that they have a pay philosophy established that supports pay transparency. As well as this, 43% of employees surveyed don’t believe that pay practices are consistent with the stated values of the organization. From these results, it can be interpreted that there is still some taboo surrounding pay transparency today.

Pay Transparency Laws in the US

Pay transparency laws dictate how employers handle salary disclosure and compensation. There are different laws and regulations that organizations need to follow depending on different states. It is not unusual nowadays, however, for organizations to conduct business across state lines, especially with the era of remote work taking hold.

One of the most commonly cited pay transparency laws is that of an amendment of Executive Order 11246 which came into effect at the beginning of 2016. This amendment protects employees who enquire about compensation from discrimination. As well as this, it also prohibits federal contractors and subcontractors from firing or discriminating against employees or job applicants for discussing, disclosing, or inquiring about compensation.

Let’s take a look at some examples of states who have pay transparency laws in place:

• California

The California Equal Pay Act is a long-standing law that prohibits gender discrimination in the workplace. Over the years it has been amended to include other factors that organizations may discriminate against, such as race and ethnicity. In 2018, the law was amended further to mandate pay transparency upon request while also banning employers from requesting the salary history of job candidates’ previous work. As well as this, starting this year in 2023, employers must include the pay range for the role in all job postings, while larger companies need to submit demographic and pay data to the state.

• Maryland

Maryland’s Equal Pay For Equal Work requires employers to disclose the salary range to applicants and employees upon request, which includes other jobs within the organization. This law also requires organizations to disclose the pay range for jobs upon request and when offers are made. As well as this, Maryland prohibits organizations from asking about an applicant’s salary history.

• Nevada

Nevada passed legislation in 2021, titled SB 293, which requires employers to disclose the salary ranges for roles with job applicants, as well as current employees, upon request. Once an applicant completes an interview, they are also entitled to know the salary range for the position without request. This extends to current employees too, as they are also entitled to know the salary range when applying for promotions or different positions. As well as this, Nevada also has a ban on asking about applicants’ salary history.

If you wish to find out which other states have introduced pay transparency laws, consider reading our article dedicated to the topic. Other states include Colorado, Connecticut, Massachusetts, New York, Washington, and more. If trends continue, it is likely to see an increase in both the number of pay transparency laws and the number of states taking the topic seriously.

Consult an Employment Lawyer if You Are Uncertain

Understanding all of the ins and outs of pay transparency laws that apply to your organization can make your head hurt. Don’t be afraid to consult an employment lawyer to help you figure out all the details and point your organization in the right direction. Failing to comply can obviously have legal implications, so it is better to be safe than sorry.