How to Take Advantage of the Pay Transparency Moment in 2023

It’s safe to say that pay transparency, pay equity, and salary ranges are having a moment, and it’s long overdue. We’re almost 60 years removed from the passage of the Equal Pay Act, but women, on average,  still only make 82 cents to every dollar earned by men and the gap is much worse for women of color. The gender pay gap has been relatively unchanged for the past 15 years, costing trillions to the economy. 

This year, there are a lot of good reasons to be hopeful. New pay transparency laws are officially in effect in California, Washington, Rhode Island, and New York City. And a diverse group of states ranging from South Carolina to Massachusetts have legislation pending. 

This is the perfect time for equity-minded employers to seize the moment, root out bias in their compensation practices, and foster more inclusive, equitable environments. To do that, here’s what I recommend you focus on this year.

Watch for more pay transparency laws and understand their nuances

This year, legislators will continue the forward momentum of the pay transparency movement by introducing and passing more legislation. To stay ahead of any potential rules that may impact your business, employers should maintain awareness of these laws and their various nuances. 

As these laws take shape, they typically fall into one of three buckets:

• Salary history bans, which are currently in effect in 21 states and 21 municipalities, prohibit employers from asking candidates about their pay history. Even if employers discover or receive salary history information voluntarily, some of these laws prohibit them from using that data to set compensation.
• Salary disclosure laws require employers to inform candidates about salary ranges upon request (such as in Maryland and Rhode Island) or in job postings (such as in California, Washington, Colorado, and New York City).
• Pay data reporting legislation requires employers to provide pay data reports broken down by gender, race, and ethnicity. Currently California and Illinois have pay data requirements in effect for private companies with more than 100 employees.

This year, I expect we’ll see more laws that require employers to disclose compensation information to candidates, and further momentum around pay data reporting requirements. There’s even potential action coming from the federal level. The EEOC Commissioner recently announced that the agency intends to bring back EEO-1 Component 2 pay data reporting, which requires that companies submit employees’ W-2 income information broken down by gender, race/ethnicity, and job category. 

Each of these laws will have their own nuances, in terms of who is required to comply, and which specific actions are required or prohibited. To keep up with their progress, follow our Pay Transparency Legislation Tracker. 

Even if there’s no pay transparency legislation currently in motion in your state or city, it’s important to stay aware of the current landscape. Some pay transparency legislation covers remote positions. New York City’s law applies to roles that could be performed in the city, and Colorado’s legislation requires companies that have at least one employee located in the state to comply. These broad parameters may mean that your company is already subject to these laws, or that pending legislation will impact you sooner than you may think.

To make sure your organization is ready to comply, download The HR Leader's Definitive Guide to Preparing for Pay Transparency.

Start making pay audits part of your regular processes

Conducting pay audits is one of the most important steps you can take to address equity, and now’s the time to start making them a part of your regular processes. Unfortunately, very few organizations conduct regular pay equity audits and even fewer look at multiple factors like race, ethnicity, gender, education, and experience. 

Choosing to put them off can be costly in a number of ways:

• Widespread inequality often leads to multi-million dollar settlements and negative publicity. Class action settlements are on the rise, and some of the most high-profile recent cases focused on pay discrimination. 
• You can’t manage what you don’t measure. Simply refusing to confront bias won’t make it go away. If you want to make meaningful change, it’s important to know where gaps exist, and how large they are. 
• Companies that don’t embrace pay equality are less competitive among candidates. Two-thirds of CEOs say pay equity greatly influences recruiting and retaining top talent. 

Keys to a successful pay audit

Pay audits allow you to identify pay gaps in your organization so you can course correct quickly, ultimately preventing financial headaches and the fallout of bias in your compensation. To perform a pay audit correctly, take the following steps:

• Assess compensation at the organizational level as well as by job level, role, and department to see if there are clear areas of discrepancy.
• If your company has established its own salary ranges, review where your employees fall into those salary ranges by demographics.
• Perform pay audits quarterly, since every new hire or exit can shift the balance. 
• Dive deeper to uncover the root causes of inequities. Is the inequity due to a difference of experience, a lapse in planning, or could it be the result of unintentional bias? 
• When you identify pay gaps, take action immediately. 

Performing pay audits can be difficult without support. The OPEN Imperative (Organizations for Pay Equity Now) is a coalition of hundreds of fast growing companies that are committed to advancing pay equity best practices and closing gaps in their companies. OPEN Imperative makes it easy to get started with pay audits by providing all members with a free and confidential pay equity report.

Take advantage of positive momentum

2023 stands to be a positive year for pay transparency, pay equity, and the sharing of salary ranges. For employers that want to make the most of the moment, staying on top of legislation, implementing regular pay audits, and offering equitable benefits will help you take advantage of this moment.

Emily Sweet is VP of Social Impact and OPEN Imperative Lead at OpenComp. She writes about topics including pay equity and diversity, equity & inclusion (DEI). A board member of the National Council of Jewish Women, Emily is a veteran philanthropic leader and policy advisor with more than 20 years experience advancing bold solutions to big problems that drive impact and inspire collective action.  Connect with her on LinkedIn here.