Employee total compensation, which includes the base salary plus the value of any benefits received in addition to salary, has traditionally been shrouded in secrecy as proprietary information. Employers typically did not disclose the pay and benefits package outright in job postings, instead choosing to make the information known to top candidates who progress to the final stages of the interview process or as part of making an offer. A series of rapidly expanding state laws, however, aim to reduce the gender and racial pay gaps that persist today by a combination of banning employers from asking questions about a candidate’s salary history and transparency about pay practices by requiring disclosure of pay ranges in job postings. This change in attitude about compensation will create challenges and opportunities for employers.
Pay transparency laws empower candidates to negotiate as employers are permitted to pay outside of the good faith estimates based on what a potential hire (or current employee) brings such as experience, skills, education and performance (CNN). A study by Indeed Hiring Lab found that “between September 2023 and September 2024 the share of salary-transparent listings grew in 43 of the 46 sectors analyzed”, and , “job postings that are transparent about pay issues — in addition to including information on the type of job on offer, its requirements, hours, location and benefits — got three times more applications on average.”
While a company’s compensation structure and by proxy its recruitment strategy likely constitute trade secrets, compliance is not optional when faced with state pay transparency and “salary history ban” provisions. The difficult task employers face, especially those that rely on winning competitive bids for revenue generation, is balancing compliance with the mandatory disclosure of foundational elements that determine the company’s contractual bidding rates. To date, virtually all of the discourse has been on the benefits discussed above and complete silence on the part of state legislatures to recognize the potential negative impact on employers.
In apparent response to the change in Administration, the Federal Acquisition Regulatory Council (“FAR Council”) withdrew its proposed “Pay Equity and Transparency in Federal Contracting” rule for government contractors on January 8, 2025, stating “in light of the limited time remaining in the current Administration, OFPP, DoD, GSA, and NASA have decided to withdraw the proposed policy and rule and focus their attention on other priorities, including directives in recent National Defense Authorization Acts.” The proposed FAR clause would have prohibited prime contractors and subcontractors from seeking an applicant’s compensation history when making employment decisions, restricted contractors from relying on an applicant’s compensation history and required employers to disclose the compensation and benefits offered for any position performing work “on or in connection” with a federal contract.
It remains to be seen if there will be similar changes at the State level.
State Legislation
Several states have enacted pay transparency legislation, requiring employers to disclose pay ranges for open positions either in their job postings or during the hiring process, including California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont, Washington and Washington, DC. An article from SixFity.com provides summaries of the most recent changes in State pay transparency laws since the second half of 2024:
- District of Columbia – July 1, 2024 – employers with at least one employee in the District must include wage ranges in all job postings and disclose healthcare benefits before the first interview.
- Maryland – October 1, 2024 – employers must disclose the wage range and a general description of benefits in all job postings for positions that will be performed fully or in part inside the state.
- Minnesota – January 1, 2025 – employers with 30 or more employees in Minnesota must include the starting salary range and a general description of all benefits and other compensation in all job postings. An associated required labor poster displaying employee rights is in development by the Commissioner of Labor and Industry.
- Illinois – January 1, 2025 – employers with at least 15 employees in Illinois will need to include the pay scale and benefits information for the position in job postings for work performed a) at least partly in the state and b) jobs where the employee will report to a supervisor, office, or other work site in Illinois.
- Massachusetts – February 1, 2025 -employers with 100 or more employees in Massachusetts must provide annual wage data reports to the State Secretary.
- New Jersey – June 1, 2025 – employers with 10 or more employees must include wage ranges in job postings, a general description of benefits in job postings and make reasonable efforts to inform existing employees of opportunities for promotion.
- Vermont – July 1, 2025 – employers with 5 or more employees in Vermont must include a wage range in all job postings for positions that will be either located in Vermont or performed remotely for an office or work location that is physically located in Vermont.
- Massachusetts – July 31, 2025 – employers with 25 or more employees in Massachusetts must provide wage ranges to applicants on all job postings, to employees who are offered a new position, and upon request to both applicants and employees.