Tips for Businesses to Prepare for the Pay Transparency Law, Effective Jan. 1

A recent amendment to Washington law will soon require employers to disclose information about pay and other benefits in job postings. The new law, which goes into effect Jan. 1, 2023, will require Washington employers with 15 or more employees to affirmatively disclose in all job postings a wage scale or wage range, as well as all of the benefits and other compensation to be offered. Employees will be able to see ranges for all posted jobs, not just their own. The new law is an opportunity to ensure your pay and benefits structure is fair and competitive.

“The objective of the new law is to narrow the gender and racial wage gap. If companies are obliged to publish salaries, they will find it harder to underpay women and people of color,” said Erika Heer, EVP, Chief Human Resources Officer, Coastal Community Bank. “From a career development standpoint, it also helps employees understand the potential of a career path and where they are in the market. It’s a benefit for individuals who are not sure where to start or what that pay range would be, so I think that also opens up many doors for individuals who may have no idea where they want to go.”

Heer explained that the new requirement might be a challenge for employers new to pay transparency and offered recommendations for companies to help prepare.

Build Tiers into Job Descriptions

“Pay transparency isn’t just about the pay. Employees need to know how they can progress or move to a different role,” Heer said. One tactic is building tiers into job descriptions, she explained. For example, provide level one, level two, and level three-tier structures with a clear pathway for employees to advance. This also allows you to hire new employees with less experience at a lower level and move them up as they grow.

Provide Accurate Pay Ranges

“The new law does not include guidance on pay ranges,” she said. “Make sure from an operation standpoint that your organization’s pay ranges are true and accurate. Once those ranges are posted, they are difficult to change because you’ll have to update the job description and internal operations around that role.”

• Look at salary ranges as a whole and compare similar positions across the company to be sure you are consistent and fair. This is a good time to clean up any issues you may have in your salary ranges and to understand the full value your company provides to employees.
• Make sure pay ranges are accurate and you’re looking at the factors within that range.
• If you change a range, justify the change fairly and for the right reasons. Also, account for employees already in that range and discuss the change with them.
• Ensure that the range is adequate to hire the talent you need.

Educate and Communicate

“Be transparent and ensure employees and managers understand the new law and how it can benefit the employees,” she said.

• Keep open lines of communication with everyone, and ensure they know where to go if there are questions and concerns.
• Ensure managers have an understanding and training in how to develop their employees.
• If you can, provide your employees with an annual compensation summary that shows the value of their salary and benefits paid by the company, education or training, and paid time off.

Work with a Compensation Consultant

If you don’t have expertise on staff or don’t have solid published pay ranges in place, Heer recommends working with a compensation consultant.

• Consultants can help businesses accurately review job descriptions and ranges, complete compensation studies, provide recommendations, and prepare them for the current employee-driven job market.
• There are local organizations listed on the Coastal Business Portal to help businesses get started.

Have a Company Pay Philosophy

“When it comes to pay transparency, make sure pay ranges align with your company’s pay philosophy for local and remote or out-of-state workers,” Heer said. “Some organizations are going to pay the top, and some are going to pay the lowest. If you are in the middle, you must make sure that you talk about why someone would want to come to work for you versus another company in the same pay range for that role,” she said.

“If you have remote employees outside of Washington state, your philosophy may have geographical pay ranges or a single pay range which can be both positive and negative, depending on what side of the scale you’re on.”

Failure to take these steps could not only cost you employees as they see other company job postings, but there could also be a financial impact. While there hasn’t been clear guidance on what happens if employers do not comply, according to the code, applicants and employees may be entitled to certain damages and other remedies, potentially including reasonable attorneys’ fees and costs, for violations of the statute. Read the new law here and check the Washington State Legislature website for updates and guidance.

Erika Heer is an EVP, Chief Human Resources Officer at Coastal Community Bank. For more help or resources, visit the People and Hiring section of the Local Business Portal Member FDIC. Equal Housing Lender.