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January 18, 2024

The importance of salary transparency laws and individual state requirements

Learn how Marsh McLennan Agency’s HR consulting team can help your company understand the salary transparency laws for your state.

Summary

  • What pay transparency laws are
  • Specific requirements by state
  • How Marsh McLennan Agency can help

Not every state has salary transparency laws. They’re becoming more common because many applicants want to know the position’s compensation before beginning the hiring process. In fact, 82% of United States employees are more likely to consider a job that lists the pay range in the job description, according to SHRM. On top of that, 74% of that same group of workers say they’re less interested in applying to a position that doesn’t list the employee pay scale within the job post.

If you’re unfamiliar with salary transparency laws or are attempting to understand what they might mean for your organization, you’ve come to the right place. We’ll examine which states have pay transparency laws implemented, cover what these rules mandate, and discuss how Marsh McLennan Agency’s HR consulting team can help you stay compliant.

What are pay transparency laws?

Pay transparency laws require employers to provide information about employee compensation, to their employees or the public. The specifics of these laws are determined by the jurisdiction of where your company is located. Overall, they’re designed to promote fairness among workers and reduce unequal employee pay based on gender, race, and ethnicity.

On top of encouraging fewer pay disparities, salary transparency laws build trust among potential applicants or current workers and employers. Knowing more about the job they’re applying for gives people a better understanding of whether the pay will provide them with a sustainable income. It also reduces the cost of hiring because it narrows the scope of candidates.

These laws have transformed from different policies and historical changes over the years. Here are some important evolutions of pay transparency to note:

  • Pay secrecy policies: The government and state laws kept employers from adopting policies restricting an employee’s ability to talk about their wages with fellow employees. It allowed employees to discuss what they were earning with other team members, shining a light on payment inequalities and gaps.
  • Salary history bans: An increasing number of laws have passed prohibiting employers from considering a candidate’s salary history when making hiring and compensation decisions.
  • Pay scale disclosure laws: A few states have created pay transparency laws that mandate the disclosure of salary or wage range to potential and current employees. Generally, these laws allowed the sharing of compensation information upon request or at a certain point once the hiring process had begun.
  • Pay data reporting: The Equal Employment Opportunity Commission formerly required employers to include any data related to employee compensation on their EEO-1 filings—also called Component 2. While this is no longer a mandatory requirement, it paved the way for the current salary transparency laws companies follow today.

Specific requirements by state

The laws depend on the state enacting them, but most require employers to:

  • Give applicants the salary range for a posted position at a specified point during the hiring process.
  • Provide an employee’s salary scale when requested if they’re changing jobs or upon hire.
  • Include salary range in job postings.

These states have specific salary transparency laws.

California

In 2020, the state identified patterns of wage disparities through statewide pay data reporting, which led to the newest update to its pay transparency law, reformed in September of 2022. The law states that employers must make pay scale information available to employees and include it in any job postings. It applies to any company that has over 15 workers.

In addition, California employers must submit annual pay data reports that have wage information on employees hired through labor contracts to the California Civil Rights Department. As part of this report, company leads should include the number of workers by race, ethnicity, and sex in each of these categories:

  • Administrative support workers
  • Craft workers
  • Executive or senior-level officials
  • First or mid-level officials and managers
  • Laborers and helpers
  • Operatives
  • Sales workers
  • Service workers
Colorado

Colorado was the first state to pass a pay transparency law regarding information posted within a job description. The law applies to any company with at least one employee, enforcing that these businesses include pay ranges in postings for open positions. Additionally, Colorado employers must inform current workers of any possible internal promotions the day the opening occurs.

Connecticut

In 2021, Connecticut had a salary transparency law go into effect that focuses on four main components: equal pay for all employees, wage range disclosure in job postings, a ban on seeking and using an employee’s wage history, and the freedom to discuss pay among team members, according to Pay Analytics.

Similar to Colorado and California—among other states—this law tacks on additional rules. An employer can’t demand that each worker’s pay be kept secret, and no previous compensation information can be used against a team member. 

Hawaii

On July 3, 2023, Hawaii signed legislation requiring employers with 50 or more workers to disclose salary information on job listings.

The law doesn’t include job posts for:

  • Positions that involve internal transfers or promotions within a current employer.
  • Public employee positions for which salary, benefits, or other compensation are determined by collective bargaining.
  • Roles with employers with fewer than 50 employees.
Illinois

Starting in 2025, Illinois employers will be required to include pay ranges in job postings. This includes roles performed at least in part in Illinois and jobs where the employee will report to a supervisor, office, or other work site located in Illinois.

Maryland

The Maryland Department of Labor says that the state’s law—Equal Pay for Equal Work— prohibits an employer from discriminating against an employee by either:

  • Paying an employee at a rate less than that of another team member based on sex or gender identity. 

  • Providing unfavorable employment opportunities because of a worker’s sex or gender identity. This could include keeping that individual from high-level positions, failing to provide information about internal promotions or advancements, and limiting an employee of chances that would otherwise be available to them if not for their sex or gender identity. 

The Equal Pay for Equal Work law applies to all employers in Maryland, regardless of size. 

Nevada

On October 1, 2021, Senate Bill 293 took effect in Nevada, providing a clear set of guidelines for companies of any size or industry to follow. These standards don’t allow human resource departments to rely on an applicant’s wage history when determining their pay for a position within the business. In addition, employers must provide the salary range to applicants who have completed an interview for a position as well as to existing team members seeking a promotion or transfer.

New York

New York State’s pay transparency legislation was enacted on September 17, 2023. It mandates that businesses with four or more employees follow the standards listed. The NYC Commission on Human Rights laid out the salary requirements:

  • Employers must post maximum and minimum pay ranges, not “$15 an hour and up” or “a maximum of $50,000 per year.”
  • The salary doesn’t include other compensation and benefits, such as paid time off, 401(k) plans, and health insurance.
  • The law also applies to promotions or internal transfer opportunities.
  • Covered listings include postings on internal bulletin boards, internet ads, and printed flyers.

These rules and regulations only apply to workers who work physically in New York or employees outside the state but report to an office or supervisor in New York.

Rhode Island

Rhode Island expanded its existing equal pay law in January 2023 to include additional requirements that employers must follow. These new regulations are similar to other states’ pay transparency legislation, focusing on candidate equality and wage transparency.

The Rhode Island pay transparency law requires:

  • At the applicant’s request, and before discussing compensation, or during employment, an employer must provide the wage range for the position the applicant is applying for.
  • A company leader must supply an employee with the salary range for their position at the time of hire and when they move into a new internal position. 
Washington

For organizations with 15 or more employees, the state of Washington requires employers:

  • Disclose the salary range and description of all benefits and other compensation in job postings.
  • Provide pay details to current employees when they ask.

Washington’s transparency legislation defines a “job posting” as any solicitation intended to recruit job applicants for a specific available position. It includes recruitment done directly by an employer or indirectly through a third party and any postings done electronically or with a printed hard copy—including qualifications for desired applicants.

Cities that have local ​wage transparency laws

  • Cincinnati, Ohio
  • Jersey City, New Jersey
  • Ithaca, New York
  • New York City, New York
  • Toledo, Ohio
  • Westchester County, New York

There are penalties for employers that don’t follow the state-mandated regulations. Depending on the location, employers could be charged anywhere from $500 to $15,000 for non-compliance per violation, according to Rippling. New York City companies have even heftier fines, with penalties of up to $250,000.

Marsh McLennan Agency can help

Help your company follow the necessary state or city mandates by getting assistance with benefits compliance and HR consulting solutions from Marsh McLennan Agency. Our team of HR specialists offers several services your business may benefit from, including compensation and total rewards, HR transformation, HR compliance and operational reviews, and more.

Reach out to one of our compliance consultants today to learn more.