Know Your Salary Transparency Laws
Updated: Jan 2
Transparency in hiring practices and wage setting is a hot topic in 2022. Currently, 21 states have salary history bans and 8 have laws requiring the sharing of salary ranges. Local municipalities and cities can also have specific guidelines. On June 8, 2022, Microsoft announced new salary range transparency guidelines being implemented no later than
January 2023. Additionally, on March 15, 2022, the Biden administration also announced
commitments to advance pay equity, which includes a proposed regulation that prohibits the use of salary history for federal employees. As states, localities, the government, and now more employers implement salary transparency laws and policies, job searchers should be crystal clear on how these changes could impact their job search. These changes could directly impact your salary.
The History of Wage Transparency
The federal Equal Pay Act of 1963 requires that men and women in the same workplace receive equal pay for equal work. This was a US law that was intended to narrow the gender wage gap. It later was expanded into the FLSA (Fair Labor Standards Act) which was expanded to include making racial and religious discrimination illegal for comparable work. As time went on, it became apparent that these laws were still not strong enough to combat wage inequities.
In the early 90s, I was working as a compensation analyst for a large hospital. Back then, salary ranges were NEVER published. Discussing salary in the workplace was banned, prohibited, or discouraged in most workplaces. Candidates were always expected to provide their salary at their last job, which would often limit the offer at their new job. I worked endlessly to survey other hospitals, trying to keep wages somewhat competitive and subtly correct pay inequities created by managers offering salaries indiscriminately. The desired candidate could often be paid more than a similarly experienced coworker. Men could often be paid more than women in the same jobs because they were the 'primary wage earner'. Pay inequities were unfortunately common.
A New Compensation Trend
In the last few years, states, local jurisdictions, and cities have been passing wage salary range sharing and/or salary history laws. These laws also can include protections for employees who discuss and share their wages with other co-workers. These laws are intended to further narrow the salary gap between genders, races, and younger workers. Sites like Glassdoor crowd-sourced and self-report salaries by employees, so the numbers are unreliable and also depend on matching job titles to actual responsibilities. Many job applicants are forced to rely on their research when asked, "What are your salary expectations?"
Wage transparency is about a company's commitment to openly sharing its approach to employee pay and compensation. Sharing pay processes and guidelines instill employee and community trust and are expected to contribute to narrowing the pay equity gap. Salary ranges are the minimum and maximum amounts a company will compensate individuals for holding certain positions. Salary history laws usually prohibit an employer from asking a candidate any information about how they were previously paid by former companies. The laws can vary widely by state, municipality, and company for specific guidelines. An updated summary of all US salary history laws can be found here and a searchable site by the state for salary range laws can be found here and here.
Transparency Pros and Cons
Candidate Opportunity - If your state prohibits potential new employers from knowing your last salary, you will potentially have more leeway to ask for more. In a candidate-friendly market, an underpaid but qualified person could theoretically experience very big salary increases when moving to a new company. If you are aware of the salary ranges of your targeted position, it will be easier to get an idea of WHAT salary to request. It will also help you decide to apply at all. Companies with less competitive salary ranges may experience more difficulty in recruiting talent.
Wage Equitability - These new laws could exacerbate a company's already existing internal pay equity issues. New employees could be hired over more experienced ones with higher salaries generating potential employee relations or resignation issues. In an already candidate-friendly job market, this places pressure on companies to make wages more equitable and attractive.
Performance will Decouple from Salary - As employers are pressured into equalizing experience with salary, the ability to reward high-performing employees with additional salary may decrease. Companies will need to adjust their compensation strategies to take this into account.
Pressure on Small Companies - Small companies or those without clear compensation ranges and guidelines or where employees' work responsibilities shift frequently may have a much harder time communicating and justifying the salary information they share. This will pressure them to organize their compensation policies.
Deceptive Practices - Some companies may post extremely wide salary ranges or move the location of posted jobs to other states with looser laws. A salary range of 50% is a normal HR practice.
What's next?
Payscale reported in February that 66% of US companies are planning to perform a pay equity analysis in 2022. This is the result of high inflation, demand for remote work, changing transparency laws, a competitive job market, and many employees seeking more satisfying work/careers. This could result in favorable changes to job offers and salary ranges of jobs.
If the salary transparency laws expand to more states and companies, rules around the protection of employees for discussing their salaries in the workplace would most likely also expand. It's now common for younger workers (especially millennials) to share salary information amongst themselves to get the best salary offer from a prospective employer. As this trend continues, there will be more pressure on employer transparency, and talking about salaries will become more of the norm.
Takeaways
Know your salary transparency and history laws and legal protections in your state, city local municipality, prospective employer, or government agencies.
Know if your state bans salary transparency or knowing a candidate's salary history.
If you are a remote worker, know your 'home base' or work location that claims you for tax reasons. Know this location and that state or city's laws.
While sharing salary information is becoming more common, consider discussing salaries with co-workers cautiously as you may expose your company's existing pay inequities.
If you are a candidate with a job offer on the table, look at other sources of information to help you analyze the offer. Check out my blog on 7 great salary surveys to help you analyze your offer.
If you discover a personal pay inequity, consider your strategy carefully on how to approach your manager and/or HR with any requests or complaints.
Have you ever shared your salary with another person? What happened? Was it a good outcome or bad? I love to hear and chat about your personal career journey.
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