California is once again making waves as it signs into effect a dramatic pay transparency law that takes effect January 1, 2023. As California goes, so goes the nation, as they say. And though it isn’t the first state to pass a law like this, it is likely the most impactful and will have a ripple effect throughout the nation.

If you are an employer anywhere in the country with 100+ employees and at least one employee living in California, this law is going to affect you.

This four-part series is going to address the law, how you should prepare, the pros and cons of pay transparency, and what this means to sales specifically.

So first-things-first, what exactly is in this law and how does it affect California businesses?

Pay Scale Disclosure

If you’re a California employer with 15+ employees, every job posting you make needs to list the pay scale for that job. This applies even when posting through third-party sites and when opening up the job to inter-state applications.

Keeping Records

You’ll need to have up-to-date records and documentation of every employee, job title, and wage rate history up to three years after an employee leaves.

Reporting

The new law makes some changes to California’s existing pay data reporting including changing the due date from March to May and adding some new parameters. Employers of 100+ employees already have to provide sample pay period data and information about each employee’s categories including age, race, gender, ethnicity, hours worked, pay band, and more. The new law requires additional analysis including a breakdown of median and mean pay rates within each category.

Labor Contractors

Private employers of 100+ employees hired through labor contractors must submit a separate report about pay data for those contracted employees including the ownership names of the labor contractors.

They Ask, You Tell

If any employee asks you for pay scale information in the position in which they are employed, you are legally required to give them that information.

Upon Penalty

All of these requirements will be enforced against a penalty that could be as large as $10k for non-compliance.

So how does this affect you?

If you’re an employer in California, and you don’t already have detailed records on your employees and their wage histories, you’re going to need to devote some time and staff to getting those records created. If you don’t already have job titles attached to standardized pay structures, you’ll also need to do this. And your reports will require more detail and analysis than before.

If you’re an employer outside of California, you should see this as a crystal ball foretelling your future. Maybe it won’t come to pass, but the likelihood is that pay transparency will gain traction in your state as well. Now’s the time to prepare.

If you’re an employee in California, be aware that the organization you’re working for will be undergoing some massive changes. Digging into the data of compensation can unearth some difficult truths and create some challenges that will need to be navigated. Know your rights and exercise caution and patience moving forward.

My next post will get into more detail about how employers can prepare records, compensation structures, and more in order to get ready for this new law.

In the meantime, check out my book Starting Simple: Sales Compensation. In it, I lay out the process of developing the compensation structures that sales managers need in order to set themselves up for successful hiring and retention of salespeople.

This compensation structure has application for any manager of employees and will help get you prepared for the changes in pay transparency that are coming.