Existing and Potential Employment Regulations
We’ve all seen the headlines about top technology companies laying off people. But that doesn’t mean every company is in the same position. Many companies are still struggling to find top talent. And new legislation on employment regulations may make the process even more difficult.
Three of the most talked about regulations include pay transparency, the proposed ban on non-compete clauses in employment contracts from the Federal Trade Commission, and human capital disclosures from the Securities and Exchange Commission.
The implications of these regulations have yet to be understood. According to the Harvard Business Review, proactive leaders can consider this an opportunity to reconsider their talent strategy and ensure these new regulations are advantageous.
A Ban on Non-Compete Clauses
According to the Federal Trade Commission, banning non-compete clauses removes “an unfair method of competition.” The commission’s belief is that the clauses are “unfair both to workers, who are prevented from pursuing other opportunities, and employers, who can’t hire the workers bound by noncompetes.” They also estimate the ban would increase workers’ earnings by $250 billion or more.
Some believe that removing non-compete clauses could improve innovation. In contrast, others believe that eliminating the clauses will make it difficult for employers to retain talent after investing in them. Poaching employees with specific skills or leadership roles pose significant risk. Companies may be more protective of the information shared with employees.
On the other side of this coin, “Without this ability to protect investments in employees, employers will have to devote increased attention to providing career opportunities, ensuring an inclusive and welcoming culture, and exploring additional ways to enhance the employee value proposition to strengthen employee retention.”
Pay Equity Legislation
California, Colorado, New York, and Washington have already passed legislation that requires companies to include salary ranges for internal and external job postings. The intent is to increase transparency, improve employee bargaining power, and address wage inequality.
Companies argue that publicly sharing pay ranges allows competitors to poach talent more easily. However, they would have to share their pay ranges as well. Some think this legislation will cause an increase in employee churn. Others say that if you haven’t already right-sized the pay of your existing workforce, it could create issues with tenured employees.
This creates an excellent opportunity for companies to “reassess the non-monetary aspects of employment with your company that could make it a more attractive place to work — work-life balance, opportunities for development, an equitable and vibrant culture, and the like.”
Proposed Human Capital Rules
According to Gary Gensler, Security and Exchange Commission Chair, “Investors want to better understand one of the most critical assets of a company: its people.” To this end, he is looking to create requirements for publicly traded companies to disclose expenditures in their 10-K on skills training and development, workforce composition, turnover, diversity, compensation, and benefits.
According to the article, “Companies should review their current approach to tracking of employee information and begin to prepare for the possibility that additional data will need to be collected and audited for the annual financial disclosure. Further, since disclosure of employee information could pose a competitive threat to the retention of key talent, companies should determine whether additional steps are needed to enhance retention.”
These changes could significantly impact culture, and addressing them shouldn’t be offloaded to a compliance team. If you want to use the new legislation to your advantage, be proactive and consider what it means to your employee experience and culture, and embrace the change.
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