What Pay Transparency Laws Mean for Your Total Rewards Strategy

More states are passing pay transparency laws, with the latest going into effect this November. The new law requires New York City employers to disclose a salary range in job ads.  

“Lack of salary transparency is discriminatory and anti-worker,” said Councilwoman Helen Rosenthal. “Every New Yorker should have the right to determine whether they will be able to support themselves and their family when they apply for a job. It is time to level the playing field and restore some dignity to New Yorkers seeking employment.”

Pay transparency laws provide HR leaders an opportunity to revisit their compensation and total rewards strategies. In this blog, we break down the ins and outs of pay transparency laws, how employers can prepare, and why competitive benefits are an important differentiator as more cities and states adopt these laws. 

What are pay transparency laws?

Pay transparency laws vary from state to state, but they generally require that employers disclose salary to job applicants. Some states require that salary be listed on any public job posting and disclosed to anyone who interviews for that job. Others require that it be disclosed if an applicant or potential applicant asks directly. Some laws also protect current employees and give them the right to share their salary information with others at their organization.  

States that have pay transparency laws include: 

• California
• Colorado
• Connecticut
• Delaware
• Illinois
• Louisiana
• Maryland
• Maine
• Massachusetts
• Michigan
• Minnesota
• New Hampshire
• New Jersey
• New York
• Oregon
• Vermont
• Virginia

The benefits of pay transparency laws

Numerous studies indicate that women, Black and Latino workers, and other minority groups are paid considerably less than their white male counterparts. Women today still only earn 83 cents for every dollar men earn. One contributing factor is the motherhood penalty, which refers to the career challenges women face after having a child, such as their ability to receive new jobs, promotions, or higher wages. This can be due to biased views that mothers are less productive because they will be more focused on caregiving, need to call off work more often, or require flexible working environments. Pay transparency laws could help mitigate these biases and expose organizations that have unfair pay discrepancy practices while also offering underpaid employees an opportunity to ask for increased salaries.

Pay transparency can also help attract more qualified candidates. A study by Indeed found that 75% of employees said they were more likely to apply for a job if the salary range was listed. Doing so helps employers commit to DEI values, reduce time to hire, establish an open dialogue with employees from the very beginning, and build a strong employer brand. 

Although pay transparency laws may be nerve-wracking for HR leaders, they also present an opportunity to examine compensation strategies for fairness and create higher levels of trust and employee engagement.  

How you can prepare

Here are a few steps that can help you adapt to new pay transparency laws:

1. Closely examine your compensation structure

Compensation is complex. You may need to step back and look at your organization’s overall philosophy. Do you offer other benefits such as unlimited vacation, excellent healthcare, or wellness perks that can compete with a very high salary? Or do you operate in an industry with lower flexibility where a higher salary might go a long way in attracting new talent? Are there significant cost of living differences across the regions where you have offices? Once you take these factors into consideration, you can carefully define each role and its responsibilities to better benchmark against other organizations and determine appropriate pay ranges.

You should also analyze how criteria such as education, years of experience, advanced training, or time in position influence where applicants and existing employees fall within that pay range. This can help reduce the possibility of pay compression, which occurs when new hires are offered higher salaries than employees who have been in the same position for a long time.  

2. Benchmark

Employee benefits benchmarking is an analysis of how your benefits compare to other companies of your size and industry. Some reports break down by specific geography, job title, and experience. This data can help you examine how competitive your compensation and benefits strategies are and where there may be room for improvement. The more granular you can get, the more you can tailor the results to your specific needs. 

3. Communicate

Next, you should prepare to have open conversations regarding your organization’s compensation philosophy with current employees. This is a great opportunity to share and publicize any data that your team has pulled together so that employees understand your organization’s values, benefits, and pay structure. 

4. Update your job posting template

Ensure that all public job postings have a listed salary range. The NYC Commission on Human Rights provided the following guidelines:

•  Employers must include both minimum and maximum salaries, and the range cannot be open-ended. For example, “$15 per hour and up” or “maximum $50,000 per year” are not consistent with requirements. 
• If there is no flexibility in the salary, the minimum and maximum salary may be identical. For example, “$20 per hour” would be compliant. 
• Advertisements that cover multiple jobs, promotions, or transfer opportunities may include salary ranges specific to each opportunity. 
• Employers are permitted but not required to include information about other forms of compensation or benefits such as employer-provided insurance, paid or unpaid time off, retirement contributions, severance pay, overtime pay, commissions, or bonuses.

Below are a few examples of verbiage companies have included in their public job listings. They can be adapted to work for any city or state where you may be hiring: 

•  For New York City the estimated base salary range for this position is $80,000 to $120,000. The specific salary offered for this or any given role will take into account a number of factors including but not limited to job location, scope of role, qualifications, complexity/specialization/scarcity of talent, experience, education, and employer budget. At [company name], we take a “total compensation approach” when making compensation decisions. This means that we consider all components of compensation in their totality (such as base pay, short-and long-term incentives, and benefits offered), in setting individual compensation.
• The estimated hiring compensation range for this role is $45,000-$55,000 based on an average compensation schedule. Final offers will be based on candidate geographic location and consider career experience and may vary from this range due to these and other factors.
• Disclosure as required by NYCHRL: The base salary range for this role when being performed in the City of New York is $100,000 to $120,000. Compensation for this role is based on a variety of factors including experience, scope of the role, capabilities to perform the role, as well as business unit and company performance.
• The salary range for this position in New York City is $99,000 to $158,000. Actual salaries may be based on a number of factors including, but not limited to, a candidate’s skill set, experience, education and other qualifications. Posted salary ranges do not include incentive compensation or any other type of remuneration.

 5. Highlight your benefits package

Highlight the additional benefits that your organization offers in job postings and during the hiring process. Consider every touchpoint with candidates an opportunity to showcase your company’s differentiators, which may include your top-tier health insurance, high 401(k) match, childcare stipends, or flexible wellness perks. Create collateral or messaging that you can send employees as a P.S. on interview confirmation emails or include on your company’s careers page. Ensure that hiring managers have consistent talking points they can discuss during interviews when candidates ask about compensation and benefits. 

The role of flexible, competitive benefits

Some employers, such as nonprofits or startups, are simply unable to offer the highest salary and might be nervous to list salary in job postings. But other characteristics such as increased flexibility, great company culture, and creative benefits can still make them an employer of choice. 

Top-tier benefits are an important differentiator when salary may not be. They allow employees to consider salary in relation to the total rewards your company offers. Even if your budgeted salary is lower than other companies hiring for the same role, competitive benefits may be the factor that tips a candidate’s decision in your favor. 

Many employees may be willing to take a pay cut for better benefits such as cheap health insurance, high amounts of paid leave, 401(k) contributions, remote work opportunities, childcare support, or fertility benefits. For example, a recent survey found that 45% of workers said fertility benefits were an important component when considering a new job. 

If you’re in search of unique benefits that can differentiate your company from competitors, a lifestyle spending account (LSA) is a great option that more companies are turning to for its high levels of flexibility and personalization. An LSA is essentially a non-salaried allowance that can be used according to an employee’s personal preferences. 

The Community Group (TCG) is a nonprofit organization creating opportunities through education since 1970. As a nonprofit, meeting the needs of a diverse population was overwhelming. Benefits such as childcare stipends only applied to certain employees, while others such as SEP retirement contributions were only available to those with tenure. With Benepass, the organization built a competitive LSA program that has acted as a tool to improve retention and recruit new employees. 

“Staffing has been so hard, and offering a new benefit has been a great retention and recruiting tool,” said Katie Graham, Chief Strategy Officer at TCG. 

Giving employees more choice in how they use their LSA dollars has led to higher engagement and satisfaction. Employees have used their LSAs to adopt a pet, take personal or professional development courses, offset childcare costs, buy items for their home office, and more. All of this translates to happier, more productive, and more loyal employees.

Check out the full case study for more information on how TCG leveled up their benefits program with a flexible LSA. If you’re interested in exploring how flexible benefits can improve recruitment and retention as pay transparency becomes the norm, contact our team here or at sales@getbenepass.com.