The paper discusses the pay equity and transparency law in the city of California. There have been on-going discussions on whether or not companies should make public their pay range. In the last few years, several laws have been passed to enhance transparency. The analysis focuses on the implications of the implementation of the pay and equity law, its effects on talent acquisition and retention, and the challenges to the current employees and the new employees. It also reveals the consequences and dangers of not implementing the pay transparency and pay equity law in the state of California.
Keywords: pay equity, talent retention, California, state, employees, company.
Pay Equity, Transparency and the California Laws
Pay equity can be termed as giving equal pay for equal work to the employees who are at the same of level regardless of gender. Pay transparency, on the other hand, means that all the earnings and benefits that the entire employees make are made known to everyone in the company. Pay equity and its transparency have caused jitters for a long time in California and beyond. Different companies have different payment structures which at times are never made public (Burkus, 2016). Company executives tend to earn significantly more than ordinary employees. Deliberate efforts have been made to bridge the gap between the top company executives and the regular level employees on the other side of the chain. Pay transparency has been touted as one of the solutions to the pay gap. The pay equity and transparency laws have received a different reaction among the employees. Most of the ordinary employees are in support of it because it seeks to address the existing payment gap between them and the management while most of the management are not in support of the law. Companies that have implemented the pay equity and transparency have had successful stories when it comes to the management of the pay gap (Bebchuk, & Fried, 2004). In the last two years, some states like California, Oregon, Puerto Rico, Massachusetts, and New York have enacted various versions of the pay equity laws. For this paper, we will focus on the pay equity laws of California.
Californian Pay Equity Laws
The primary objective of the pay equity law of California is not only to eliminate the issue of unequal pay among the different employees but to also detach the wages and benefits history from the recruitment process. The recruitment process is one of the most hectic processes in any company. In the past, there are some companies that included the wages and benefits of the different employees as part of the recruitment process. This was somehow discriminative as some employees ended up earning less than other employees in the same company that the joined because it paid significantly higher wages than their previous companies. Gender equality has for a long been practiced in the job market. Many companies pay women significantly lower salaries than their male counterparts for the same job entry and responsibilities. The decision to have different payment rates for different employees based on the gender can have a lifetime effect on the career of the employee. It is estimated that the salary gap between the men and women stands at 20 percent. The recently enacted pay equity laws in California is meant to address the pay disparity which has effects of the employee’s morale and hence productivity. The law also seeks to address the issue of gender disparity that has existed in the market place for a long time. There have been flaws in pay equity laws that the state of California has tried to enact in the last few years. The Assembly Bill 168 that was signed into law in October 2017 by the governor of California is an excellent example of the same. The law has faced opposition from individuals who feel that the pay equity should not be improved notably the company executives. The Assembly Bill 2282 of the state of California is a better law than the first with some of the flaws being ironed out.
Implications of Implementation for Companies
When discussing the pay equity and transparency laws in California, we cannot fail to mention the impact of its implementation for companies. As we had discussed earlier on, companies have for a long time had different payment rates for employees doing the same jobs. Notably, female employees have been paid significantly less than their male counterparts (Wright & Chartered Institute of Personnel and Development, 2004). This has affected the worker’s morale and has affected the productivity of some employees as some have decided to go on a go-slow strike to protest against the action of the management. Secondly, there has been a considerable pay gap between the administration and ordinary employees (Burkus, 2016). The regular employees typically labor and sweat for the company only to be paid peanuts concerning the company executives. The wage bill of the companies that have implemented this law has significantly gone up. The result of this is that the said companies have had their revenue and thus profit margins being reduced significantly. The silent gender –war that has existed in most of the companies has also been eliminated as this law has helped in eliminating the preferential treatment in the organizations based on gender. Companies have had to comply with the new pay equity laws that are clear as opposed to the existing legislation that had several loopholes. The high-profile litigation that is related to pay is going to reduce substantially in California. For a long time companies have been sued on the grounds of pay discrimination but the federal laws that were available they had loopholes which the company’s lawyers used to take advantage to tilt the case to their position. The situation is, however, totally different at the moment with the existing loopholes being sealed thus the number of legal suits has significantly gone down. The Executive Order 11246, the Equal Pay Act, and Title VII were some of the laws that prosecutors and defendants relied on. Following the implementation of this law, we are likely to see more stable work environments and more productivity because all the employees are motivated. The salaries and benefits of the company executives are expected to go down which might lead to the company being more profitable.
Effects on Talent Acquisition and Retention
Recruitment is one of the most challenging activities that companies have to go through from time to time to fill the available vacancies. Whereas some companies have their human resource departments, others typically outsource this department that helps them in processing their pay and recruiting employees for the jobs that are available. Talent acquisition is equally an expensive venture as companies have to advertise at the proper channel for a while. After a job has been advertised and the interested candidates have applied, the next procedure is typically shortlisting whereby the employees that are most qualified are often separated from the others. After shortlisting, the candidates are often invited for interviews which are often involving. The candidates might be subjected to more than one interview to determine the ideal candidate. The most successful candidate is then usually picked and offered with a contract that details his roles. The exercise of talent acquisition is not only challenging but complicated as well. It not only engages the existing employees in the process but also uses a significant chuck of company’s resources. At times some employees have to handle the interview process and their day to day assigned roles. This has thus affected the productivity in such companies. Printing of the resume, catering for the interviewers and interviewees, and managing the logistics that are related to the interview process are some of the expenses that the companies have had to spend. Companies that pay poorly or have poor working conditions usually suffer from this as they quickly lose their top talent to rivals to get back to the drawing board which is expensive (Wright & Chartered Institute of Personnel and Development, 2004). Talent acquisition and retention are likely to be high following the pay equity and transparency laws. The bridging of the 20 percent gap that has existed between the female employees from their male counterparts will no doubt lead to female employees staying with their respective companies (Elsesser, 2015). Talent acquisition will also be more competitive as both the male and female counterparts will compete for the available slots that are available. The talent acquisition and retention in California will thus be competitive.
There are challenges that the existing employees and the new employees that are hired from outside are likely to face as a result of the pat equity and transparency law. Firstly, it is essential to note that this law seeks to standardize the salaries of the employees. It tends to remove the discrimination that has existed for a long time of granting some employee more wages than the others yet they perform similar roles (Wage gap, 2016). Most of the companies have adopted a performance-based model that they use to promote or demote employees. Experience also counts a lot in most of these companies since the experienced employees understand the systems better than the novices. The law thus seems to be punitive to the skilled employees who would have been paid slightly higher than the inexperienced ones. It may also kill the morale of the hardworking employees which will affect the productivity of the company. We also have two types of companies: the public and private companies that operate differently. It is punitive to dictate the payment terms to the private companies because most of such companies pay according to what they can afford. This is likely to have an adverse effect on the investors who are likely to invest in other states that have not enacted the bill. Employees from outside the companies are also likely to feel the heat depending on which side they come from (Higgins, n.d.). For the male employees who are used to earning significantly more than their female counterparts, they will have to contend with standardized salaries. The company will have to look for ways of encouraging performance as the standardization of wages might promote laziness. Employees who are used to working with a particular gender might also get the tough going in their new areas of work (Elsesser, 2015).
Consequences of non-implementation of Pay Equity and Transparency Law
As we had mentioned earlier, the pay equity and transparency law of California has consequences to the company and the employees. The law can be termed as a good law since it takes care of the interest of the employees and workers. Companies that fail to implement this law are likely to face several legal suits that are likely to be ruled against them (Bebchuk, & Fried, 2004). This means that they are likely to lose more funds if they maintain their hardline stand. Failure to implement the pay equity and transparency law will hurt talent acquisition and retention. We live in an era whereby women are equally talented like men and can take on the roles of the men in the correct way. Non-implementation of this law means that the company will continually pay women fewer salaries than compared to their male counterparts for similar roles (Higgins, n.d.). Such companies are likely to lose their top female talents to their rivals who have implemented the pay transparency and equity law. The company is this likely to suffer on a long-term basis since they may be required to go for the recruitment process frequently which is an expensive exercise.
From the above discussion, it is evident that the pay transparency and equity law tends to streamline the wage issue in California. It takes care of the interest of the employees as well as that of the businesses. It promotes transparency in the workplace which will stop theft and boost the morale of the workers. When workers in a company are happy, they will focus their efforts in the company and give their all. Discrimination in the workplace is one of the challenges that many companies have had to deal with. Discrimination on the gender grounds is equally devastating as it is a bad example to the young children who are growing up and looking at the society for role models.
Bebchuk, L. A., & Fried, J. M. (2004). Pay without performance: The unfulfilled promise of executive compensation. Cambridge, MA: Harvard University Press.
Burkus, D. (2016). Under new management: How leading organizations are upending business as usual. Boston: Houghton Mifflin Harcourt.
Elsesser, K. (2015). Sex and the office: Women, men, and the sex partition that’s dividing the workplace.
Higgins, M. (n.d.). The Gender Wage Gap. New York: ABDO Digital.
Wage gap. (2016). Place of publication not identified: Greenhaven Press.
Wright, A., & Chartered Institute of Personnel and Development. (2004). Reward management in context. London: Chartered Institute of Personnel and Development