Laws governing how we discuss salary are the hot state legislative item these days. Starting in January, a new California law requires employers to disclose salary details in job ads and to existing employees. The goal is to promote pay equity, an issue that keeps women earning 82 cents for every dollar a man makes and women of color making even less. What does this law say and how will it affect your business? Here’s what you need to know about California’s new salary laws.
What the California Law Says
California law already requires employers to share salary details upon request. But when the new law begins on January 1, 2023, companies with 15 or more employees will also have to post these details in their job ad. Specifically, covered employers must include a pay scale for the job opening in any job advertising. Companies with 100 or more employees must also annually report detailed pay information to California’s Department of Fair Employment and Housing.
The law doesn’t address what posting a pay scale really means. Does it mean just salary ranges, or does the company have to also disclose bonuses and benefits?
According to The Washington Post, the new rule applies to approximately 200,000 California companies employing 19 million workers. Failure to comply could result in fines of up to large fines per employee, not to mention reputational damage.
While the new California law represents one of the most sweeping attempts for pay transparency in the U.S., these types of regulations are already in effect in the European Union. Other states have adopted some similar regulations including:
- New York City
- Rhode Island
Some cities like Cincinnati and Toledo in Ohio and New York City have enacted some form of pay transparency laws.
Do We Need This New Legislation?
Companies haven’t felt the impact of these rules yet, but the reasons driving this legislative change are tied to pay equity. In today’s pre-pay equity climate, equally qualified white women make less than white men and people of color make even less. The data shows us that:
- White women in the U.S. earn 17% less than white men.
- Equally qualified black women earn 88% of the average wage of white women.
- Hispanic women earn 79% less than white women.
- Equally qualified black men earn 82% of the earnings of white men.
- Hispanic men earn 75.5% less than white men.
- Asian men and women on average earn more than their white counterparts.
The new law may create some challenges for companies new to the pay equity issue. There are benefits to these changes for employers, too; now you’ll be able to see what your competition is paying for talent.
The reality of pay inequities boils down to sheer numbers. In California alone, women lose $87 billion in salary due to the pay gap. Note that these numbers stem from cases where women are equally qualified for a job as a male counterpart, but due to their gender, they are paid less. The issue is worse for people of color.
Prosum supports pay equity. We work with employers to help them create the best possible packages to attract top talent. Our experienced teams bridge the gap between employer and candidate, helping both parties find the perfect match. Call on us. We can help meet your hiring goals.