Pave recently hosted a webinar on the new pay transparency laws taking effect in 2023. Speakers included Dashlane Senior Director of People Stacy Sahagian, Athena Head of People Melanie Naranjo, Rhino Senior HR Business Partner Leighton Martin, former Loom VP of People Meghana Reddy, and Pave VP of People Alexis Merritt.
The conversation included a description of the new laws, why they matter, how employers can prepare, and the potential benefits of pay transparency. Here were the key takeaways:
Starting in 2023, California employers of all sizes must provide employees with their role’s salary range upon request. They must also maintain records of wage changes for up to 3 years during and after the end of the employment period.
California employers with 15 or more employees must additionally share salary ranges in job postings that are eligible to be performed in the state, as well as salary ranges for promotions and internal transfers.
Starting May 10, 2023, California employers with 100 or more employees must report pay data by sex, race, and ethnicity to the U.S. Equal Employment Opportunity commission annually.
New York City’s pay transparency law, which went into effect November 1, 2022, requires all New York City employers with at least 4 employees to share salary rangers in job postings eligible to be performed in New York City. New York City employers must also share salary ranges for promotions and internal transfers.
Washington’s pay transparency law requires all Washington employers with at least 15 employees to share salary rangers in job postings eligible to be performed in the state. Washington employers must also share salary ranges for promotions and internal transfers. The law takes effect in 2023.
Colorado’s law requires all employers to share salary ranges for job postings eligible to be performed in the state and salary ranges for promotions and internal transfers. Colorado employers must also maintain records of wage changes for up to 2 years during and after the end of the employment period. The law takes effect in 2023.
Notably, these new laws apply to employers in other states without pay transparency if they employ at least one person in California, New York City, Washington, or Colorado.
Noncompliance with the new pay transparency laws present both legal and cultural risk. On the legal side, employers that fail to comply with the new laws expose themselves to financial penalties from the state and legal action from employees.
Culturally, noncompliance could lead to an erosion of trust between employees and their employer. Employers that fail to provide employees with pay transparency, or that implement pay transparency practices poorly, will alienate employees that can now compare their organization’s pay transparency practices to that of its competitors.
Employers unsure how to proceed with the new laws should consider what they’re trying to optimize for, and what impact pay transparency will have internally and externally. Employers aiming to maintain or improve employee retention and attraction will likely need to implement robust pay transparency in order to avoid negative cultural impact and public scrutiny.
Organizations preparing for pay transparency should create a compensation philosophy and identify how they’ll operationalize and communicate their philosophy throughout the organization.
Here are some additional tips offered by our speakers for organizations implementing pay transparency in the coming months:
Making your organization more transparent can be daunting, but there are also many benefits to implementing pay transparency:
Pave’s new Compensation Bands product is designed for organizations seeking to establish a foundation for fair and transparent pay practices. With Pave Compensation Bands, organizations can view, edit, and share all their compensation bands, see where individual employees fall within the band, and identify employees who fall outside a given band. Compensation Bands also comes with custom permissions to control who gets to view your compensation data. Learn more about Compensation Bands.
After years with little to no accountability, 2023’s new pay transparency laws will go a long way towards eliminating the pay gap and helping employees better advocate for themselves.
As your organization goes about implementing pay transparency, remember that you’re playing an important role in making pay more equitable, which is better for everyone in the long run.