Maryland is one of the most recent states to enact a pay transparency law, named the Maryland Pay Transparency Act. It took effect on October 1, 2024 and if you’re in HR, then you’ve been in the thick of this new law over the past 6 months. Now is a good time for you to do a status check to make sure you’re covering all the law’s requirements.
As you know, these pay transparency laws aren’t just about legal compliance—they’re intended to build trust, fairness, and to make sure your company’s compensation practices are in line with today’s expectations around transparency. Let’s review the “ins and outs” of the new law.
Here’s three key takeaways you’ll learn in this article:
- The major HR process changes as a result of Maryland's 2024 Pay Transparency Law.
- How this law affects recruiting, hiring, compensation, and recordkeeping.
- Actions and practical tips for HR that support compliance of the law.
Why Pay Transparency Matters
You’ve probably already noticed a shift in your workplace culture when it comes to overall compensation. Employees, both current and prospective, are asking for more transparency when it comes to how much they’re being paid. Pay transparency is a huge step toward equity, especially for underrepresented groups. It also helps prospective employees make more informed decisions about whether or not to apply for a job or continue through the interview process based on the salary and if it fits their desired pay.
Imagine two employees are doing the same job in the same company, but one is paid less simply because they didn’t negotiate their salary as much during the hiring process. Or maybe there’s a discrepancy between what men and women are paid for identical roles. This type of pay gap is exactly what new laws aim to eliminate by increasing transparency around salary information.
What Does the Maryland Pay Transparency Law Actually Require?
Maryland’s Pay Transparency Act is a big deal, and it’s already here. If you're hiring in Maryland, here’s what you need to do to stay in compliance with the law:
- Disclose Salary Ranges in Job Postings
As of October 1, 2024, every job posting in Maryland must include a salary range and a general description of benefits or additional compensation. This includes either private or public companies. If you're recruiting for a position, then you need to include the salary range. This way, candidates know up front what to expect so there’s no surprise when the offer is extended. It’s about fairness as well as clarity.
- Provide Salary Information When Requested
During the hiring process, candidates can now inquire about salary information. You can no longer ignore these questions or requests. Maryland’s law mandates that you provide a pay range for the job. It’s about giving candidates the information they need to make informed decisions, especially when transparency is becoming a priority for many job seekers.
- Don’t Ask About Pay History
Here’s a major change for your interview process: You can no longer ask job candidates about their previous salary. Why? Well, mainly because pay disparities often follow people from job to job, especially underrepresented groups. By taking this question out of the equation, employers are forced to determine compensation based on the specific role, and not on a candidate’s prior salary history.
Keep in mind too that an individual’s salary history doesn’t always tell you the entire story, because salary could have been influenced by biases or represent salary negotiations that didn’t go well. As the individual’s next employer, you won’t always know this background information, so that’s another reason why salary history should no longer follow an individual. The bottom line is that it’s time to stop asking about salary history and focus on the value the candidate brings to the position.
- Keep Good Records
Document, document, document! In case you’re asked to prove that you’re complying with the law, be sure to keep detailed records of salary ranges for every position in your company. According to the Maryland law, employers must retain records showing their compliance for at least three years from the date the position is filled. If the position is not filled, then employers must retain records from the time the position was initially posted.
If a candidate or employee requests salary information, files a complaint, or if you’re audited, you'll need to have a record of your pay practices to show you’ve been fair and transparent. Keeping detailed and organized records is a must—not just for compliance, but for showing your commitment to pay equity.
Consequences for Non-Compliance
What happens if you don’t comply? Non-compliance with Maryland’s pay transparency laws isn’t seen as a simple oversight. If your company is found guilty of not following the law, then the Maryland Department of Labor could get involved, investigate, and determine next steps. You could face fines, or even legal action, if an employee claims they’ve been unfairly compensated. There are steps you can take to minimize pay transparency risks today.
But it’s not just about the potential for financial penalties; non-compliance could hurt your company’s reputation. Today’s job seekers value transparency and fairness. A company that isn’t open about pay could easily lose out on attracting and retaining top talent. Penalties are issued by the Commissioner of Labor and Industry and may include:
- First violation: Issue a letter compelling compliance
- Second violation: Civil penalty up to $300 per applicant/employee for whom the employer is not in compliance
- More than two violations: A civil penalty up to $600 for each subsequent violation for each applicant/employee for whom the employer is not in compliance
How Can HR Teams Prepare?
Let’s talk about action and strategy. How can you audit your company’s processes to make sure they’re in compliance with Maryland’s pay transparency law? Here are some steps to incorporate into your HR processes:
- Update Your Job Postings
Double check that all your job postings include salary ranges. You’ll also want to make sure the language in the job postings articulates your company’s commitment to pay equity. Remember that transparency in your job ads doesn’t just support legal compliance—it enhances your employer brand and can help attract and retain top talent.
- Audit Your Compensation Structures
This law provides you with the opportunity to take a closer look at your company’s pay structures. Some questions to consider: Are there any obvious disparities in what you’re paying employees in similar roles? Are salary ranges competitive with the market? Pay transparency can help highlight any gaps that need to be addressed. You can then proactively, instead of reactively, make any needed pay adjustments. This will help your company avoid potential legal issues down the road. Download our Compensation Benchmarking: The HR Leaders Complete Guide today for actionable steps you can take to begin benchmarking today.
- Train Your Hiring Managers
HR isn’t the only department that needs to be on board. Make sure your hiring managers, and any other key players involved in the hiring process, are up to speed on the new law and understand the “how and why”. For example, management should know how to respond to salary inquiries, how to discuss compensation expectations, and the “do’s and don’ts” of questioning candidates about salary history. Training is a critical part of this entire process in order for smooth onboarding and staying compliant. Finally, make sure you provide on-going training with your managers so they can be comfortable in the process.
- Multi-State Employers Need to Stay on Top of Other State Laws
If your company operates in multiple states, not just Maryland, remember that pay transparency laws vary by state and continue to change and evolve. If you operate or recruit in multiple states, don’t forget to check other states’ regulations to make sure you’re in compliance there as well. Check out our Ultimate Guide to Pay Transparency Laws by State to see what the requirements are in other states
Stay Ahead of the Game
To avoid falling behind, it’s so important to stay updated on the latest regulations. One effective resource to regularly check is the Maryland Department of Labor website. If you're unsure about how the new law applies to your company, another good option is to consult with OutSolve for advice. The experts at OutSolve are well versed in this area and are ready to support you and your team with pay transparency compliance.
The changes in Maryland’s Pay Transparency Act are a positive step towards fairness in the workplace. Yes, it will require some adjustments to your processes, but it’s also an opportunity to build trust with your employees and confirm that your pay practices are competitive, transparent, and free from bias.
What the Maryland Pay Transparency Law Means for Your Organization
This law has been in effect since October 1, 2024, so your organization should be following it today. If you are new to posting jobs in Maryland, then make sure you follow the above requirements to ensure you are in compliance. Or, download our Maryland Pay Transparency checklist and use it as a guide to double check your HR processes and training plans to make sure you’ve covered all grounds.
As with any employment law, it’s critical for HR to be proactive and remain updated on new laws or changes to existing law.
We also recommend checking out OutSolve's Ultimate Guide to State Pay Transparency Laws for an in-depth look at how other states are approaching this issue. This can help multi-state employers ensure they are following the law across all locations.
If you need further assistance, please reach out to the experts at OutSolve.