Pay Equity and Transparency: What Employers Need to Know in 2022
Some of us are old enough to remember a time when three topics were (supposedly) never discussed in polite society: religion, politics, and how much money you made. Even when taboos against religious and political discourse went the way of whalebone corsets and 8-track cassette tapes, prohibitions against revealing your income to all but your spouse, your banker, and your CPA still remained absolute. In some companies, just mentioning your pay to a co-worker was actually considered a fire-able offense.
No more.
Today, two of the hottest topics in employee management are pay equity and pay transparency. That’s right… transparency. As we move deeper into the 21st century, employees not only expect to know how their pay compares to that of their co-workers but, in many states, including California, companies are now required by law to be able to justify any pay disparities that may exist within their workforce. It’s all part of the ongoing drive to battle workplace discrimination and make companies more accountable to all their stakeholders, including the people they employ.
Now, for some historical background. Pay equity laws have been around for more than a half century. In California, the Fair Employment Practice Act became law in 1959. It prohibited job discrimination based on race, religion, color, or national origin. It did not, however, ban job discrimination based on sex. In California, this would not happen until 1970.
The state’s pay equity laws continued to be revised and updated on a fairly regular basis, most notably with the California Fair Pay Act of 2015. With its subsequent amendments, it has served as a guiding legislation for California employers, reminding them that differences in pay for same or similar work cannot be driven by (or look like they are driven by) differences in gender, race, or ethnicity. Pay differences for same or similar jobs need to be supported by tenure or performance—for example, sales levels for sales professionals—or other bona fide business factors.
The idea behind pay transparency, the most recent addition to legislative attention over the past year or so, is to make employers more accountable to stakeholders, including those they employ. Recently LinkedIn, this very professional online platform with more than 750 million members, listed pay transparency among its “Ideas that will change the world in 2022,” noting, “For several years, companies like Whole Foods and Netflix have offered all employees access to their colleagues’ salaries. But the current impetus for pay transparency stems from growing momentum around addressing gender and racial pay inequities,” adding, “Societal desire to close the wage gap for protected groups is what’s really at the heart of it,” according to Diane Domeyer, managing director at human resources consultancy Robert Half.
Pay transparency also appears to be a lasting effect of the Great Resignation, and the new employer/employee contract in which employees are demanding higher pay levels and information around how pay is determined. (That employees are talking about and sharing their pay details amongst themselves is nothing new.) Compensation and HR professionals have known for decades that people who work together compare and contrast their remuneration; it’s just that such talk was usually discouraged in the belief it fostered envy and/or resentment.
What is new is a greater willingness of people to talk more than they have in the past about their pay levels, and their demand to know more about what employers pay others for their jobs. TikTok phenom Hannah Williams has interviewed many people on the streets in the Washington D.C. area and asked them what they earn. Most people she spoke to were surprisingly frank about their situations and as a result, her videos have been widely shared.
Returning to our larger conversation, several states (California, Colorado, Connecticut, Maryland, Rhode Island, and Washington) now have pay transparency laws, and there’s currently a bill before the General Assembly in California requiring employers to disclose pay ranges in job postings, as well as median pay gaps with respect to median differences across gender, race, and ethnic lines. Here in the Golden State, employers are now required by law to tell employees the salary range for their job when asked. And, when applicants inquire about pay range after a first interview, employers must provide this information.
Bottom line: If you run a business, regardless of size, you must be able to competently answer questions such as these below, when it comes to pay equity and transparency:
How do employees know if their pay is fair?
Are you delivering pay the way you say you are?
What are employers doing to share their pay equity commitment with employees?
What data and metrics are used to determine pay levels?
How are you leveraging your commitment to pay equity to signal to your employees how much you value them?
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Forward-thinking employers are embracing pay equity and pay transparency, viewing them as another way to enhance their employer value proposition. These are topics that will not go away. Instead, they will become ever more embedded in how we do business going forward. For help on setting up pay scales that are both competitive and compliant with current state laws, please contact me at laura@conoverconsulting.com.