Pay Transparency & Equity Laws: What Growing Businesses Need to Know

As pay transparency and equity laws gain traction across the United States, it’s increasingly vital for small and scaling businesses to understand and comply with these regulations. These laws are designed to close wage gaps, ensure fairness in the workplace, and promote equitable compensation practices. For employers, this means not only understanding what these laws entail but also taking proactive steps to integrate compliant pay practices into their operations.

This guide dives deep into the core concepts of pay transparency and pay equity, explains state-specific laws, and provides actionable insights for creating compliant compensation programs.

Pay transparency refers to laws that require employers to disclose compensation details at various stages of the hiring or employment process. These laws aim to reduce wage disparities, particularly for women and minorities, and empower job seekers to make informed decisions about job offers.

Where Pay Transparency Comes Into Play:

1. In Job Postings: Some states require employers to include salary ranges in job advertisements.
2. During Interviews: Candidates may be entitled to know the expected pay for the role during the hiring process.
3. Upon Employee Request: Existing employees may have the right to request information about the pay range for their position.

Why Pay Transparency Matters:

• Enhances Employer Trust: Being open about pay demonstrates a commitment to fairness, improving employee morale and retention.
• Promotes Fair Negotiation: Applicants are equipped with the knowledge to negotiate more effectively.
• Closes Wage Gaps: Transparency exposes and reduces wage disparities.

Several states have implemented pay transparency laws. Below are some examples of key legislation:

• California: Requires employers with 15 or more workers to include a salary range in job postings. Additionally, businesses must report pay data on race, gender, and other demographics, ensuring fairness across the board.
• Colorado: Pioneering pay transparency, Colorado mandates salary ranges and benefits to be included in all job postings. This law applies to in-state and remote roles.
• New York: Effective September 2023, New York’s law covers employers with four or more workers and mandates the inclusion of salary ranges in job postings. Employers must also include existing job descriptions and maintain records of these details.
• Illinois (Effective 2025): This law requires employers to include pay ranges and benefit descriptions in job ads. It also mandates employers notify employees of internal promotion opportunities within 14 days of posting.
• Washington D.C.: D.C.’s pay transparency law requires salary ranges and details about healthcare benefits to be posted for all job listings.

Pay transparency laws not only vary by state but often have additional requirements at the local level. For businesses operating in specific cities or counties, understanding these local regulations is critical to maintaining compliance. Below are some examples of local pay transparency ordinances in the United States.

• New York City: Effective November 1, 2022, NYC’s ordinance requires employers with 4 or more employees (including one working in the city) to disclose a minimum and maximum annual salary or hourly wage in all job postings. This includes roles that can be performed remotely or in the field. Salary ranges must also be included for internal promotions and transfer opportunities.

• Ithaca, New York: Beginning September 1, 2022, employers with 4 or more employees must include minimum and maximum hourly or salary compensation in job postings, as well as for promotion or transfer opportunities.

• Westchester County, New York: Effective November 6, 2022, Westchester’s law mandates that employers with 4 or more employees disclose the minimum and maximum salary range for all job ads, including positions that can be performed remotely from the county. Internal promotion and transfer postings must also include salary ranges.

• Cincinnati, Ohio: Since March 13, 2020, Cincinnati’s ordinance requires employers with more than 15 employees to provide a salary range upon a candidate’s request after a conditional offer of employment has been made.

• Toledo, Ohio: Effective June 25, 2020, employers with 15 or more employees must disclose a salary range upon request after a conditional offer of employment is made.

For businesses navigating the patchwork of state and local regulations, maintaining compliance can be challenging. Here are some tips for managing it effectively.

1. Standardize Your Pay Policies

• Adopt a consistent framework that aligns with the strictest state laws where you operate.
• Ensure salary ranges are clearly defined and consistently applied across roles.

2. Conduct Regular Pay Audits

• Review pay data regularly to identify disparities.
• Benchmark salaries against industry standards to ensure competitiveness and compliance.

3. Leverage HR Technology

• Use HR software to automate tracking, reporting, and pay range documentation.
• Many platforms include tools for managing compliance with both pay transparency and equity laws.

4. Develop Clear Job Descriptions

• Detailed job descriptions help set accurate pay ranges and ensure consistency.
• Include key responsibilities, required skills, and qualifications to justify pay scales.

5. Consult An Attorney

• While this guide provides general, foundational knowledge, legal experts can ensure your pay practices meet specific state and local requirements.

6. Train Managers and HR Teams

• Educate your leadership and HR staff on pay transparency and equity laws.
• Ensure they understand how to communicate pay practices to employees and applicants.

Creating a compensation strategy that balances compliance with your business goals is critical for success. Here’s how to get started:

1. Define a Compensation Philosophy:
   • Establish your company’s approach to setting salaries, such as aiming for market rates or prioritizing equity adjustments.
2. Communicate Transparency Efforts:
   • Regularly inform employees about your commitment to fair pay practices.
   • Share the steps you’re taking to comply with pay transparency and equity laws.
3. Incorporate Employee Feedback:
   • Solicit input from employees about compensation fairness through surveys or focus groups.
   • Use this feedback to refine pay policies and address concerns.

Non-compliance with pay transparency and pay equity laws can lead to significant repercussions for businesses, ranging from financial to reputational damage. Understanding these consequences is crucial for employers who want to avoid costly mistakes.

By staying on top of these requirements and proactively complying, businesses can not only avoid these penalties but also strengthen their reputation as fair, transparent employers committed to equitable pay practices.

While pay transparency focuses on openness, pay equity laws directly address unfair wage practices by requiring equal pay for equal or comparable work. These laws aim to eliminate discrimination based on gender, race, ethnicity, or other protected characteristics.

Key Features of Pay Equity Laws:

• Regular Pay Audits: Employers are encouraged, and sometimes required, to evaluate pay practices regularly to identify and rectify disparities.
• Comparable Work: States like Massachusetts define comparable work based on skill, effort, responsibility, and working conditions—not just identical job roles.
• Prohibiting Wage History Inquiries: Many states now forbid employers from asking about an applicant’s salary history to prevent perpetuating past pay disparities.

Complying with pay transparency and equity laws isn’t just about avoiding penalties—it’s also an opportunity to strengthen your business:

• Attract Top Talent: Transparent and equitable pay practices appeal to job seekers and demonstrate your company’s values.
• Enhance Employee Trust: A commitment to fairness fosters loyalty and reduces turnover.
• Improve Productivity: Employees who feel fairly compensated are more motivated and engaged.

By proactively adopting fair pay practices, businesses can position themselves as leaders in ethical and competitive compensation. For more information on pay transparency and equity laws, contact your state Department of Labor.