September 12, 2022

Legislated Pay Transparency – Could it hurt the people it’s supposed to help?


California’s legislature passed a pay transparency bill. I’m a huge advocate of closing the pay gaps based on gender and race. I love empowering candidates and employees. But…

10 potential unintended consequences if Governor Newson signs this bill into law. 

➤Hiring paralysis. Expectation of paying top of the range more frequently…  The list of required qualifications continues to expand. Hiring only candidates who meet every qualification. 

➤Companies may explore more consulting and service provider options, reducing overall headcount.

➤More gig employment. Chronic underemployment for many. Challenging in a country where healthcare is tied to employment.

➤Companies could avoid hiring in states with restrictive laws. Indeed job postings in Colorado decreased 8% when their pay transparency law went into effect.

 ➤People departments could swing back towards Human Resources. Primarily focusing on employment law compliance rather than Talent Development and Employee Experience.

 ➤Companies could shift towards engaging larger contracting firms who can support the reporting requirements.

 ➤The reporting burden discourages company growth beyond 15 employees and 100 employees thresholds.

 ➤Learning new skills continues to become the employee’s responsibility. Paying top of range potentially leaves less money for training. Layoffs increasingly require candidates to get a skill refresh to get hired (additional degree, bootcamp, certification, etc.)

 ➤Healthcare costs increasingly get passed onto employees. These costs are rarely disclosed until time of offer (or start).

 ➤Job postings continue to include more legalese. They become incomprehensible like privacy statements, and terms and conditions documents. 

To me, these potential effects sound like getting hired and hiring will get harder. Gaps in employment will likely increase in regularity and duration. My prediction – the negative impact will disproportionately impact women and POC – the groups the law is aiming to empower.

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Employers with more than 15 employees must include pay scale in job postings. Current employees can request pay scale disclosure.

Employers with over 100 employees must report median and mean hourly rates by job category. Including a breakout by demographics (race, ethnicity, sex).

Companies must also report this data if they employ more than 100 contractors.

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To reduce the pay equity gap for women & POC
To empower candidates (and employees) in their compensation negotiations

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