Historically, discussing salaries was discouraged among both contingent and full-time workers, often under the guise of privacy to maintain workplace harmony.
Recent legislative changes and a shifting workforce culture have ushered in a new era of pay transparency. While this openness has primarily impacted full-time roles with established pay structures, there’s growing momentum to also extend transparency to contingent workforce management.
Let’s explore the concept of pay transparency, examine recent legislation in North America and Europe, and get actionable advice on how businesses can successfully implement this approach.
What Is Pay Transparency?
Pay transparency is the practice of openly sharing information about employee compensation with candidates, current employees, and potentially the general public. The disclosed information goes beyond just base salary and can encompass details like bonuses, commission structures, salary ranges for specific roles, and how compensation changes with promotions.
Why Is Pay Transparency Important?
Pay transparency plays a crucial role in reducing wage disparities and ensuring fair compensation:
- It provides workers with a clear understanding of what is being offered and how their pay compares to others.
- It encourages companies to justify their pay ranges, which can help eliminate unconscious bias that leads to unfair pay gaps based on gender, race, or experience.
Furthermore, this openness can reduce the pressure and awkwardness of salary negotiations for both employers and candidates, as the displayed pay rate sets clear expectations. Overall, pay transparency improves hiring outcomes and fosters employee satisfaction in the long run.
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Pay Transparency Status Across North America and Europe
Here’s a summary of the legislative developments on pay transparency across selected regions:
U.S.
While there’s no comprehensive federal law in the U.S. as of July 2024, activity is already happening at the state level. Currently, 10 states require pay transparency. Key state-level regulations include:
- California: Approved Senate Bill 1162, requiring employers to disclose salary ranges in all job postings and provide pay scales to applicants upon request.
- Colorado: Passed the Equal Pay for Equal Work Act. Employers must include compensation information in job postings and inform current employees about promotion opportunities.
- Connecticut: Passed the Act Concerning the Disclosure of Salary Range for a Vacant Position, requiring employers to provide wage range information to applicants upon request or before making an offer.
- Hawaii: Passed Senate Bill 1057, which requires employers to disclose salary ranges in job listings that must “reasonably reflect” actual expected compensation.
- New York: Various jurisdictions, including New York City, Ithaca, and Westchester County, require employers to disclose salary ranges in job advertisements.
On top of that, more states and local jurisdictions are passing laws that prohibit employers from asking about applicants’ salary history during the hiring process.
Canada
Similar to the U.S., there’s no federal law directly requiring pay transparency, but the Pay Equity Act, effective in 2021, requires employers in federally regulated workplaces with 10 or more employees to identify and correct pay disparities.
Provincial Legislation
Despite the absence of federal law, five of 10 Canadian provinces have enacted or proposed pay transparency legislation:
- British Columbia: Passed the Pay Transparency Act in November 2023, requiring employers to post expected salaries and wages for job postings.
- Prince Edward Island: Since June 2022, amendments to the Employment Standards Act now require salary disclosure for job postings.
- Ontario: Passed the Pay Transparency Act in April 2018, but the act was never brought into force. The government is introducing the Working for Workers Four Act 2023, which will require employers to include expected salary ranges in job postings.
- Newfoundland and Labrador: Passed the Pay Transparency and Pay Equity Act in November 2022, which requires employers to include pay information in publicly advertised job postings.
While these regional initiatives represent significant strides toward pay transparency in North America, there’s still room for further development. National frameworks could foster even greater consistency and impact, accelerating the shift towards a more equitable workplace for all.
European Union
The European Union has taken significant steps towards pay transparency with the adoption of the EU Pay Transparency Directive in 2023. This Directive aims to harmonize pay transparency laws across EU member states, requiring them to transpose the Directive into national law by June 2026.
Key Provisions of the EU Directive
The Directive mandates several key actions for employers:
- Conduct thorough assessments of compensation, including basic pay, bonuses, and other incentives, and report the results publicly.
- Provide salary transparency to job candidates by including salary ranges in job postings or informing candidates before the interview stage.
- Employers with 100 or more employees must report detailed information related to the gender pay gap and publish this data on their websites.
United Kingdom
In the UK, pay transparency is currently voluntary, subject to data protection restrictions. However, the UK has had gender pay gap reporting requirements in place since 2017, requiring companies with more than 250 employees to report on pay structure and providing specific statistics on gender pay gaps.
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MSP’s Pay Transparency Efforts
In the UK, where pay equity laws have been in place for a considerable time, managed service providers (MSPs) have effectively adapted their practices. They ensure that vendor management systems (VMSs) are configured to support pay transparency. These systems not only prevent vendors from inflating mark-ups to maximize profits, but also guarantee a fair assessment of salary ranges.
In contrast, the situation in the U.S. is less developed. Pay transparency isn’t yet a significant focus for MSPs, and many third-party staffing companies only comply when legally required. However, there’s a growing push for these practices, driven by clients and MSPs who recognize the benefits of transparency.
A 2022 report from a compensation software company revealed that 60% of 1,000 employed U.S. adults surveyed would switch to companies with more pay transparency. This push is further fueled by the increase in remote jobs, where workers from states with pay transparency laws now advocate for similar practices in states without such laws.
Recommendations to Adopt Pay Transparency
To remain compliant and competitive, companies should proactively embrace pay transparency rather than waiting for legal mandates. This proactive approach can position them as employers of choice, particularly in a market facing significant skill shortages. A 2024 survey from Manpower Group indicated that 75% of 40,077 employers across 41 countries reported difficulties in filling roles.
Here are suggested steps for implementation:
- Training and communication: Train recruiters and vendors to have meaningful conversations about pay. Equip them with the necessary information and skills to discuss pay rates transparently and confidently.
- Update systems: Ensure that your VMS is configured to handle different locations and can pull bill rate and pay rate ranges, while managing mark-up percentages and margins.
- Prepare for challenges: Anticipate potential challenges, such as resistance from internal stakeholders or concerns about market competitiveness, and develop strategies to address them.
By taking these efforts, companies can foster a more equitable and attractive work environment, ultimately benefiting from a more engaged and satisfied workforce.
Ready to streamline your pay transparency process? VectorVMS automates key tasks, making it easier to ensure fair and equitable pay practices. Contact us or request a demo to see how VectorVMS can help you improve your compensation strategy!
Meet the Expert
Irene Koulianos – Program Manager
Irene Koulianos brings a decade of experience in contingent labor staffing and recruitment to her role as Program Manager. She helps new and existing clients to develop best-fit vendor management solutions for their contingent labor programs. This includes product demonstrations, completing bids, and supporting the product team with roadmap initiatives. In addition to this primary role, she is passionate about building eLearning solutions for clients, partners, and internal VectorVMS staff leveraging Learning Technologies Group products. Prior to joining VectorVMS, Irene worked for large international staffing organizations as well as smaller boutique IT recruitment firms. She has a deep understanding of the contingent workforce landscape which helps her create meaningful solutions for her clients. Connect with her on LinkedIn.