June 2024
tl;dr
- New pay transparency laws are emerging including enactments in Illinois and Vermont.
- An estimated 1 in 3 employees will be impacted by pay transparency laws by 2025.
- Pay transparency elevates pay equity regardless of gender, ethnicity, and sexual orientation.
- Privacy concerns, administrative burdens, and competitive disadvantages are among the challenges of promoting pay transparency.
With Vermont becoming the latest state to enact a pay transparency law in the U.S., effective July 1st, 2025, the countdown continues as U.S. states begin to feel the pressure for greater pay transparency. Pay transparency laws are playing a crucial role in the workplace.
Embracing Equity of Pay
Pay transparency promotes equity by requiring employers to disclose information regarding salary and/or compensation, either to their employees or to the public. By enacting pay transparency laws, legislative measures aimed at promoting the disclosure of information, pay inequities are reduced across gender, ethnicity, and sexual orientation leading to higher employee productivity and job satisfaction[1]. 82% of U.S. workers were more likely to consider applying to a job if the pay range was listed in the job posting based on a research study conducted by SHRM in 2023[2]. Additionally, in 2022, the gender wage gap among workers with federal jobs that list pay publicly was roughly 6%, comparatively to 16% nationwide[3]. By addressing wage inequality, disparities in pay will be diminished.
Challenges of Pay Transparency Laws
While pay transparency laws aim to promote pay equity in the workplace, the enactments can place burdens on not only on the employers, but also the employees. For employers, implementing pay transparency requires significant administrative effort (e.g. overhauling existing pay structures) and can cause a financial strain particularly for startup companies. Public disclosure of salary information can put employers at a competitive disadvantage as well, leading to talent retention challenges. On the other hand, employees are subject to privacy concerns due to the disclosure of information[4]. As a result, successful implementation of pay transparency requires a balanced approach that considers these challenges yet achieves the intended benefits of pay equity.
Pay Transparency Law Updates
Since 2019 when the first state enacted a pay transparency law, several states have followed in Colorado’s footsteps welcoming the concept of pay transparency including California, Connecticut, Nevada, New York, Washington, and Rhode Island. In 2024, specifically, new legislation has passed or is becoming effective for Hawaii, Washington, D.C., Maryland, Illinois, Minnesota, and Vermont[3][5]. As a result, an estimated 1 in 3 employees will be impacted by pay transparency laws by 2025.
- Hawaii: Hawaii’s legislation became effective on January 1st, 2024, enforcing a requirement on employers with 50 or more employees to disclose hourly/salary ranges in job listings[3][5].
- Washington, D.C.: Washington, DC’s legislation became effective on June 30th, 2024, requiring employers to disclose minimum and maximum salary ranges. Additionally, employers must inform candidates about healthcare benefits and are prohibited from seeking salary history information[3][5].
- Maryland: Maryland’s legislation amendment will become effective on October 1st, 2024, requiring employers to post minimum and maximum hourly/salary ranges for both internal and external job postings[3][5].
- Illinois: Illinois’ legislation will become effective on January 1st, 2025, mandating that employers with 15 or more employees disclose wage/salary range and a general description of position benefits as well as other compensation. Also, employers will need to inform current employees about promotion opportunities no later than 14 calendar days after posting the position externally[3][5].
- Minnesota: Minnesota’s legislation will become effective on January 1st, 2025, compelling employers with 30 or more employees to disclose starting salary ranges and a general description of position benefits as well other compensation[3][5].
- Vermont: Vermont’s legislation will become effective on July 1st, 2025, requiring employers with 5 or more employees to post minimum and maximum hourly/salary ranges and information regarding tips or commissions[3][5].
Future Outlook
Pay transparency laws will continue to be a dominant force in reducing gender and racial pay gaps as well as enforcing equitable pay structures in the workforce. In 2025, it is expected that additional states including Massachusetts and Michigan might move forward with their pay transparency laws[3]. Although the implementation of such laws can be costly and arduous, the benefits of enacting pay transparency laws will significantly offset the limitations. As more countries adopt pay transparency measures besides the U.S. including the United Kingdom and Canada, it is clear the momentum towards pay transparency is reshaping the employment landscape, driving more equitable and transparent compensation practices.
Introducing Integr8ion
Given that pay transparency is poised to reshape workplace dynamics and organizational structures, staffing agencies are welcome to visit integr8ion.com for support. Integr8ion is a technology service provider for the staffing industry, scaling and automating operations through seamless software integration. If you are interested in learning more, you can connect with us through our various channels.
Let’s traverse the complexities of pay transparency together.
References
- Harvard Business Review “Research: The Complicated Effects of Pay Transparency”
- Society for Human Resource Management (SHRM) “New SHRM Research Shows Pay Transparency Makes Organizations More Competitive, Leads to Increase in Qualified Applicants”
- CNBC “More States are Requiring Companies to List Salary Ranges on Job Ads - Here’s Why”
- Experian “Know Your Pay Transparency Laws”
- Forbes “2024 State-By-State Pay Transparency Laws: Key Insights for Employers”
