2016 is the year of pay equity. As of August 1, Massachusetts has joined the ranks of California, New York, and Maryland to pass some of the most expansive equal pay laws in the U.S. With so many laws getting passed in the US, what things should you know about this newest legislation?
Massachussetts’ signed law goes into effect January 1, 2018, and is very similar to some of the changes in the California, New York, and Maryland laws.
- Definition of “work.” Employers need to pay equitably by similar work being performed, not just across all those in the same title. That means that employers will want to compare all jobs requiring a similar effort, skill, and responsibility. In other words, people in your accounting clerk and your accounting assistant titles may be doing “similar work.”
- Differentiating pay. There are a few reasons that employers can legitimately differentiate pay. Mostly, the burden of proof is on employers to demonstrate the rationale for providing different pay, with the following acceptable reasons:
- Documented merit system
- Documented system based on production quality or quantity
- Education, training, or experience
- Talking about pay. Most new laws also include some notion that it’s not ok to penalize employees for talking about pay. The rationale is that if employees are not able to gather information about what other employees are making in their organization, it’s hard to uncover issues of pay inequity.
What’s different about Massachusetts? Massachusetts has gone one step further into talking about pay to prohibit employers from asking about employee pay history during the recruitment process. The rationale is that employees should be paid fairly according to the value of the work. By paying them according to the salary history, the potential to perpetuate unfair pay would still exist. The big leap Massachusetts has taken, then, is to encourage employers to pay based on the fair value of the job, vs what they think they can get away with paying.
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Implications for employers
There are a few things employers in these states should do in order to ensure compliance.
- Pay fairly. Audit your compensation practices to determine if you have any inequities to resolve. PayScale developed the Gender Pay Comparison feature to help employers do just that. Remember that when you start gathering information, if you find anything, you’ll want to fix it immediately.
- Make data-driven decisions. Employees gather information from all sorts of sources. Rather than relying on candidates to provide employers with information about pay, using market data can give employers a leg up in negotiations. The key is to have a clear compensation strategy that is appropriately competitive for your market.
- Communicate well. Once you have your market data in hand, share it with candidates and employees alike. Explain how you arrived at those numbers, then engage in a conversation about what really drives employees to deliver results.
Something to note is that all the legislation that has been passed has explicitly stated that it’s ok to differentiate pay by performance or merit, by skills and experience, and by geographies. Paying fairly doesn’t mean paying everyone the same. In a competitive market, employers will want to make sure they have a compensation strategy in place that will deliver value to those employees that provide the most value in return.
For more information, visit our Fair Pay Hub.
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