It’s the start of a new year and the perfect opportunity to prepare for a productive and compliant 2023. This includes adapting your hiring and compensation strategies so that they are in line with all employment law developments. One such example, if you live in New York City, is the NYC pay transparency law which came into effect in November 2022.
Following in the footsteps of other states, including Colorado, California, and Washington, this new law aims to provide job seekers with a range of protections against discrimination. It is also an important step towards ensuring pay equity for New Yorkers.
Today, we are going to share everything you need to know about the NYC pay transparency law so that you can prepare your business for full compliance.
Table of Contents
Table of Contents
What is New York City’s pay transparency law?
Pay transparency is a concept that has been growing in popularity over recent years, especially since the wake of the #MeToo movement which, among other issues, put the spotlight on gender equality and equal pay for all. The COVID-19 pandemic and the “great resignation” have added more fuel to this debate. As a result, society is demanding fairer hiring practices and more transparency in business. And this has led to the creation of a number of US federal employment laws, including those related to salary transparency.
The NYC pay transparency law is one such federal law. Launched in November 2022, the law requires employers to disclose minimum and maximum pay ranges in good faith for all on-location and remote jobs, promotions and transfer opportunities based in New York City. Failure to comply with this law can result in penalties of up to $250,000 per violation.
New York City Council isn’t the first jurisdiction to introduce laws that promote salary transparency. In fact, pay transparency laws are being enacted all around the country. For example, California has just this week enacted its own law related to pay scale disclosure. California’s new pay transparency law has one primary objective: to promote equal and transparent pay for all.
What NYC pay transparency law means for employers
So, what exactly does the NYC pay transparency law mean for employers in the Big Apple? What salary transparency obligations do you need to be aware of?
Let’s break down the basics before we discuss how you can adapt your business to ensure compliance.
New York City’s pay transparency law is an amendment to the New York City Human Rights Law. Originally planned for May last year, the amendment was eventually enacted on November 1, 2022.
Essentially, according to the NYC pay transparency law, companies with four or more employees that have at least one employee working in New York City have an obligation to disclose minimum and maximum salary ranges for all advertised employment positions. This includes job ads for remote and in-house employees, hourly and salaried positions, independent contractors, and interns. The requirement also applies to internal promotions and transfer opportunities. Whatever position you are looking to fill, you need to clearly detail the salary range that you will offer. This published salary range must be based on a “good faith belief” of what you will pay successful candidates.
How to adapt to the NYC pay transparency law
Pay transparency is important for a number of reasons. It helps to promote fairness and reduce the gender pay gap. It also protects workers from discrimination, especially those from historically underrepresented minority groups.
Let’s take a look at a few strategies you can implement to promote pay transparency. That way, not only will you stay compliant and avoid potentially hefty penalties, but you can also build a reputation as an equitable and transparent employer. And this will help you stand out from the competition and attract top talent to your business.
Develop a fair compensation system
The first step in creating a culture of pay transparency involves developing a fair compensation system.
There are a few ways to do this.
Firstly, make sure you have a clearly defined compensation plan that defines guidelines for salary ranges and how salaries should be negotiated during the hiring process. This means that no single manager should have unilateral authority over salaries, bonuses, or other forms of compensation.
It’s also important to make sure that all employees performing the same duties are offered the same salary, in line with wage and hour laws, and all bonuses should be calculated according to clear performance benchmarks.
All this will help you avoid potential issues with unjustified pay gaps, such as overrepresented groups being paid more than minority groups regardless of experience or qualifications.
Make a career path plan
Once you’ve developed a fair compensation plan, the next step is rolling it out to your employees and designing clear career paths for all staff. This will ensure that all employees understand why they are being paid the amount they receive, and what they need to work on before they can earn a higher salary.
For example, you could set clear training goals so that employees know which skills they need to develop before they are entitled to a pay rise. This helps you encourage your employees to take responsibility for their own professional development. And that way, they will understand how their development influences their salaries and why some of their colleagues might be, justifiably, receiving a higher salary. As a result, you will reduce potential claims of discrimination and avoid related claims of pay transparency violations.
Conduct pay audits
Another valuable tool for ensuring your salaries are fair and balanced is conducting regular internal pay audits. It’s a good idea to include these audits in your HR compliance calendar for 2023. This will help you set reasonable salary ranges that ensure pay equity and consistency.
Review all the positions in your company. Look at how much you pay according to factors such as experience, seniority, and qualifications. Are you paying employees performing similar duties equal salaries, regardless of gender or race? Which criteria do employees need to meet in order to qualify for a promotion or internal transfer? In the event of discrepancies, are there legitimate reasons for paying higher or lower salaries to certain employees? The more transparent your process for determining salaries is, the easier it will be to be publicly transparent about the salary ranges you offer candidates.
Identify your pay gap
Part of your pay audit should involve conducting checks to help you identify if there are any pay gaps in your salary structure. This is where you pay different salaries to employees with the same skills and experience. Although most companies these days promote the idea that they support gender and racial equality in the workplace, there still continues to be an issue with pay gaps in reality. For example, on average, women in the U.S. make 82 cents on the dollar compared to men, and Latinas are paid 54 cents for every dollar paid to white, non-Hispanic men.
Break down your salaries according to different demographics, including age, gender, and race. Are you paying certain groups consistently less than others? Could there be an issue with conscious or unconscious bias or discrimination in your hiring and salary negotiation practices? If you’re in any doubt here, then it’s a good idea to get legal advice. It’s better to identify and address potential pay gap issues rather than face claims of unfair or untransparent salary practices.
Eliminate bias in your compensation strategy
Finally, make sure you do everything you can to eliminate potential bias or discrimination in your compensation plan and salary negotiation strategy.
The best way to do this is through training. Are your hiring managers aware of any potential unconscious biases during the recruitment and negotiation process? Do they understand the importance of offering equal pay for equal work? Are they aware of the guidelines for offering salaries in line with a candidate’s level of skills and experience? When should they offer lower salaries? Can they justify offering higher salaries to certain candidates?
The right training will ensure that all your hiring managers understand how your compensation plan works and how applicant requests related to salary range data should be handled.
NYC pay transparency law: what to avoid
As with all laws, there will always be businesses that try to bend the rules to their own advantage. This is especially true for those who are not willing to be transparent about their compensation strategies.
Here are a few examples of things to avoid in order to ensure compliance with the NYC pay transparency law:
- The first loophole that some businesses have started using to their advantage relates to the definition of “good faith”. When you publicly share a salary range for a position, it should reflect the minimum and maximum amounts that you are willing to pay for the role, depending on qualifications and experience. This means that you shouldn’t publish vastly broad ranges in an attempt to hide what you actually pay employees in certain positions. Some companies have already received public backlash for this. For example, when the law first came out, Citibank posted job listings with pay ranges from $0 to $2 million. This range was meaningless and gave candidates no indication of what Citibank would actually pay a successful candidate.
- Another tactic used by some companies to avoid disclosure is reducing the number of job ads that they post. This tactic was used by a lot of businesses in Colorado when the state released its own salary transparency law. As a result, the state’s labor department sent warnings to hundreds of employers and fined a number of businesses for violations.
Similar legislation in New York State
The NYC pay transparency law applies to all businesses located or operating in New York City, and it is controlled by the New York City Commission on Human Rights (NYCCHR). A similar law is expected to come into effect later this year. This pay transparency law will apply to the entire state of New York.
This pay transparency legislation will contain three additional requirements:
- A posting must include a job description if one exists;
- A posting must include a general statement that compensation is based on commission, if applicable to the position; and
- Employers must keep and maintain records of compensation history for posted jobs, promotions and transfer opportunities.
Moreover, other areas of New York State, including Westchester County and Ithaca, are adopting their own salary transparency laws. For example, Section 700.03 of the Westchester County Human Rights Law was amended in 2022 to require salary transparency in covered job postings. And the pay transparency law in Ithaca has made it an unlawful discriminatory practice for an employer to advertise a job, promotion, or transfer opportunity without stating the minimum and maximum hourly or salary compensation.
Examples of pay transparency
Let’s finish by taking a look at a few examples of pay transparency that have helped well-known brands establish reputations for being fair and transparent employers.
The following examples should help you understand how complying with the NYC pay transparency law can help you boost your employer brand and attract and retain top talent.
Whole Foods has been a big advocator of wage transparency since 1986. According to the company’s CEO John Mackey, employees have a right to know what everybody else in the business is earning. That’s why the company publishes the average pay of all its positions on its website.
Mackey believes that pay transparency motivates employees and gives them something to strive for. The idea is that employees look at a colleague’s salary and think, “Wow, I had no idea that a coordinator could get paid that much. I want to be a coordinator”. And this creates a healthy sense of internal competition that encourages employees to better themselves.
Mackey also believes that pay transparency is essential in correcting discrepancies between employees. Plus, it’s an effective strategy for helping employees understand why they are paid what they are paid. It establishes a direct relationship between an individual’s performance and their impact on the business.
Starbucks takes a slightly different, yet equally effective, approach to pay transparency. The coffee giant shares pay equity data with everyone and pay ranges with candidates when asked. And the company has been doing this for over a decade now. Long before it became a legal requirement in certain states.
Starbucks launched an initiative in order to study wage disparities among its employees. The aim was to close any existing gender and race pay gaps. It did this by following 3 core principles: equal footing, transparency, and accountability. For instance, hiring managers never ask candidates about their salary history. The company also sets salary ranges before sourcing begins. Plus, it bases starting salaries on skills, abilities, and experience. The company has furthered its commitment to pay transparency by publishing its pay equity progress annually.
As a result, the company now claims to have achieved 100% pay equity across its U.S. workforce, with a pledge to achieve this in all company-operated markets worldwide.
The final example of a company that has benefitted from promoting pay transparency is Salesforce.
Marc Benioff, the CEO of Salesforce, has voiced his commitment to gender equality on numerous occasions. However, two of the company’s SVPs (Leyla Seka and Cindy Robbins) were concerned that there was a gender pay gap. So, they pledged to conduct a thorough pay gap analysis to determine if they were paying women the same as their male counterparts. They were not.
As a result of this study, Benioff asked Seka and Robbins to regularly monitor pay rates to make sure that women didn’t fall behind again, and to make these findings publicly available. By committing to pay transparency in this way, the company was able to close the gender pay gap. It also secured its reputation as a fair and equitable employer. And this is precisely what the NYC pay transparency law aims to do: promote the open sharing of salary data with the aim of creating a fair system for all.