Regulatory compliance is one of your key roles as HR manager. It is your job to ensure your organization adheres to US labor laws and meets the regulatory compliance requirements in your state.
One regulation that has gained momentum in recent years is pay transparency. New legislation on salary disclosure requires employers to disclose salary ranges to job applicants and current employees.
Currently, pay transparency laws are in effect in 10 states, including Colorado and California. A newly proposed bill may see this rule enacted federally.
This guide explores pay transparency laws, why they exist, how they impact the business landscape, and how your organization can adopt them to remain compliant.
What are pay transparency laws?
Pay transparency laws require employers to disclose compensation information to current employees and job applicants. Also known as wage transparency or salary transparency laws, these legislations may mandate that certain employers provide information on the following:
- Salary ranges – Some states require that employers disclose salary ranges. How and when this information is disclosed varies from state to state. Some states mandate that wage ranges be provided on job listings, and others mandate that wage ranges be provided during the first interview
- Total compensation – Some states require transparency on other compensation elements, including benefits, commissions, and bonuses
- Compensation for remote employees – In states like Colorado, pay transparency laws require that employers disclose salary information for remote as well as office and hybrid employees
Pay transparency laws differ across jurisdictions. Overall, however, many grant employees the right to discuss their salaries, bar employers from asking about employee salary histories, and mandate employers to disclose pay ranges on job listings or upon demand.
💡 See also: 10 Fair Employee Compensation Strategies For Global Teams
Why do pay transparency laws exist?
Pay disclosure laws exist to eliminate pay discrimination. When salary ranges are disclosed, employers can detect and avoid pay inequalities, which tend to happen due to systematic discrimination or unconscious bias. Essentially, wage transparency evens the playing field.
More precisely, however, pay transparency laws were enacted to address the gender pay gap. Statistics show that women in 2021 earned 77 cents to every $1 men earned. This disparity is greater for women of color and persists despite years of lobbying and lawmaking efforts.
Wage transparency laws can help narrow this gap by eliminating pay secrecy. This could deliver more information on the wage status of a position and empower women to negotiate for better salaries.
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A brief history of pay transparency in the US
While pay transparency legislation has enjoyed renewed interest since 2018, it is not a new concept.
The United States passed the National Labor Relations Act in 1935 to defend the rights of private-sector employees to discuss their salaries. Ten years later, the Women’s Equal Pay Act was introduced to Congress, although it failed to pass. The Equal Pay Act was signed into law in 1963.
Since then, many bills have been introduced and passed to protect the compensation rights of employees. California adopted pay transparency legislation in 2018, becoming the first state to do so and setting the stage for other jurisdictions.
Pay transparency laws by state
There are currently ten states with salary transparency laws or that are in the process of enacting pay transparency legislation. Let’s review each one:
- Washington: Washington passed the Revised Code of Washington 49.58.110 in January 2023. The law applies to employers with 15 or more employees, who must list salary ranges on all job listings and pay for internal promotions and transfers when an employee requests it
- Rhode Island: The Pay Equity Act in Rhode Island applies to employers with at least one employee. Passed in 2023, it requires the employer to reveal salary ranges for job applications before making an offer, to employees during hiring and before a transfer or promotion, and on current positions upon request
- New York: Employers with four or more employees in New York must reveal salary ranges for all job positions. The state law also applies to jobs performed outside the state that report to a worksite, office, or supervisor based in New York
- Nevada: The Nevada Senate passed Bill 293 in October 2021. This pay transparency act requires all employees to disclose salary information on all jobs for which an applicant is interviewed
- Maryland: The Maryland Equal Pay for Equal Work initiative was passed in 2020. It requires all employees to provide a wage scale to job applicants upon request
- Illinois: Illinois is set to amend its Equal Pay Act of 2003 in January 2025 with Illinois House Bill 3129. This amendment mandates employees with at least 15 employees to provide a pay scale for all job postings
- Hawaii: In Hawaii, employers with 50 or more employees must provide hourly wage rates or salary ranges for all job postings. The Hawaii pay transparency law does not cover internal transfers, promotions, or public employees whose pay is determined by a collective bargaining agreement
- Connecticut: Connecticut enacted Public Act 21-30 in October 2021. The pay transparency law requires employers to disclose pay data during recruitment before making a job offer or upon request. They must also disclose salary information to current employees before a transfer, promotion, or upon request
- Colorado: Colorado’s salary disclosure law was passed in January 2021. It requires employers with at least one employee to announce promotion opportunities to all employees on the day the position becomes open. Each job listing should include information on benefits, salaries or hourly wages, and all other applicable forms of compensation
- California: Under the 2023 California Equal Pay Act, employers with one employee must disclose salary ranges only upon request from an employee. For those with at least 15 employees, the employer must provide:
- salary ranges for all job postings
- salary ranges to a current employee for a specific role upon request
This applies even when only one of the 15 employees works in the state. Employers must also not ask job applicants about their pay history.
Several other jurisdictions have proposed pay transparency laws similar to these. They include West Virginia, Washington, D.C., Virginia, Vermont, South Dakota, Oregon, New Jersey, Montana, Missouri, Michigan, Massachusetts, Maine, Kentucky, and Alaska.
💡 See also: The Remote Team’s Guide to Employee Compensation Strategies
Pay transparency laws benefit employees and employers
Beyond eliminating pay discrimination and narrowing the gender pay gap, transparency laws benefit employers and employees in several ways.
Wage transparency boosts morale, improves job performance, and increases employee retention. This is because it provides a clear picture of how compensation works within a company, reaffirming employees that they will be fairly compensated for their efforts. This, in turn, raises the quality of work in a company and creates a positive company culture.
Transparent pay policies also provide employers a defense against discrimination claims and non-compliance suits. With compensation information available for scrutiny, HR teams can catch oversights that could cause unequal pay and resolve them promptly.
In the job market, transparency laws can optimize recruitment by eliminating awkward salary conversations, subverted expectations, and pay disagreements.
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How are employers responding to pay transparency laws?
Failing to comply with regulations may expose a business to litigation, fines, license revocation, and a ruined reputation. This is why companies are advised to stay updated on changing regulations and continually update their policies.
With wage transparency, failing to comply with local laws carries penalties ranging from small and large fines to civil litigation. The California salary range disclosure law prescribed a fine of between $100 and $10,000 for each violation. Meanwhile, an employer that fails to comply with NYC salary transparency laws can be fined up to $250,000 for a subsequent offense.
Employers have responded to these laws in two ways. Some have stopped hiring workers from states with pay transparency laws. But, as more states adopt these laws, this strategy becomes unattainable.
The best response is by far the second one – overhauling and reworking your payment policies and payroll practices to account for transparency laws in your jurisdiction.
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Achieve pay transparency compliance with Deel
Pay transparency laws currently only exist in a few states. However, they are not going anywhere. More cities, states, and countries will enact similar laws in the coming years.
Understanding the wage transparency laws in your state is critical to maintaining regulatory compliance. It can help you create a pay policy that promotes salary transparency for your organization’s workforce.
But how do you keep track of ever-changing salary ranges? How do you adjust your company salaries for fairness and competitiveness? How do you protect your organization from non-compliance?
Deel is the answer.
Deel’s all-in-one platform helps you manage several HR, payroll, and compliance activities from a single dashboard. You can onboard new hires, hire international employees, manage salaries, PTO, and sick leave, track regulatory changes, and more.
Learn more about how Deel can help you integrate pay transparency into your pay policy today.
