Compensation Equity, Transparency and Equal Pay Legislation

Equity and Transparency

Disclosing pay equity can enhance trust with employees, Improve retention and make promotions more clear. This transparency also supports the hiring process through streamlining pay negotiations.

Microsoft, AT&T, CBRE and JPMorgan Chase are among the 22 percent of the 922 largest, public U.S. corporations (ranked by JUST Capital) that disclosed conducting a pay equity analysis between 2016 and 2020 of their U.S. workforce.

The first step a company can take is to decide whether they should share information regarding pay gaps, equity or pay in general. The transparency a company publicly shares can range from each job’s salary to aggregated pay equity data to an executive’s salary cap. Transparency depends on a variety of factors, including legal requirements, internal pressure and public relations. If the decision to share pay information is made, it is then important to communicate the decision, including where the information will be published, to all stakeholders. When publishing this information, it is important to provide space for employees to reflect, ask questions and share comments, potentially regarding their and their team members’ salaries.

*Small Business Pro Tip: Conduct a pay equity analysis and share the results with employees. Provide opportunities for employees to ask questions.

 

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Equal Pay Legislation

Over the past four years, 14 states have passed enhanced pay equity laws aimed at closing the pay gap at the state and local levels. These enhanced pay equity laws generally prohibit employers from paying employees unequal pay for “comparable” or “similar” work (as opposed to “equal” work required under federal law). They also vary in scope and complexity, but in general, they all expand the scope of comparators required when determining whether an employee is being paid appropriately, narrow the available defenses for employers trying to explain or justify an employee’s pay and increase the penalties available against employers that violate them.

Colorado’s Equal Pay for Equal Work Act became effective January 1, 2021, and requires the following actions of compliance:

  • Wage rate history: Employers’ ability to ask about the salary history earned by applicants is restricted (thereby ending the perpetuation of historical compensation levels that may have been tainted by bias).
  • Wage transparency: Employers cannot discipline employees for discussing compensation, which allows employees to talk about their compensation or the compensation of other employees without the fear of retribution.
  • Provide compensation in job postings: Employers must disclose the hourly or salary compensation or a range of the hourly or salary compensation in each posting. A general description of all benefits and other compensation to be offered to the hired applicant must also be included.
  • Position posting and promotions: Employers must make reasonable efforts to announce, post or otherwise make known all opportunities for promotion to all current employees on the same calendar day and prior to making a promotion decision.
  • Improved record keeping: Employers must keep records of job descriptions and wage rate history for each employee for the duration of employment, plus two years after the end of employment, in order to determine if there is a pattern of wage discrepancy.

The following link provides the details on the bill.

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