Pay Equity and Pay Transparency
Although most of the fuss around this topic (which, frankly, is not new) has been about pay transparency, the core issue is pay equity. We are using this post as a refresher on what caused pay transparency to be such a hot topic, and what best practices we can implement to make the progress the state wants to see!??
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Pay transparency laws, across all states, are the offspring of pay equity laws that have been around since the 1960s. When Congress passed the Equal Pay Act in 1963, enforcement wasn’t a prevalent thought. There was no action to be taken by employers, other than knowing it is against the law to pay someone differently based on gender. In January 2016, the California Fair Pay Act went into effect restricting an employer’s ability to ask a job seeker their pay history. The goal of this was to have employers pay employees an equitable wage for the job they were hiring them to do for their company. Removing pay history from their decision-making was a step in the direction of removing historical and deeply baked-in pay equity issues.? In other words, if we continue to pay someone based on their pay history, vs what the job should be paid, we will never break the cycle of pay inequity or move away from the sins of our past.??
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Now in 2023, the goal of posting salaries (and in some states, benefits) is to increase transparency and make it easier to identify pay inequities. The Equal Pay Act requires not only base salary to be equal among genders, but also incentives, bonuses, profit sharing, and commissions. Allowing EVERYONE to see what a company has valued a job at (i.e., the pay range) allows a candidate to know going into the application process what the company may pay them if selected for the position. While not new, federal laws also provide protections for employees to discuss their own wages with each other. Many of these Pay Transparency laws, such as ours in California, require employers to disclose to employees the pay range the company has set for the position the employee holds when requested by the employee.??
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This is where HR comes in. Inquiries about pay discrepancies or pay inequity should be treated the same as any other discrimination complaint. An investigation, documentation, and follow-up should take place to ensure the employee knows why they are paid their wage. When an employee comes to their manager or HR to say "I just found out what John makes and it is 20% higher than what I make. I have longer tenure, better sales records, better attendance, and better overall performance. Can you tell me why I am making significantly less?" alert your leadership team and HR (or call TPPS). These are the types of situations you want to tread cautiously through; this is exactly the smoking gun the Labor Commissioner is looking for, and no one wants to be the martyr!??
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Additionally, HR and supervisors should be trained on how to address concerns employees may have with pay ranges listed on job advertisements and how it compares to their pay.??
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Compensation is complicated, there are a lot of factors that go into determining pay including location, experience, education, job responsibilities, industry knowledge, and so on. Taking these factors into consideration when determining pay is acceptable and explaining such to an employee questioning their pay could help ease their concerns.??
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We advise setting protocols and approvals for setting compensation. HR should be involved so they can oversee compliance with a company’s set pay ranges, and help navigate through deviations – which are okay and will be necessary at times.??
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Lastly, another important factor to consider is culture. Be clear on what your company’s compensation philosophy is. Establishing this from the beginning can help curve questions about pay differences. It is also beneficial for employee morale to achieve pay equity in the workplace.??
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We know this pay transparency law seemed to be just that – posting pay ranges – but it goes SO much deeper!!?
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Have questions? TPPS is here to help. Just Ask Us!?