A new salary transparency law may soon be coming to California, home to 19 million workers and some of the most influential companies in the world including Apple, Disney, Google and Meta.
The state legislature approved a bill Tuesday that would require all employers in the state with at least 15 workers to include the hourly rate or salary range on job listings.
Currently, the state requires employers to disclose the pay range for a job if an applicant asks for it after an initial interview, per the state's Equal Pay Act.
Under new legislation, California-based companies hiring outside of the state won't be required to include salary ranges on those job listings. But companies based out-of-state and hiring for jobs to be done in California will be required to disclose pay ranges per the law.
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The bill is now with California Gov. Gavin Newsom, a Democrat, to veto or sign into law. It could pave the way for more policies across the U.S., Jamie Kohn, director in the Gartner HR practice, tells CNBC Make It.
Workers say pay transparency is about 'fairness and respect'
Salary transparency has become a huge focus for employees, especially with remote work, the Great Resignation and the leverage people have in today's tight job market, Kohn says.
A majority, 66%, of job-seekers expect to see salary in the job description, according to a June Gartner survey of more than 3,600 people.
"Pay transparency is not just about the money," Kohn adds: "It's about fairness and respect. Candidates tell us they see companies who don't include salaries in job descriptions as being less fair. So it's really driving how people perceive your organization — not just from a money standpoint."
Other salary transparency laws exist elsewhere in the U.S. — including Washington, Nevada and Connecticut — and have gained momentum in recent years.
Colorado's Equal Pay for Equal Work act went into effect in January 2021 and requires employers to disclose the salary range on all job ads. Early data suggests the change led more people to find work in the state, despite a drop in employer listings.
New York City, which boasts roughly 4 million private-sector workers, is set to enact its pay transparency law in November after being delayed from May.
'Companies have had a lot of warning that this is the direction we're heading'
Salary transparency policies are overwhelmingly popular among workers, and economists say they're key to closing the racial and gender wage gaps. The U.S. Census Bureau estimates women earn 82 cents for every dollar earned by a man, and the gap widens for many women of color.
Hiring experts say pay transparency can also be a big recruitment tool, particularly in today's tight labor market.
There are some downsides from the employer's side, Kohn says. For one, becoming compliant with a new law will take a lot of time to implement. HR leaders may worry people will prioritize base pay and overlook other company offerings like generous benefits, flexibility and growth opportunities. And it could lead to disgruntled employees if they see they're being underpaid compared to a brand new external hire.
Additionally, "companies may choose to pair salary transparency with a broader pay equity move in the organization, and right-size people's pay more broadly," Kohn says. "That's a very expensive prospect."
Still, Kohn says other states, cities and businesses should take California's latest move as a sign to get to work on implementing their own transparency policies.
"Companies have had a lot of warning that this is the direction we're heading," she says. "Most of the companies I talk to know that it's going this way and have been trying to figure out the best way to implement it."
The push for pay equity is likely to last beyond the current job market, where workers have more bargaining power than ever. Even as hiring demand cools, "there are some things people aren't willing to sacrifice and go back to the way things were before," Kohn says.
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