Pay Transparency Laws and How HCM Technology Can Help You Avoid Disparities

Human Resources

pay transpareny laws

To gain a solid understanding of why something is the way it is today, we must first understand how it came into being. Afterall, this is an article on pay transparency laws, and what better way to gain insight into an HR topic than to mix in a little bit of history? 

In 2009, Congress endorsed the Lilly Ledbetter Fair Pay Act to eliminate pay gaps and strengthen historical equal pay claims. Despite this and other similar acts of Congress like the regulation of equal pay (both directly and through antidiscrimination laws) initiated by several states, we continue to see significant pay disparities in the United States on the basis of race, gender and ethnicity. So what can your human resources HR department do to ensure you’re following pay transparency laws in 2023?

Ensuring that people have the opportunity to earn equal pay for equal work is a fundamental concept for employee and labor rights advocates. Pay transparency laws were put in place to require employers to be more transparent with salary ranges and benefits. Depending on the jurisdiction or state, these laws require employers to:

  • Provide applicants the salary range for a posted position at a specified point during the hiring process.
  • Provide employees salary range upon request, when changing jobs, or upon hire.
  • Include salary range in job postings.

As a result, state and local legislatures have begun to consider regulations targeting specific employment practices viewed as perpetuating historical wage inequality. Many of these rulemakers view secrecy about wages and benefits amongst employers as a primary culprit of wage inequality. In 2018, California became the first state to institute pay transparency legislation when it passed AB 2282, which allowed job applicants to request the pay scale for an open position for which they had interviewed. Effective January 1, 2020, Colorado took this idea one step further, mandating employers include pay ranges and benefits descriptions in all job postings for Colorado residents.

Why Pay Transparency Law Is Trending in 2023

Numerous cities and states have followed the pay transparency trend and the primary reason is due to better pay transparency leading to higher organizational trust. Results from a 2022 Gartner study show that only 32 percent of 3,500 workers surveyed believe they are fairly compensated. Since most employers from this study put pay equity as a high priority, this perception may come from a lack of organizational trust rather than a company’s commitment.

As of January 1, 2023, California joined the growing list of jurisdictions that require automatic pay range disclosures on job advertisements, instead of merely allowing job applicants to request this information. The state of Washington has followed a similar path, first requiring wage scales upon request and, effective January 1, adopting rules that will obligate covered employers to “disclose in each posting for each job opening the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered to the hired applicant.” Could your state be next? What measures will you put in place to ensure your organization follows pay transparency laws?

Avoid Pay Disparities With HCM Technology

In 2023, employers must ensure that all demographics of their workforce have access to the same information, especially information tailored to their needs. This, combined with pay transparency, will ultimately lead to a more engaged and productive workforce. Modern human capital management (HCM) software can help in reviewing and updating compensation, as well as standardizing job postings across an organization in order to comply with new and evolving pay transparency laws.

HCM technology is designed to serve people, not processes. The purpose of this software is to truly serve the greater good of the company and improve the personal and professional lives of its employees. In league with Title VII, passed by Congress in 1964, HCM technology can help companies improve diversity and inclusion (DEI) efforts and avoid pay disparities on the basis of race, color, religion, sex and national origin. Data collected in 2020 by the Bureau of Labor Statistics indicates women earned 83 cents for every dollar a man earns. The pay gap is even wider for women of color with Black women being paid 64 percent and Hispanic women 57 percent of what white non-Hispanic men were paid in 2020.

Employers looking to enact the pay transparency law can leverage HCM technology to do the following:

  • Streamline procedures
  • Promote better engagement
  • Develop accurate compensation management
  • Address the wage gap and ensure pay equity

Does Your HR Team Need Help Staying Compliant?

At Quanta, we understand it can be tough trying to keep up with federal, state and local regulation and compliance laws. That’s why our lifecycle experts are here to help you minimize risks associated with compliance so that you can focus on your most important asset – your employees. Contact us today to schedule a personalized demo of our HCM platform, an all-in-one suite of payroll and HR services custom-tailored to suit your needs.

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