Have you heard of the California Equal Pay Act and how it can affect your staffing firm?
Beginning January 1, 2023, job postings in the state of California will have an added boost to pay transparency through the California Equal Pay Act.
This bill, which has been signed into law by California Governor Gavin Newsom, mandates all companies with more than 15 employees to begin disclosing pay ranges on job ads posted state-wide. It makes California the biggest state where salary ranges must appear in all job listings.
More than 19 million workers live in California. It is also the home of Silicon Valley and some of the world’s most renowned big tech companies, such as Apple, Disney, Google, and Meta, among many others.
Many people are hailing the act’s passage as it reveals the salary gap between managers and employees and the wage gaps among marginalized people such as women, ethnic minorities, and people of color.
Job seekers stand to benefit from this greater pay transparency. But apart from them, current employees may now also know where their salary falls within the organization. Additionally, they can now spot discrepancies in pay and request any rectifications should they spot irregularities.
This move comes from a greater desire for an equitable society in the wake of #MeToo, Black Lives Matter, the Covid-19 pandemic, and other recent events that laid bare inequities in the US job market.
Many lobbyists blame these inequities as to why many minority and marginalized groups suffer greatly during times of crisis or when inflation is on an upward trajectory. Advocates for pay transparency are lobbying for pay transparency to better equip workers to negotiate for fairer wages.
Pay Transparency Bills Outside of California
Staffing agencies must know that there are moves being made similar to what California has done elsewhere in the U.S. This signals a clear shift towards pay transparency which recruitment firms should now prepare for.
The states of Colorado, Connecticut, Nevada, Washington, and New York all have pending legislation in support of pay transparency and wage equity. To date, 14 U.S. states and five cities have passed laws mandating companies to adopt pay transparency.
Outside of these states, a survey revealed that 17 percent of companies are now disclosing pay range information even though it is not (yet) required. What’s more, is that an additional 62 percent of companies surveyed are planning to include pay range information in the short term.
The trend is the same for job candidates. A survey of 3,600 individuals conducted by Gartner in June of this year disclosed that 66 percent of job seekers expect the salary range to be included in the job description.
Undeniably, when you look at all these data, it seems that the world of work is headed toward more wage equity and greater pay transparency.
Salary Transparency Law and Staffing Firms
This brings us to the question: How will the California Equal Pay Act impact your staffing firm?
Companies with 100 or more employees who are hired via staffing firms will be required to submit reports on pay data to the California Civil Rights Agency. The report should be broken down according to gender, race, and ethnicity.
Reporting data on salaries based on demographic background may reveal existing worker segregation that must be brought to employers’ attention. It should help companies truly champion equal pay and a truly equitable workplace and demolish existing patterns that may be viewed as discriminatory.
That said, staffing agencies need not be reactionary about this legislation. Instead, be proactive. Below are a few of the benefits of pay transparency.
It empowers job candidates and streamlines the recruitment process for staffing firms.
This kind of legislation helps narrow down the focus of job candidates when applying. Conversely, this will save you time as a staffing firm because you will only be getting job candidates amenable to the pay range listed in the job ad. It streamlines all the back-and-forth negotiations that could take up so much time in the recruitment process.
Job candidates may now self-select based on their desired pay range. Hence, the first round of conversations regarding pay now occurs in the interview process. As a staffing agency, you need not beat around the bush because you are sure that the job candidate has sufficient information on salary and wages.
It helps the workplace to become more inclusive.
Pay transparency can be a powerful tool to ensure that employees and job candidates are heard – no matter their background.
Employees come to work to earn enough money to care for themselves and their loved ones. Hence, companies and staffing firms need to keep the trust between the employee and the company they end up working for by ensuring that their financial needs are met.
Women also stand to benefit immensely from pay transparency. Data shows that women find themselves on the shorter end of the stick when organizations practice pay secrecy. For instance, a Pew Research Center survey revealed that women earned 84 percent of what men earned in 2020. Women know this for a fact. However, they do not have much room to discuss this inequity. Pay transparency laws like the California Equal Pay Act can eradicate this.
It helps attract and retain top talent.
In today’s fierce job market, many companies are finding it more and more challenging to attract and retain top talent. Staffing firms for sure also share in this challenge.
By including the pay range for job listings and current roles occupied by employees within an organization, workers can readily see how they stand in compensation and may move to negotiate a “fair” amount should they feel underpaid.
Generally speaking, states that have implemented laws similar to the California Equal Pay Act–like Colorado, for instance–have seen wages increase across the board. This move makes salaries, in general, more competitive, as people who perform more excellently than others can negotiate for higher pay.
Embracing legislation, such as the California Equal Pay Act and other similar laws that may be enacted in your state, is a vote of support for greater transparency and inclusivity in the workplace.
Staffing firms need not perpetuate the problem by either discouraging pay transparency discourse among job candidates or getting involved in inequitable hiring practices that render applicants to receive a lower base pay–all tactics that disproportionately affect minority groups, women, and people of color.
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