More states now have pay transparency laws. Here’s the effect they’re having

By Jeanne Sahadi, CNN

(CNN) — In the past few years, a growing number of states have put laws on their books requiring employers to disclose pay ranges for open positions — either in their job postings or during the hiring process.

Today, Washington, DC, and 13 states have pay transparency laws in place: California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, Vermont and Washington. Most are already in effect, but the laws in four of those states (Illinois, Massachusetts, Minnesota and Vermont) won’t take effect until next year.

A 14th state — New Jersey — passed pay transparency legislation this fall. If Gov. Phil Murphy decides to sign it into law, it would go into effect seven months later.

Plus, five cities and at least one county have their own pay disclosure requirements: Jersey City, New Jersey; Cincinnati and Toledo in Ohio; plus New York City, Ithaca and Westchester County in New York State.

The net effect for employers and employees

While only a minority of states require employers to provide pay transparency, their laws are having a domino effect on employers across the United States.

“It is having a larger impact than just on those states,” said Sarah Wieselthier, a partner and management-side employment attorney at Fisher Phillips.

Compensation data and research provider Payscale estimates that next year nearly 1 in 3 workers in the US will be affected by some pay transparency law when they look for a job or see their employer’s job postings.

One reason may be sheer practicality. With so many different laws in place there is no one standard for how employers must disclose pay. That’s a particular concern for multi-state employers, but also any company hiring remote workers. That’s because the state of Washington, for instance, considers all employers subject to the state’s pay transparency law if they are advertising for a role that potentially could be filled by a resident of Washington state.

“With multi-state employers — especially larger ones — sometimes the easiest way to comply is to comply with the state that has the most stringent requirements. It’s best practice now to include [pay ranges],” Wieselthier said.

Secondly, pay transparency is desired and increasingly expected by Gen Z and Millennial employees but especially Gen Zers, who will likely make up 30% of the US workforce by 2030, said Lulu Seikaly, Payscale’s senior employment counsel.

Between September 2023 and September 2024, “the share of salary-transparent listings grew in 43 of the 46 sectors analyzed — often by large margins,” according to a study by Indeed Hiring Lab jobs site.

In addition, Indeed found that 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. “Missing one [of those features] dramatically reduces an employer’s ability to attract quality candidates,” said Viral Kadakia, Indeed’s vice president of product.

A separate study from Payscale found that top-performing employers –– defined as those that beat their 2023 revenue targets — were more likely than others to be very transparent with job candidates and employees about pay issues.

“The majority of top-performing organizations (57%) embrace pay transparency and share pay ranges even when not required by law,” Payscale’s report noted.

It also found most top-performing employers (71%) are more likely to proactively and regularly deal with issues of underpaid employees; and more than half (52%) also “provide always-accessible pay communications to their employees that explains the ‘why’ behind their pay,” the report said.

How pay transparency is helping individuals

While there are federal laws prohibiting wage discrimination based on gender and other protected classifications, most states also have their own pay equity laws on the books.

Wieselthier considers pay transparency laws a subset of pay equity because they provide a tool people can use to ensure they’re being paid fairly. “We don’t know if we are being paid equitably until we know what the range is for a job,” she said.

But the range is just a jumping-off point for a discussion about pay. “The whole purpose of pay transparency laws is to empower the candidates to negotiate,” Seikaly said.

That’s because they only require employers to provide a good faith estimate of what they’re willing to pay, but they’re permitted to pay outside of that range based on what a potential hire or current employee brings to the table.

Wieselthier recommends that clients include language in their job postings indicating the pay range is a reasonable estimate of what they’ll pay, but that actual compensation may vary based on things like experience, skills, education and performance.

Another approach: Seikaly notes that Payscale in its own job ads provides not just a minimum-to-maximum pay range but an indication of what they’re most likely to pay. “We’ll say we try to target the 60th percentile of the range,” she said.

However the range is presented, find out during your interviews what objective factors the employer considers when deciding to pay someone at the high end of the range or above it.

“Ask the employer, ‘How do you determine where I would fall within the range? What specifically are you looking for in a stellar candidate?’” Seikaly suggested.

That way, she said, you’ll have a sense of what it takes to be paid the maximum, and know better what to stress about your own attributes in interviews.

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