Understanding California's Wage Transparency in 2024

April 12, 2024
April 12, 2024

Today’s business owners live in an era when transparency is more than valued — it is an expectation. California’s wage transparency law has taken effect, creating a new chapter of openness and fair compensation practices in the workplace. Small businesses need to understand its intricacies. Knowing all about the key aspects of this legislation allows companies to stay compliant and build strong relationships with their employees.

What Is the Wage Transparency Law in California?

California’s SB 1162 is a new law that strides towards enhancing wage transparency within the state. The state enacted this legislation on January 1, 2023 to address and reduce the gender and racial pay gaps.

The objective of this law is to hold companies accountable for fair wages. By requiring employers to be more open about how they compensate their employees, the law intends to bridge pay gaps that persist across different demographics.

Key Requirements of SB 1162

California’s wage transparency law introduces requirements for employers to enhance pay transparency across the state. While the law has broad implications, its key provisions focus on making compensation practices more open and equitable. Here’s what small-business owners need to know about the law’s primary mandates.

Pay Scale Disclosure

If you have at least 15 or more employees, the law requires you to include a pay scale when posting a job advertisement. A pay scale is the salary or hourly range an employer typically pays for a position. While this excludes tips, bonuses and other compensation benefits, you must list a wage range that falls within a reasonable amount in the job advertisement.

Employers must also provide applicants or current employees with the pay scale upon request. This ensures they clearly understand potential earnings so they can make educated decisions.

Annual Pay Data Reporting

Alongside the provisions for pay scale disclosures, SB 1162 establishes a requirement for annual pay data reporting for certain employers. This part of the law further enforces pay transparency and equality by gathering detailed information on employee compensation.

Employers with 100 or more employees must report annual pay data to the California Civil Rights Department. This includes employers who meet this employee threshold regardless of whether all employees work within California or you employ workers remotely from this state.

The information must also report the number of employees by race, ethnicity and sex within job categories. Each job category must then report the median and mean hourly rates to provide a clear picture of pay distribution. Employers must also provide a similar pay data report for employees hired through labor contractors. This ensures contract workers’ pay follows the principles of fairness and equity.

Implications for Small Business Owners

Understanding and adhering to the requirements of SB 1162 is crucial for employers in California. Otherwise, California’s government may impose penalties for non-compliance. The exact amount may vary, but the law states it can find business owners up to $100 per employee for failing to report. It increases to $200 for each employee for a subsequent violation.

Non-compliance may also have implications beyond the financial penalties. There’s the potential for reputational damage, which can affect a company’s ability to attract talent. Additionally, non-compliance can lead to legal challenges, further increasing costs and disrupting business operations.

Complying with the law is key to avoiding financial penalties and maintaining a fair workplace. You can also ensure top talent attraction and retention remains high, even in a competitive job market.

Best Practices for Disclosing Pay Scales

While disclosing pay scales is a must to comply with the law, practicing it enhances transparency and trust within the workplace. Some strategies for disclosing pay scales include:

Integrate pay scale information early: Include a clear pay scale in every job posting. This should outline the position's minimum and maximum salary or hourly rate. Doing this in the early stages of recruitment ensures applicants are knowledgeable about the compensation, setting clear expectations from the start.

Maintain open communication: Encourage employees and candidates to ask questions about pay scales. Providing a point of contact for inquiries can create an environment of openness and trust.

Regularly review and update pay scales: Make adjustments to reflect changes in the job market, industry standards and internal valuations of positions. Keeping pay scales current ensures your company remains competitive and fair in its compensation practices.

Document and record disclosure practices: Keep detailed records of how and when your company discloses pay scale information. This documentation can be invaluable in demonstrating compliance with SB 1162’s requirements.

Charting a Future of Fairness in Pay Transparency

Embracing the principles of SB 1162 by integrating transparency into your pay practices is more than a legal obligation — it’s an opportunity to build equity. You can create a workplace where all employees feel treated fairly. As you work to follow these requirements, let your actions prove your commitment to fairness. You’ll enhance your reputation as an employer of choice in today’s competitive job market.

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