How will pay transparency affect the future of hiring?

On Sept. 27, California Governor Gavin Newsom signed a game-changing pay transparency bill into law. 

The law will require pay ranges in job ads for employers with 15 employees or more who are based or hiring in California. In addition, the law is the first to require employers with 100 employees or more to report pay scales by gender, race and ethnicity, which California will make public. 

The recent legislation is another push in a string of pay transparency efforts. California has joined places such as NYC, Colorado and Washington in requiring salary ranges in job applications. 

How it will affect the future of hiring

As the number of places that require pay transparency rises, it’s clear that the trend of pay transparency is not going away. “Just because the state you’re operating in doesn’t yet require disclosing salary or pay equity information, don’t wait until it does. It’s likely to happen sooner rather than later,” says Tanya Jansen, Co-Founder of continuous performance management platform beqom.

Adding pay transparency to your job ads isn’t just for compliance purposes – it’s a great hiring tool. With the Great Resignation, inflation and everything else throwing a wrench in a “normal” workforce, employees are looking towards (toward) more than just pay – they want a company that aligns with their values, offers impressive benefits and doesn’t underestimate the value they can bring to a company. 

Eighty-one percent of people are more likely to apply for a job that lists the salary range, according to beqom’s 2022 Compensation and Culture Report. States that have already passed legislation are seeing positive results. In Colorado, Indeed job openings were filled 8.2% faster than Utah, which doesn’t have laws around pay transparency.

“Job seekers today seem to know their worth and are far less willing to go through the interview process if the salary isn’t listed or the offer is lower than expected,” says Tanya. 

Transparency trends aren’t just about pay, either. Other parts of job descriptions should be more transparent about things like PTO and other benefits.

“Candidates want to understand the job they’re applying for, which is why it’s so important to create a job description that really paints a picture of what life is like at your company, the benefits you offer and what success looks like when it comes to performing the job,” Tanya says. “The best way to attract talent is to share the salary you’re offering for the position, list benefits, and describe job functions in as much detail as possible. For companies not yet comfortable sharing all three, try to highlight the area(s) in which your job offer is the strongest.”

Starting conversations around pay transparency

Offering pay transparency is not something many companies are used to and starting a conversation around increasing pay transparency can be difficult. Use these tips to help start tough conversations. 

• Come prepared: “Leaders can’t begin to discuss potential pay transparency without understanding the context behind the push for greater visibility and identifying areas they may need to improve upon,” says Tanya.
• Conduct an audit: Audit local or regional competitors and their pay ranges to understand average salaries for each role and create benchmarks.
• Look inward: One of the biggest reasons for the recent push for pay transparency is to expose pay gaps. Look internally to see if there are pay gaps in your own organization. “By gathering internal and external data, conversations become less daunting, [and] you’re more likely to find solutions to any pay gaps you uncover,” Tanya says. 

HR considerations

If a pay transparency law passes in your state, you may want to implement some practices to stay compliant. Here are some things HR may want to do if your company is required to be transparent with salary ranges:

• Create a protocol to approve and review job ads to ensure they contain accurate salary ranges
• Collet and retain records of job ads, and
• Document pay ranges for employees throughout their time at the company and three years after employment ends.