Pay Transparency Laws by State: An In-Depth Guide

“How much does this job pay?”

This question is a crucial one for job candidates. Increasingly, candidates are obtaining this information earlier in the hiring process due to pay transparency laws being enacted in various states and cities.

Depending on the jurisdiction, employers might be restricted from asking candidates about their salary history, or they may be required to disclose a wage range for both current roles and new openings.

However, following these laws is just one aspect of pay transparency. Being open about compensation also fosters better pay equity, a crucial issue for many employees these days. As a result, pay transparency can significantly influence an employer’s reputation and their ability to attract and retain talent.

The Evolution of Pay Transparency

The notion of pay transparency—and its impact on both employers and employees—has evolved markedly over the years.

Pay Secrecy Policies

For many years, federal and state laws have generally prohibited employers from imposing policies that prevent employees from discussing wages among themselves.

Salary History Bans

Many state and local governments have enacted laws prohibiting employers from taking a candidate’s salary history into account during the hiring or compensation decision-making processes.

Pay Range Disclosure Laws

To combat pay inequalities, several states and localities have introduced pay transparency laws. These regulations require employers to share a wage or wage range with prospective candidates and/or current employees. Disclosure may happen upon request, at a certain stage in the hiring process, or even publicly in job postings, depending on the specific legislation.

Pay Data Reporting

The Equal Employment Opportunity Commission (EEOC) once required employers to report pay data within their EEO-1 filings, known as Component 2. Although this requirement has been removed, the federal government is considering improving its pay data collection, and future mandates are possible. Meanwhile, states like California and Illinois have initiated their own pay data reporting requirements.

Five Benefits of Implementing Pay Transparency

Beyond compliance in states that require pay transparency, companies may experience several benefits from introducing the practice. Here are just five ways it can help:

1. Promote Trust
   Employees tend to trust organizations that value equity and fairness. Explaining how compensation is determined and distributed can help your people feel more secure and comfortable in their current role if they have evidence of their competitive salary.
2. Support Competitive Pay Structures
   Transparent compensation can prove to employees that they earn—or even exceed—the industry standard. This candor not only helps retention but also expands your team with top talent.
3. Drive Employee Productivity and Engagement
   When employees know their pay sincerely reflects their roles and contributions, it’s easier to cultivate their commitment. If an employee knows that their pay is competitive, they are less likely to feel compelled to look for opportunities elsewhere.
4. Encouraging Pay Equity
   Pay transparency can help diffuse bias and close the gap between gender, racial, and other forms of wage disparities. Shining a light on these issues helps identify areas where a company could be more equitable.
5. Increased Applicant Interest
   Salary ranges in job postings can help attract truly interested and motivated candidates. This practice reduces the potential for awkward conversations, subverted expectations, and lost applicants due to disagreements over pay.

Challenges of Implementing Pay Transparency

While pay transparency has numerous benefits, it also poses several obstacles. Consider the following three hurdles before and during implementation.

1. Constant Flux to Align with the Market
   If you work in an industry with erratic pay, keeping your compensation competitive can be challenging. Constantly updating and changing pay quickly can drain resources without a benchmark, a solid core strategy, and an understanding of market trends.
2. Employee Discomfort with Pay Disclosure
   Employees might question why they get paid differently if they suddenly know each other’s pay. Pay transparency could trigger feelings of being undervalued or underappreciated for some, while others may feel the need to hide or defend their wage, difficult to address without a categorical—and possibly costly—adjustment to your compensation strategy.
3. Doesn’t Fully Close the Wage Gap
   Pay transparency can address inequity at work but it’s not the sole fix. Cultivating equity requires addressing other issues like favoritism, bias in hiring and promotions, unequal access to development opportunities, and a toxic work culture.

Specific State and Local Pay Transparency Laws

Many regions have specific requirements for pay transparency. Here is an overview:

California – All employers must:

• Provide an applicant with the pay scale for the position they applied for, even before the initial interview.
• Provide an employee with the pay scale for their current position.
• Employers with 15 or more employees must include the pay scale in job postings, and if using a third party for postings, provide the pay scale to them as well.

Colorado – Each job posting must disclose:

• The hourly rate or salary compensation (or range thereof) being offered.
• A general description of all employment benefits.

Connecticut – Employers must:

• Provide a job applicant with the wage range for a position at the earliest of the applicant’s request or when an offer is made.
• Provide an employee with the wage range at hiring, during a role change, or upon request.

Maryland – Upon request, employers must provide applicants with the wage range for the job.

Nevada – Employers must:

• Provide the wage or salary range or rate to individuals who have completed an interview.
• For promotions or transfers, disclose the wage or salary range to employees who have applied and inquired.

Jersey City, NJ – Employers with five or more employees must disclose a minimum and maximum salary and/or hourly wage, including benefits, in job postings.

New York City, Ithaca, and Westchester County, NY – Employers with four or more employees must state the minimum and maximum annual salary or hourly wage for advertised job, promotion, or transfer opportunities.

Cincinnati and Toledo, OH – Employers with 15 or more employees must provide the pay scale to applicants with conditional job offers upon request.

Rhode Island – Employers must:

• Provide the wage range for a position when requested by an applicant.
• Provide the wage range for an employee’s position at hiring, during job changes, and upon request.

Washington – Employers with 15 or more employees must disclose the wage scale or salary range and a general description of all benefits and other compensation in job postings.

These state-specific laws illustrate the growing importance of pay transparency. Businesses must keep abreast of these regulations to avoid the hefty financial penalties associated with non-compliance, which may include thousands of dollars per violation, along with legal fees and reputational damage. Consult with compliance experts or attorneys to ensure alignment with the latest requirements.

Best Practices for Pay Transparency

Implementing pay transparency can be challenging but essential, especially if mandated by state law. Here are eight tips to effectively introduce pay transparency in your organization:

1. Research Current Pay Transparency Laws by Work Location
   Verify which—if any—current pay transparency laws affect your operations. Compliance obligations will inform situations in which you must disclose compensation info.
2. Conduct Market Research on Pay Ranges for Each Position
   Even if you have an idea about a role’s salary range, research it. Look into similar businesses or industries to ensure you maintain competitive ranges for roles in your organization. This helps you understand where your company stands—and if it needs to pivot.
3. Audit Any Existing Pay Transparency Practices Against Your Research
   Based on your findings, evaluate your current (or lack of) practices. In doing so, you’ll spot where you may need to adjust salaries, benefits, bonus structures, and other forms of compensation.
4. Develop a Core Strategy for Salaries Based on Roles
   Once you understand what your employees’ wages should be, create a strategy to help guide you. Define every piece of compensation for each role and account for those that don’t exist yet.
5. Include HR and Management on the Pay Transparency Team
   Assemble a team with HR professionals and leaders from various departments to provide input and assist with constructing new pay policies. Training managers on pay transparency is crucial as they often directly deal with employees’ concerns.
6. Plan the Rollout of New Pay Structures with Your Team
   Collaborate with your pay transparency team to steer implementation, ensuring everyone understands the goals, timeline, and their responsibilities.
7. Communicate the Pay Transparency Program to Employees
   Present the finalized policies to employees clearly and ensure they have easy access to the information. Emphasize your commitment to pay transparency, why it exists, and the changes employees should expect.
8. Track and Adjust Pay Practices as Needed
   Monitor and adjust your policies based on shifts in the legal landscape, job market, and organization. Flexibility ensures your pay transparency policies remain effective and compliant.

By considering and implementing these practices, businesses can navigate the complexities of pay transparency, fostering a more equitable environment for all employees while staying compliant with legal requirements.