Employee compensation has traditionally been shrouded in secrecy. Salaries were rarely discussed in polite company, and employers did not disclose their compensation for job openings until making an offer. But a series of rapidly expanding laws requiring employers to post salary ranges and prohibiting questions about salary history are offering more pay transparency than ever before, creating a foundational challenge—and opportunity—for HR leaders.
Seminal events including the #MeToo and Black Lives Matter movements and the COVID-19 pandemic shined a brighter spotlight on the long-standing pay inequality experienced by women and minorities in the United States. That led to a flurry of new laws in states and localities that—in an attempt to help end pay disparity—now require organizations to provide salary ranges for open positions.
“Since wages have been set under a realm of secrecy, when the curtain is lifted, you would expect wages to rise,” says Zoe Cullen, an assistant professor of economics at Harvard Business School. “Why? Because everyone has been negotiating individually. When people who are paid less than their peers suddenly discover that, they will want to renegotiate their salary.”
But three years after those first state laws passed, is the movement accomplishing what it set out to do—shrink the gender pay gap?
Information Is Power
In 1963, Congress passed the Equal Pay Act, protecting women from wage discrimination on the basis of sex. Sixty years later, women in the U.S. still earn only 82 cents for every dollar earned by a man, and the wage gaps for Black women (70 cents) and Hispanic women (65 cents) are even wider.
Research on the wages of remote workers reveals an even more alarming trend: A recent Payscale report indicates that the gender pay gap is 10 cents wider for women who work from home (79 cents) compared to women who cannot work from home (89 cents). Put in perspective, the average woman stands to earn approximately $900,000 less than the average man over the course of her career due to her gender alone.
Enter pay transparency laws.
Multiple states and localities enacted laws in recent years that cover both prohibitions against asking job candidates about their pay history (or basing job offers on that history) and laws requiring employers to post—or reveal upon request—a salary range for specific positions within their companies.
“Information is power, obviously, so if pay transparency laws require salary disclosures, it gives women information on what the marketplace says about what a position is worth,” says Lynne Marie Finn, CEO of Broadleaf Results, a global workforce solutions company in Williamsville, NY. “It helps people decide whether they want to apply for a position, and it gets them information relative to what they are currently making.”
Finn adds that research indicates women are less likely to negotiate their salary upon receiving a job offer or negotiating a pay raise. “Having knowledge of what the market bears will enable women to better negotiate for themselves,” she explains.
Although Maryland began requiring employers to provide job applicants with salary ranges for open positions upon request in January 2020, Colorado was the first state to require employers to publicly post salary ranges in January 2021. Connecticut, Nevada, Rhode Island, Washington, California and New York followed, bringing the current number of states that require employers to post or disclose salary ranges for open positions up to seven. Hawaii and Illinois have also passed statewide pay transparency laws to be implemented in 2024 and 2025, respectively. The District of Columbia and an additional 15 states—Alaska, Georgia, Iowa, Kentucky, Maine, Massachusetts, Missouri, Montana, New Jersey, Oregon, Pennsylvania, South Dakota, Vermont, Virginia and West Virginia—are considering pay range transparency bills.
According to a SHRM survey, 42 percent of HR professionals said their organization operates in a location that requires pay ranges to be included in job postings. When not required by law, however, more than two-thirds of those surveyed (67 percent) said their organization voluntarily lists starting pay in their job openings sometimes, often or always.
Transparency Growing Pains
With these new laws, however, the devil can be in the details. For example, the salary ranges required in the eight states with pay disclosure laws currently on the books provide a lot of wiggle room. The recently enacted New York state pay transparency law, for example, states that “the range may extend from the lowest to the highest hourly wage or salary that the employer in good faith believes at the time of the posting it would pay.”
That “good faith” provision has its detractors, particularly when some companies post ranges that strain credulity. “I’ve seen organizations being called out on posting ridiculously wide ranges that are the equivalent of not having a range at all,” observes Garry Straker, senior compensation consultant at Salary.com, a compensation management company headquartered in Waltham, Mass.
Lulu Seikaly, senior employment counsel at Payscale, a compensation data company in Seattle, recounts seeing a company post a range of $90,000 to $900,000 for an advertised position. “I would put a lot of money on a million-dollar spread not being a good faith range,” says Seikaly. “When I looked closer at the job posting, I saw that the stated range took into account total compensation. Well, that’s not the law. The law says that you need to post base salary only. The intention of the law is to allow candidates to come into a level playing field to negotiate their base salary.”
Posting remarkably wide pay ranges may not just be off-putting to job seekers; it can also stir discontent with incumbent staff. A post that went viral on X (formerly Twitter) read, “My company just listed on LinkedIn a job posting for what I’m currently doing … and now, thanks to salary transparency laws, I see that they intend to pay this person $32K to $90K more than they currently pay me. So I applied.”
Finn says some companies are having trouble figuring out how best to bring their policies in line with the new regulations. “Most companies don’t seek to actively violate the law,” Finn says. “They don’t want to get caught not complying, and they don’t want bad publicity or a negative impact on their brand. As with any new law, it’s going to take time for people to get comfortable with it.”
Still, noncompliance has hit some companies hard, leading to hefty fines and poor publicity.
“We are hearing some companies saying, ‘We’re just going to roll the dice because we feel that these states aren’t going to enforce these laws,’ ” Seikaly says.
Colorado imposes fines ranging from $500 to $10,000 per violation for failing to include wages in job ads. For now, there is some leeway. If an employer corrects the posting after an initial violation, Colorado will waive the fines. However, in the law’s first two years, Colorado handed out a total of $237,000 in fines against five companies, according to Bloomberg. Fourteen other companies also received citations.
New York City’s labor department racked up 300 tips from the public about noncompliant companies in the first six months of its pay transparency law. But, like Colorado, New York City is currently favoring citations and reminders over fines.
Seikaly says she encourages her clients that are inclined to resist these new laws to consider the bigger picture. “If you get caught, it’s costing you employee trust, it’s costing you attracting great talent, it’s costing you a great branding opportunity for you to showcase to your employees that you’re a really good employer to work for.”