One of the most significant developments impacting various industries is the rise of pay transparency laws. While Illinois implemented these laws effective January 1, 2025, several other states have already practiced similar regulations. It’s crucial for all companies, regardless of their sector, to understand the implications of these laws and adapt accordingly.
The Illinois law that went into effect earlier this year applies to employees in the state of Illinois or any positions physically performed (at least in part) in Illinois or physically performed outside of Illinois but the employee reports to a supervisor, office, or other worksite in Illinois.
The new law makes it clear that employers may satisfy the “wage or salary, or the wage or salary range” requirement by referring to:
- Any applicable internal pay scale
- The previously determined pay range for the position
- The actual pay range of others currently holding equivalent positions
- The budgeted amount for the position, as applicable
Pay transparency laws mandate that employers disclose salary ranges and benefits in job postings. The visibility of salary ranges will become more apparent, making it essential for organizations to find innovative ways to attract and retain talent. To remain competitive, organizations may need to enhance their overall compensation packages, offering more than just salary to entice potential employees.
The implementation of pay transparency laws is not without its challenges. For those operating across multiple states, compliance can become complex. For instance, while Illinois mandates salary disclosures, other states may not have similar requirements. This discrepancy raises questions about how organizations can maintain consistency in their hiring practices while ensuring compliance with varying state laws.
The law stipulates that it is unlawful to omit pay scales and benefits from job postings, which applies to organizations with 15 or more employees. This means that even if an organization based in Illinois has employees in a state without similar pay transparency laws they must still comply with the law for postings in the state of Illinois.
While the law does not require employers to post job opportunities, it does necessitate transparency for both internal and external postings. This presents an opportunity for companies to enhance their employer branding by showcasing their commitment to fair pay practices.
Moreover, the penalties for non-compliance can be significant. The Illinois Department of Labor has the authority to investigate alleged violations, which can lead to fines and other repercussions. Organizations must be diligent in documenting pay scales and benefits for each position, as well as maintaining records of job postings. This requirement underscores the importance of having robust HR practices in place to ensure compliance and mitigate risks.
I encourage organizations to leverage an insurance broker who can ensure compliance and explore innovative ways to enhance compensation packages, ultimately fostering a more equitable and attractive workplace for all.
Check out our employee health and benefits practice to learn more.
