California has now joined New York City and Colorado in requiring employers (for Golden State employers, of 15 or more) to publish “pay scales” in job postings. As with many things California, however, the new law (which becomes effective on January 1, 2023) regulates, but doesn’t guide. Pay transparency may be a worthy goal to effectuate parity, but employers face more questions than the new mandate answers. Because human resource professionals are often the first to venture out into new territory (often unaided by maps and navigation equipment) we thought a field guide for pay “rangers” was in order.
Calculate the pay range. A pay scale should reflect the compensation range an employer “reasonably expects” to pay. What is reasonable under these circumstances? As always, what is reasonable in any given case depends on the facts, but a range should be grounded in some concrete data. That data might include things like, (1) the salary or hourly rate being paid to the person currently in the position (if one exists); (2) data reflecting what the employer is or has been paying for the positions just above and below the position being advertised; (3) market data reflecting what other employers in the same or similar industries are advertising in the same geographic location (being sure to navigate around any wage fixing claims); (4) information gleaned from recruiters and other staffing professionals; (5), internal information, such as the budget for the position, amounts paid to other individuals in similar positions within the employer organization, and any other objective data that might inform the upper and lower boundaries of the pay range. A wider range gives more flexibility than a smaller range, but even so, a range is not a promise of what any particular candidate will be paid (and yes, employers might consider including that language – more on that below).
Post the pay range. The new law requires pay ranges for positions to be advertised on any external posting, and any recruiter advertisements, postings on company websites, and postings on such public sites such as LinkedIn, Indeed, or any other website. Some public versions may be the same as the internal version for internally posted positions, but for others it may be beneficial to tailor the information to the intended audience. For example, some job postings should contain disclaimers, such as stating that the job posting is not necessarily reflective of actual compensation that may be earned, nor a promise of any specific pay for any specific employee, which is always dependent on actual experience, education and other factors. Employers may—but are not required to—consider mentioning equity, benefits, and other nonmonetary compensation that the employer may want the applicant or employee to know (especially if it makes the employer more competitive). Consider the amount of details to be provided in each job posting and be consistent in that level of detail across the many different avenues of advertisement.
Map the discussion protocol. Undoubtedly, employees and applicants will have questions about pay scales and other information relevant to the position. Employers need to be prepared to explain why an applicant might qualify for the lower or upper end of the scale, depending on the applicant’s experience and education and other relevant criteria such as special licensing or other qualifications. In addition, the new law does not require information regarding bonuses, equity, or commissions to be posted (though in the case of commission-only sales positions, the ranges for those commissions should be posted in the same manner as other positions are posted, with a commission range instead of salary). The communication should also provide a contact for further inquiries or follow up questions and provide any necessary disclaimers (e.g., the advertised pay scale is not a promise of a particular wage).
Guide the interviews. Internal interview guidelines should have already been updated to make employees aware that they should not be asking about an applicant’s wages at a prior position because California law (and many other state laws) already prohibits those questions. Instead, interviewers should be aware of the advertised pay scale for the position and be prepared to answer questions about it or to direct the applicant to the appropriate personnel for further questions about compensation and benefits.
Maintain the records regarding the process for and conclusions regarding posted pay scales. Records of job titles and pay rates must be kept for the duration of each employee’s tenure with the company and for three additional years after employment ends. Employers should confirm with their payroll provider to ensure this information remains accessible for the required 3 years after an employee’s departure, and that no records are deleted or destroyed until the appropriate time. Furthermore, records relating to the process by which pay ranges are set should also be maintained for the same time period.
Be ready to navigate. The pay transparency movement empowers applicants and employees to question why they are being offered certain rates of pay. Employers should prepare for these conversations by reviewing their job descriptions for thoroughness and accuracy, considering the business reasons behind the pay ranges and the market factors driving the process. And, just like understanding (and following) the map, employers need to be able to explain how the employer got from here to there in a way that makes sense and instills confidence in the process.
For an FAQ on the contours of the new pay transparency laws, click here.