The History & Business Case For Wage Transparency & Disclosure – A Brave, Necessary New World

Jul 20th, 2022

The History & Business Case For Wage Transparency & Disclosure – A Brave, Necessary New World

More than just a legal requirement in an increasing number of states, pay transparency is sweeping companies across the globe as they look to not only remain compliant, but further diversity, equity, and inclusion in the workplace and retain valuable human capital. According to a recent SHRM article from earlier this year, “companies that embrace pay transparency will likely have an easier time finding and retaining workers amid the Great Resignation and through the rest of the year (Why 2022 Is the Year of Pay Transparency).”

So where did this movement start? Most states in the US have existing legislation on the books that forbid a company from offerring someone lower pay due to race, gender, religion, sexuality, or other discriminatory factors. Even hold out states like Mississippi have adopted such equality-based laws effective in July of this year. We can also thank the Equal Employment Opportunity Commission for their support in upholding such gender-focused legislation at the federal level when they updated the Equal Pay & Opportunities Act (EPOA) in March of 2018.

In typical trend-setting fashion post-EPOA, California led the way in the movement toward added transparency in wages when they passed their landmark 2018 legislation required companies to furnish ranges to external job applicants upon request and/or after their first interview with the company. Since then, a grand total of 14 states have some sort of wage disclosure and/or salary inquiry laws in place or about to go into effect as seen by the below overview chart with information pulled from our compliance partner, XpertHR.

Not all disclosure laws are created equal, however. For example, most of the above states ban employers from asking about an applicant’s pay history or requiring disclosure of said wages on an application, while more progressive states require minimum to maximum salary ranges are added to all job postings up front (e.g., New York City’s law taking effect in November of 2022). As a middle ground, most states require ranges to be furnished upon request early in the interview process.

Of particular interest to employers when it comes to pay transparency requirements is how to proceed with remote positions when an employer is based in one state that doesn’t require a wage range inclusion, but the employee could perform the work anywhere in the US. To ensure compliance with states that require ranges, employment law best practices dictate you provide the minimum to maximum range that covers the US. Alternatively, employers may also put in their posting that positions “cannot or will not be performed, at least in part” in the states that require wage ranges are posted like Connecticut or (soon-to-be) New York City if you would not like to list a range.

As Human Resources professionals wage disclosure and transparency can seem a daunting prospect for potential employee relations issues that may arise, but we must overcome that temporary hurdle to ensure equity for all. As quoted in LinkedIn’s ‘29 Big Ideas That Will Change Our World in 2022,’ published in December 2021, Robert Half’s Diana Domeyer said, “Pay rates were once an opaque internal mystery at offices and the subject of most speculation, gossip, and resentment. But as the push for equity at work gains momentum, pay transparency will begin to go mainstream.” It’s not if we must add transparency to compensation practices and conversations, but when as legislation sweeps the county backing up Ms. Domeyer’s prediction.

So how can we carefully navigate pay questions to ensure a candidate is within range? As HR professionals, we must shift the narrative from, “what do you make at your current position?” to “what salary range are you targeting for your job search?” Here we shift the focus from where a job candidate has been financially and instead focus on what they require for their future employment, thus stopping the propagation of unfair wages where women have earned 84% of what men did for the past 15 years or more according to a recent Pew Research Center article by Amanda Barroso and Anna Brown.

In summary, the movement towards pay transparency is coming whether companies like it or not. In the profession of Human Resources, it’s up to us as practitioners to learn the history of pay equity and wage disclosure in order to best embrace the changing tide towards transparency. Not only is it increasingly important as more states pass such sweeping legislation, but a larger number of employees are also demanding crystal-clear expectations up front to stay engaged and retained in their work. Simply stated, companies can’t afford the misty pay practices of old to remain relevant and competitive in a dynamic and tight labor market.