Preparing for the Salary Transparency Act: What Philippine Employers Need to Know

Today’s rising inflation rates and cost of living are prompting calls for greater salary transparency to ensure fair compensation. This transparency is becoming crucial as employees seek to understand how their pay compares within the industry.

According to a 2023 beqom report, a majority of employees across generations — 73% of Millennials, 58% of Gen Xers, and 59% of Baby Boomers — are now open to sharing their salaries publicly during the job application process. Almost 75% of employees feel that national salary transparency laws could significantly narrow pay gaps.

By making salary information more accessible, organizations can promote fairness, reduce discrimination, and build trust among employees. This practice also helps level out the playing field during negotiations in job interviews and empowers workers to make informed decisions about their careers.

Let’s take a closer look at the proposed Salary Transparency Law and find out how employers can prepare for compliance.

The proposed Salary Transparency Law, officially titled the “Senate Bill No. 758: Salary Transparency Act of 2022,” is a legislative initiative introduced in the Philippine Senate by Senator Francis “Tol” N. Tolentino.

This bill aims to promote equality in employment opportunities and eliminate discriminatory hiring practices in the Philippine labor market.

As of July 2024, the Salary Transparency Act remains a proposed piece of legislation in the country. Amidst growing public support, the bill is still under consideration by the Philippine Congress and has not received final approval or implementation.

The proposed Salary Transparency Act includes several important provisions:

Employers with at least three employees must clearly state the minimum and maximum salaries for all job ads, promotions, and transfer opportunities.

For employers with fixed salary offers, the exact amount must be stated in the job advertisement. This practice promotes transparency and equity by providing clear salary information, reducing pay disparities, and helping candidates make more informed decisions.

Employers are prohibited from asking job applicants about their salary and compensation history, unless the applicant voluntarily provides this information during the interview.

By avoiding a discussion of a candidate’s previous pay, it  could help shift job negotiations to focus more on an applicant’s skills, qualifications, and value to the company.

3. Penalties for Non-Compliance

Once the bill is passed, violating this law could lead to hefty fines and a mandate to correct your job advertisements.

• First Offense: Receive a notice to amend the job advertisement and provide notices to existing applicants within 30 days.
• Subsequent Offenses: After due notice and hearing, be fined between ₱30,000 to ₱100,000.
• Salary Offer in Bad Faith: After due notice and hearing, be fined between ₱200,000 to ₱400,000.

With the bill still in the proposal stage, employers should note that they must comply with the law 15 days after publication, regardless of whether the Department of Labor and Employment (DOLE) has released the rules and regulations.

Once the bill is passed, employers have an estimated total of 75 days to fully adapt to the new requirements.

Once the bill is passed, violating this law could lead to hefty fines and a mandate to correct your job advertisements.

• First Offense: Receive a notice to amend the job advertisement and provide notices to existing applicants within 30 days.
• Subsequent Offenses: After due notice and hearing, be fined between ₱30,000 to ₱100,000.
• Salary Offer in Bad Faith: After due notice and hearing, be fined between ₱200,000 to ₱400,000.

With the bill still in the proposal stage, employers should note that they must comply with the law 15 days after publication, regardless of whether the Department of Labor and Employment (DOLE) has released the rules and regulations.

Once the bill is passed, employers have an estimated total of 75 days to fully adapt to the new requirements.

At its core, the Act aims to eradicate discrimination in salary offers. It ensures workers are compensated based on skills, qualifications, and experience — not on gender, race, age, creed, or other factors.

The Act aims to break the cycle of pay inequity, protecting those that may have been underpaid in previous roles.

Here are some examples of how the Act protects employees:

• A company looking to hire a marketing manager would need to include a salary range or fixed salary in the job posting. This transparency lets applicants judge if the pay meets their expectations upfront.
• During a job interview, if an employer asks about an applicant’s previous salary, the applicant can refuse to answer and report the violation. This protects applicants from being lowballed based on their previous compensation.
• Companies risk penalties for ‘salary offers in bad faith’ if they propose a salary significantly below the advertised range without a valid reason.

These protections are designed to promote transparency, prevent discrimination, and ensure fair compensation practices.

To comply with the law, businesses will need to update all job postings with salary ranges, train hiring managers about the new rules, and revise application forms and interview protocols to exclude questions about an applicant’s salary history.

Additionally, companies should conduct internal pay equity audits to verify that their disclosed salary ranges are both fair and consistent across all roles. Some of the best practices have been listed below:

By following these approaches, businesses can foster a culture of trust and fairness, enhancing their reputation and attracting top talent. And we even have the data to show for it: SHRM reports that 82% of employees are more likely to apply for a job when it clearly indicates the pay range.

Staying ahead of regulations is crucial to avoid legal repercussions. Although laws may still be under review, it’s best to proactively prepare. Here’s a clear roadmap to future-proof your recruitment practices:

Carefully examine all current and future job advertisements to ensure they include the required salary information.

For positions with a salary range, clearly state the minimum and maximum salary. For fixed-salary positions, indicate the exact amount. Ensure this information is prominently displayed and easily accessible to potential applicants.

Hold comprehensive training sessions for all hiring staff on the new legal requirements in the hiring process, especially about how it’s unacceptable asking candidates about their salary history. Provide interview scripts and guidelines to ensure legal compensation discussions.

Review and update all internal policies related to hiring, promotion, and transfers. Ensure these policies align with the new transparency requirements.

This may involve revising application forms, interview protocols, and offer letter templates to remove any references to salary history and include appropriate salary information.

Given the complexity of the new laws, it’s crucial to seek expert guidance. Consider consulting with legal experts specializing in labor and compensation laws to ensure your company’s practices fully comply with regulations.

You can also consider salary benchmarking to streamline compliance and ensure your compensation practices match industry standards.

Maintaining accurate and transparent compensation records is crucial for building trust with employees and ensuring fair pay practices. It also helps organizations prevent legal issues and discrepancies that could result in employee dissatisfaction, potentially causing the loss of their top talents.

HR and legal teams must collaborate closely, regularly auditing compensation practices to ensure they are fair and comply with laws.

Salary transparency fosters trust, thereby improving employee satisfaction. When done right, this can go a long way in improving talent acquisition and retention at your organization.

As salary transparency requirements continue to change, it’s crucial to stay ahead. Sprout provides two innovative tools to streamline your compliance journey.

Sprout BenchMark is a powerful tool designed for maintaining salary transparency and compliance. It offers up-to-date salary data allowing you to:

• Set competitive and fair salary ranges for job postings
• Conduct internal pay equity audits
• Make informed decisions about compensation structures

Complementing BenchMark, Sprout’s Compensation Leveling Service (CLS) helps standardize pay practices across your organization. This service includes:

• Collecting, consolidating, and anonymizing salary data in Sprout’s database, and matching it with corresponding job titles.
• Providing comprehensive analyses and comparisons of similar job descriptions to local market rates from reliable sources.
• Assessing and making salary recommendations tailored to your company’s needs.
• Creating a structured salary framework, assessing benefits, and evaluating competencies.

Ready to prepare your organization for upcoming regulatory changes? Visit our blog page to stay updated with the latest regulations and ensure your business remains compliant.