PEO
Pay Transparency Laws Are Changing How Managers Prepare for Salary Discussions
By Anthony Beck, . Insurance Wire.
Pay transparency laws are changing how employers communicate compensation decisions, particularly as more states require salary ranges in job postings and certain employment disclosures.
In an HRO Today article, Robin Belk, Senior Principal of Change Management at Marsh, explains that employees increasingly enter compensation discussions with access to salary information that was previously difficult to obtain.
Published salary ranges allow employees to compare their current compensation against positions advertised by their own employer or competing businesses.
That visibility creates questions managers need to be prepared to answer, including why an employee earns a particular amount within a salary range and what would justify an increase.
Belk emphasizes that employers can no longer rely on informal or inconsistent explanations of compensation decisions.
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How Pay Transparency Requirements Affect Employers
Pay transparency requirements vary by jurisdiction, but several states now require employers to disclose compensation ranges in job advertisements or during specified stages of the hiring process.
For example, California Labor Code Section 432.3 requires covered employers with at least 15 employees to include pay scales in job postings.
Colorado's Equal Pay for Equal Work Act and its implementing regulations require covered employers to disclose compensation information and certain benefits in job opportunity notices.
New York Labor Law Section 194-b requires covered employers with four or more employees to disclose compensation ranges in advertisements for covered job opportunities, promotions and transfers.
These requirements can also apply to certain remote positions or jobs that may be performed in a covered jurisdiction.
Employers operating across multiple states must account for differences in coverage thresholds, disclosure requirements and enforcement provisions.
Importantly, a published salary range does not necessarily mean every employee performing a similar job must receive identical compensation.
Differences may be supported by legitimate factors such as experience, qualifications, responsibilities, performance and applicable seniority systems, subject to federal and state equal pay requirements.
However, employers should be able to explain how those factors are applied within their compensation structures.
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Preparing Managers for Compensation Discussions
Belk recommends that HR departments establish clear compensation practices and communicate them before individual salary discussions take place.
Managers should understand the employer's salary ranges, how employees are positioned within those ranges and the criteria used to determine pay increases.
For example, an employee earning $65,000 may question why the employer advertises the same position with a salary range of $60,000 to $85,000.
The manager should be prepared to explain the factors determining placement within that range, including experience, job responsibilities, performance or other established criteria.
Managers also need to distinguish between annual merit increases, promotions and market adjustments.
A merit increase generally reflects an employer's performance-based compensation process, while a market adjustment addresses differences between current pay and prevailing compensation for comparable positions.
Without consistent guidance, managers may provide conflicting explanations or make commitments that do not align with company compensation policies.
HR should establish approval procedures and ensure managers understand which compensation decisions they are authorized to make.
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How Compensation Technology Can Help
Compensation management platforms can help employers organize salary ranges, evaluate internal pay relationships and document compensation decisions.
These systems may identify employees whose compensation falls outside established ranges or highlight differences between comparable positions.
They can also help HR departments review proposed salary increases against available budgets and compensation policies.
Some employers are incorporating artificial intelligence into manager training, including simulated compensation discussions that allow supervisors to practice responding to employee questions.
However, technology cannot determine whether a compensation policy is appropriate or ensure managers apply it consistently.
Belk emphasizes that compensation systems are most effective when supported by established policies, reliable data and properly trained managers.
Employers should also review the accuracy of salary information before making it available through employee portals or management dashboards.
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What This Means for Employers Using a PEO
Professional Employer Organizations (PEOs) may provide payroll administration, HR consulting and compensation benchmarking services that support employers with pay transparency requirements.
However, the client employer generally retains responsibility for establishing employee compensation and managing salary discussions.
The PEO may assist with identifying applicable state requirements, maintaining payroll records, evaluating compensation data and providing HR guidance.
The client remains responsible for determining appropriate pay levels, approving compensation changes and communicating those decisions to employees, subject to the applicable agreement and law.
For employers operating in multiple states, a PEO's HR team may help identify differences in salary disclosure requirements and review job posting practices.
PEOs offering compensation benchmarking or HR technology can also provide managers with information needed to explain pay ranges and evaluate proposed increases.
Employers should understand which services are included in their PEO arrangement and whether the available compensation data reflects their specific positions and labor markets.
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Building Consistent Compensation Practices
Pay transparency requirements make it increasingly important for employers to maintain accurate job descriptions, defined salary ranges and documented compensation criteria.
Before managers discuss compensation with employees, HR should verify that published pay ranges reflect the employer's actual compensation practices.
Employers should also review whether differences in pay between employees performing comparable work can be explained by legitimate, consistently applied factors.
Regular compensation reviews can help identify outdated salary ranges, internal inconsistencies and positions where market pay has changed.
The objective is not to guarantee employees identical pay or eliminate management discretion. It is to ensure compensation decisions are supported by established criteria and that managers can explain those decisions accurately.
As employees gain access to more compensation information, employers that maintain consistent pay practices and prepare managers in advance will be better positioned to address questions and comply with applicable disclosure requirements.
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Sources
HRO Today — Transparent and Tech-Driven Compensation Conversations https://www.hrotoday.com/news/current-features/transparent-and-tech-driven-comp-conversations/
California Legislative Information — Labor Code Section 432.3 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=432.3.&lawCode=LAB
Colorado Department of Labor and Employment — Equal Pay for Equal Work Act https://cdle.colorado.gov/equalpaytransparency
New York State Senate — Labor Law Section 194-b https://www.nysenate.gov/legislation/laws/LAB/194-B
Source: https://www.hrotoday.com/news/current-features/transparent-and-tech-driven-comp-conversations/
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