Beckway Insights: Employee Pay Transparency
Employee Pay Transparency Revolution Is Coming
Are you ready for the newest legislation on employee pay?
What’s happening and what do firms need to be focusing on right now?
What do New York, California, Colorado, Rhode Island, Ohio, Maryland, Nevada, and Massachusetts all have in common? Thousands of great companies and millions of employees?
Indeed, yes, but these states have either enacted or are considering enacting new “Pay Transparency Laws.” With public and private employers of all sizes facing significant pressure to comply, we see this as the tip of the iceberg.
What are some of the key features of the new laws?
- For some time now, California and other states have banned employers from asking about a candidate’s pay history – This aspect is expanding to other states, but more importantly, California’s new disclosure laws kick in on January 1, 2023.
- New York City and California’s laws require listing of pay ranges or specific salary data on job postings, both internally and externally – This is the newest trend and is gaining interest and will likely be part of new legislation in key states. This can impact all positions and potentially all internal job movement within the firm.
- Disclosures and timing – Salary ranges, and in some cases, total compensation for a position is required to be communicated. Key issues to solve for are 1) who needs to be provided this information and 2) under what circumstances, such as new hires and promotions, lateral movements, etc.?
- Penalties and resolution – What could happen if there’s noncompliance and state authorities are engaged? Regulatory enforcement will vary state to state, but material fines are being written into the statutes.
What do we see as key gaps in current processes?
- Only a very small percentage of firms that we see in the mid market are even somewhat prepared to implement the requirements. Even fewer are prepared to deal with the people implications from the new requirements.
- HR organizations traditionally have not favored such disclosures, largely because of the immense challenges in communications, administration, and potentially any disparity that already existed in pay plans and structures. This is especially true in companies that have gone through acquisitions or have rolled up multiple firms.
- Employee disruption and manager capability to handle the questions. Imagine one of your best people learning that they are at the lower end of a pay range. Consider the implications and the questions and reactions that will come forward to both HR and leadership.
What else do the new regulations cause HR to focus on?
Here’s a list of additional items to consider addressing if you will want to get ahead of the curve:
- Position descriptions and required clarity between levels and roles.
- Pay banding or salary structures for all positions.
- Pay equity pressures and new initiatives.
- Budgets that cover expected or planned actions and unexpected issues resulting from the regulations.
- Promotional or even lateral pay increase processes.
- Communications and compliance plans around new requirements.
- Leader training on how to handle the questions from current employees and candidates.
How can our experts assist your team?
Beckway’s HR practice has multiple experienced resources that can assist your teams to focus on the right outcomes including:
- Understanding the changing requirements and needed steps.
- Assessing your current practices and gaps across the total HR outputs and/or course corrections to current pay structures.
- Using our compensation tools and platform, digging into plan design, and implementing the right steps to help maintain a salary structure, and banding where appropriate.
- Developing and implementing change management procedures and policies to maintain compliance.
- Building and executing communications and training plans internally for employees and leaders.
If you have questions or want to talk with our HR team practitioners, please contact Mike Bugaj (firstname.lastname@example.org) or Keith Swenson (email@example.com).