Pay transparency laws rapidly reshape the employment landscape, impacting hiring practices, salary negotiations, and organizational culture. That’s why our team partnered with Morgan Geffre, an employment and labor law Associate at Foulston-Siefkin LLP, to discover what to know and expect in order to stay ahead of these upcoming changes.

Whether you’re prompted by regulatory compliance in your state or at the forefront of implementing these updates, here is what you need to know to maintain trust with employees and job candidates.

Q&A interview with Morgan Geffre, Associate Labor Attorney at Foulston-Siefkin, LLP

What’s the easiest way for HR to ensure compliance in job postings, particularly when cross-posting across multiple jurisdictions (without having to write an entirely new job posting)?

The easiest way to ensure compliance is to take pay transparency head-on by making a company decision to comply with the most stringent requirements across multiple jurisdictions. As an example, Washington state has the strictest requirements for including detailed employee benefits within a job posting. If an employer complies with the Washington requirements, they would similarly comply with the other states that require job postings to include employee benefits. While this may appear daunting, employers should also consider the advantages that pay transparency has in streamlining the hiring process. For instance, accurate salary ranges and detailed explanations of employee benefits narrow the applicant pool to eliminate those with greater expectations and minimize salary negotiations.

What are the legal repercussions for failing to be transparent in 2025?

The legal repercussions vary based on state. In some states, an applicant’s only recourse is to file a complaint with the local state agency. The agency then has the ability to investigate and issue a monetary fine for each violation. Other states provide applicants with a private right of action, and employers may face class action lawsuits for noncompliance or systemic pay disparities.

What advice do you have for institutions needing to standardize pay practices in 2025?

Employers contemplating changes in their pay practices for new hires should also consider the impact on current employees. As wages increase to attract and recruit new talent, it is important to make internal adjustments to support retention and eliminate disparities.

Is there any additional information you feel is important to know?

Pay transparency laws will continue to change almost every year. Employers can set up a Google alert or a periodic reminder to run a search in each state the employer operates to confirm if there are any changes.

Understanding Pay Transparency Laws

Laws involving wage transparency require employers to disclose salary ranges and, in some cases, additional compensation information for job openings. The specifics of these laws vary by jurisdiction, with states like California, New York, and Colorado leading the charge. Key components of these laws include:

1. Salary Range Disclosure
Employers must provide a salary range for open positions in job postings or during hiring.

2. Equal Pay Considerations
These laws often intersect with equal pay regulations, reinforcing the need for consistent pay practices.

3. Employee Access
Some laws allow current employees to request pay scale information for their roles.

What are the Implications?

Financial institutions, known for rigorous compliance requirements, must adapt to these new regulations while preserving their methodology and operational efficiency. Here are some specific considerations:

• Revise Job Postings: Ensure all job advertisements include accurate salary ranges. Collaborate with hiring managers to establish these ranges based on market data, internal pay structures, and organizational budget

“Our ongoing analysis of workforce and job posting data has revealed a decline in the use of non-transparent terms like ‘competitive salary’ during the recruitment process,” says Elin Thomasian, SVP of Workforce Strategy and Consulting at TalentNeuron. “In the US, from August 2023 to August 2024, there was a 16% drop in these vague descriptors, with the number of job postings across the country using such language falling from 138,521 to 116,628.”

• Standardize Pay Practices: Pay transparency highlights disparities in your compensation structure. Conduct regular pay audits to ensure alignment with market benchmarks and address potential gaps.
• Educate Hiring Teams: Train recruiters and managers to discuss salary expectations transparently. Drip-feed pay education to your employees so they better understand compensation basics and how your compensation programs translate to their current jobs and rewards opportunities. Equip them with tools and resources to explain how ranges are determined and any factors influencing a candidate’s positions within the range.

Develop managerial confidence in their pay decisions and address employee questions. Education and training for employees and managers should be a priority. Employees want to understand the rationale behind their compensation: What factors get considered? How is performance weighted? What role does market data play?

Without clear answers, even well-intentioned pay structures can be perceived as arbitrary or biased, undermining trust and causing employees to look elsewhere for a higher paycheck.

• Update Policies and Documentation: Review employee handbooks and internal policies to reflect compliance with pay transparency laws. Include clear procedures for employees requesting pay scale information. Start by planning a multi-year pay transparency journey.
• Leverage Technology: Use HR software to streamline compensation management. Modern tools can help you analyze pay equity, generate compliant job postings, and manage employee queries efficiently.
• Use Outside Expertise: For organizations with over $200M in assets, the best practice is to work with industry experts equipped with data that can streamline the process, saving both time and money.

Data needs to be accurate and available across the organization so that you can prepare the required disclosures and analytics. Develop a regular cadence for conducting pay equity analyses. This will enable you to proactively address pay gaps and inform reward actions to prepare for increased transparency.

Balancing Compliance and Culture

While compliance is critical, pay transparency also presents an opportunity to build trust and foster a culture of openness. Transparency can:

• Enrich Employee Trust: Workers who understand pay structures and perceive fairness are more likely to feel valued and engaged. Employees want to understand the rationale behind their compensation. Without clear answers, even well-intentioned pay structures can be perceived as arbitrary or biased, undermining trust.
  • What factors are considered? 
  • How is performance weighted? 
  • What role does market data play? 
• Attract Top Talent: Clear salary information attracts candidates who align with your compensation philosophy.
• Improve DEI Efforts: Pay transparency complements diversity, equity, and inclusion initiatives by exposing and addressing inequities. For example, the Women’s Foundation of Colorado stated its pay gap decreased by seven cents since its law was implemented in 2021, equating to women earning 85 cents for every dollar earned by a similarly qualified man, up from 78 cents (~$3,000 annually). California and Washington followed closely behind, shrinking pay gaps by three and five cents. See how BalancedComp virtually vanquished gender and minority pay disparity by partnering with community banks and credit unions.

Challenges to Anticipate

Implementing pay transparency is not without challenges. Be prepared to navigate:

• Employee Concerns: Current employees may question their pay if ranges for new hires appear higher.
• Market Pressures: Disclosing pay ranges could influence competitor strategies and reveal market discrepancies.
• Administrative Burden: Ensuring compliance requires time and resources for audits, training, and system updates.

Your pay equity methodology should reflect new legislative and regulatory requirements. For example, the EU regulations will require data across all total rewards elements (including in-kind benefits), and the results should be evaluated at the entity, employee group, and individual employee level. It is important to have a documented process.

Steps to Get Started

1. Audit Current Practices
Assess your existing compensation policies and identify areas for improvement.

2. Stay Informed
Monitor changes in pay transparency laws and consult legal counsel for guidance. Changing laws (city and state, also including federal reporting laws).

3. Communicate Proactively
Keep employees and leadership informed about your efforts to comply and the benefits of pay transparency.

“The future belongs to those who prepare for it today.”
– Malcolm X

In conclusion, pay transparency laws are here to stay, and HR professionals in banks and credit unions play a pivotal role in ensuring compliance and leveraging these changes to enhance organizational culture. By staying informed and proactive, you can turn legal requirements into a competitive advantage, attracting and retaining talent while fostering trust and equity within your institution.

 

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