Salary Transparency and What it Means for Your Business

Pay disparity in the United States has been well documented. Among full-time, year-round workers, studies show that women earn 83 cents for every $1 earned by men. This gap is even wider for women of color, with Hispanic women impacted the most, earning 57 cents for every $1 earned by white, non-Hispanic men. While the country has made important strides in pay equity, there is plenty more work to be done.

Against this backdrop, a salary transparency movement has gained steam in recent years, with state and local governments passing new legislation aimed at giving workers more leverage to negotiate their pay. Roughly a quarter of all residents in the U.S. now live within a jurisdiction where laws are currently on the books requiring companies to disclose pay ranges. Elsewhere, half a dozen states are currently debating legislation that would impose similar requirements. More than a trend, it’s clear that the push for greater salary transparency is here to stay.

Keeping up with labor laws takes time. At AgileOne, our Client Services teams have been hard at work unpacking this legislation so we can better assist our clients with compliance — no matter where they conduct business.

In my latest blog, I provide an overview of the legislation and offer up some tips we’re sharing with our own clients about how businesses can prepare for this new world of work.

What does the legislation say?

The specifics of salary transparency legislation vary by location. In some locations, such as New York City, employers must include a salary range on all job advertisements for positions that may be filled within the city, including those that can be performed remotely or in the field. In other places, such as Connecticut, employers are only required to reveal a salary range for a position if an applicant asks for it, or when they extend an offer — whichever occurs first. Many of the laws also apply to current employees, mandating that employers must disclose salary information when workers change positions or upon request. CNBC is keeping track of the U.S. states, cities, and counties where companies have to share salary ranges with workers. You can view their list here.

Laws targeting pay equity are not new. Over the past decade, several states have passed legislation barring companies from asking for a candidate’s salary history, seeking to end a practice that has been shown to perpetuate pay imbalances among certain populations — especially, women and people of color. But in 2021, Colorado paved the way for the latest wave of laws to level the playing field by mandating companies to disclose salary ranges to potential candidates.

As with any legislation, there are many nuances, and AgileOne can help you determine how it affects you based on where you do business.

However, there are a couple of important considerations that all companies should keep in mind. First, with so many Americans still working remotely, employers should be mindful of where they are sourcing their talent. In many locations where salary transparency legislation is in place, such as California — which employs more people than any other state — the law also applies to remote workers. That means even if you don’t operate your business in California, advertising your job to a worker within the state could make your business accountable to California’s law. Second, many of the laws require companies to report on pay rates according to diversity categories such as race and gender, not just FTEs, and may include protections for contractors as well. Therefore, companies must not only make their pay ranges available to workers but also report on how they pay them.

Penalties for non-compliance can be steep.

The State of California imposes civil penalties from $100 to as much as $10,000 per violation. Meanwhile, employers may have to pay civil penalties of up to $250,000 for an uncured first violation of New York City’s law.

How can my business prepare?

Although there is mounting pressure to disclose pay, 31 percent of employers are not prepared to do so, and 46 percent are delaying the process, fearing potential backlash from their current employees, according to a recent survey.

In an environment where inflation is already driving up costs for businesses, the number one concern we’ve heard from our clients regarding salary transparency is the potential that it will push staffing costs even higher. Coupled with labor market tightness, companies are just as worried about their ability to compete for quality talent when pay is on the table. Although research is just beginning to unfold around this recent movement, there are preliminary signs that salary transparency can benefit employers by cutting down on recruiting costs and generating pools of candidates who are a stronger fit for jobs.

While the jury is still out, companies would be wise to consider the rise of salary transparency as yet another opportunity to streamline their workforce practices to manage costs. For starters, we’ve seen an uptick in the adoption of solutions like AgileOne’s AccelerationVMS platform, which gives clients extraordinary visibility into their non-FTE workforce. By automating critical steps in the lifecycle of a contingent worker and opening up access to in-depth reports like those required under the new legislation, employers can hone in on opportunities for cost savings and avoid costly compliance issues.

There is also immense savings potential within the Statement of Work (SOW) space, which has gained traction in today’s economic climate.

We’ve found that many companies have misclassified their talent in this area, resulting in higher premiums for the same work. Proper classification and management of SOW through MSP programs can help align rates with the market and, therefore, allow companies to achieve significant cost savings.

Finally, in the unrelenting search for quality workers, more companies are turning to talent communities.

The premise is straightforward: companies that plan ahead during economic uncertainty will be better positioned to weather the storm and come out ahead. By bringing together groups of candidates who are interested in working for a company but are not yet ready to commit, employers can keep a pipeline of candidates engaged until the time is right for both parties. This cuts down on costly search processes that are too often driven by tight timelines and pressing needs.

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From cutting-edge technologies to award-winning services, AgileOne has the expertise to provide true total talent management with access to world-class workforce solutions and technologies configured to meet your unique enterprise needs. Reach out to me today for help navigating the new world of work, including salary transparency legislation.