By Rebecca Meharchand and Samantha Seabrook
On September 27, 2022, California Governor Gavin Newsom signed a new salary transparency requirement into law. The law requires any employer with at least 15 employees to publish a pay scale alongside any job advertisement.
It also requires that companies employing more than 100 people submit an annual report of pay data to California’s Civil Rights Department, which would provide a picture of what employees were making and whether there were any correlations or patterns when it came to equity factors such as race, ethnicity and sex. Employers also have to provide the Civil Rights Department with the median and mean hourly pay rate for each group.
Similar laws have also recently come into effect in Colorado, New York City, and Washington state.
While Premier Doug Ford’s government hasn’t announced any plans to implement similar legislation in Ontario in the near future, the rationale behind these salary transparency laws is worth looking into, from both a time-saving perspective, as well as a Diversity, Equity and Inclusion (“DEI”) perspective.
Salary Transparency Can Save Time (And Money!)
Imagine an employer is interviewing a prospective candidate; someone who meets all the job requirements, has great experience and references, and is a generally pleasant and personable person in their interview. The employer and the candidate have two, maybe three interviews during which the candidate is interviewed by different members of the team to assess their competencies and their communication skills. After several deliberations across the company, the employer decides that they want to extend an offer of employment to the candidate.
And just like that, two parties who seemed to be so great for each other are horribly mismatched. The employer is just unable to offer what the candidate is looking for in terms of salary (or vice-versa).
At this point, both parties have placed a ton of time and money into this job application process. The employer had to sift through dozens – possibly hundreds – of applications and make decisions on who to interview and who to not. Then, they’ve had to ask members of their team to take time away from their regular paid job duties to participate in hiring interviews. Then they ran reference checks and corresponded with previous employers to establish that the candidate was, in fact, who they claimed to be.
On the other hand, the employee has had to search through numerous job postings to find a position that they find interesting, and that they qualify for. Then they have to draft a resume and cover letter in their free time, contact old employers to ask for references, take time out of their day (and possibly away from their current employer) to attend multiple rounds of interviews (whether virtually, or in person), all the while engaging in the practice of “selling” themselves, which can be mentally and physically exhausting on a number of levels.
Both parties have suffered losses all because neither one of them was willing to ask about salary expectations. The candidate likely didn’t ask out of fear of being seen as too “money-hungry”, and wanting to express interest in the overall position. And the employer likely didn’t post the salary band because they wanted to attract all interested, qualified candidates regardless of salary expectations.
However, whatever benefits either party stands to gain from not inquiring about the other’s salary expectations are significantly outweighed by the losses that they both incur when it comes to light that their compensation expectations are mismatched.
By posting the expected salary range, an employer can be assured that all applicants will be more willing to accept compensation within the range posted. And by contrast, a candidate who is looking for a job can have a better idea of where to spend their time and resources in their job application process.
Salary Transparency can Create a more Equitable Workplace
Of course, saving time and money is no small thing, but another real benefit of salary transparency is that it helps to create and sustain an equitable workplace.
According to the Ontario Pay Equity Commission, for every dollar that a man makes in Canada, women earn just 89 cents. That gap is wider for BIPOC members, especially those who are women or transgender. According to a recent study released by Statistics Canada earlier this year demonstrated that the average pay for visible minorities can be as much as 24% lower than their white counterparts in some workplaces.
When it comes to the gender pay gap, Ontario does have pay equity laws that require men and women doing the same or comparable work to receive the same or comparable pay. However, what these pay equity laws don’t do is consider who is getting promoted or recognized for their work, and who is not. They also don’t consider who is expected to also shoulder the unpaid labour of childcare and family responsibilities, and who is not. And of course, these laws only look at the overall gender pay gap, not the pay gap experienced by people of colour.
By introducing salary transparency, employers could experience the following DEI-related benefits in the workplace:
- Employers and employees would have a better understanding of who is getting rewarded for hard work and who is getting overlooked.
Is there a certain type of person in the workplace who is constantly getting promoted, or getting recognized for their efforts? Are there certain type of people in the workplace who are constantly getting overlooked? While promotions may become company-wide knowledge, knowing the value of that promotion helps keep track of ensuring that there isn’t any unconscious bias at play in making salary decisions.
- Employees would be able to see what they could reasonably expect if and when their hard work is rewarded.
Research has shown that women and minority employees tend to ask for less money. By providing some insight into salary expectations either at an initial hiring stage or within the employer’s promotions processes, employees will have a more uniform expectation of what salary they can expect and employers will have a prepared answer that they will be able to provide all employees, regardless of DEI factors.
- By creating an environment where women and people of colour feel knowledgeable about company progression and salary expectations, employers can eventually expect to see more diverse individuals in senior leadership positions.
Many DEI related issues in the workplace stem from the fact that many organizations still have yet to take proactive steps to ensure that their senior leadership teams are as diverse as their entry level positions, or as diverse as the community in which they are situated. In a city as diverse as Toronto, for instance, from a DEI perspective it is inappropriate for companies to assert that they cannot find “qualified” BIPOC candidates to join their senior leadership teams. Salary transparency is a way for employers to invest in their employees, especially their female and BIPOC employees, by ensuring that they are provided with the same opportunities and same rewards as their white male counterparts.
Ultimately, whether or not to implement salary transparency is the decision of the employer; there are no laws in Ontario which mandate it. However, the benefits from both a time and money saving perspective are substantial; the benefits from a DEI perspective are invaluable.
For more information on how to implement salary transparency in job postings or in company policies, please contact your Seabrook Workplace Law lawyer.
