New York City employers will soon post minimum and maximum salary ranges in job advertisements under a new law. The city council passed the pay transparency law to address pay disparity based on gender and race. It's similar to a 2019 state law in Colorado requiring employers to post wage ranges in job ads.
Advocates for pay transparency laws believe that advertising wage ranges will help close the wage gap. Women earn 82% of what men make, and for women of color that percentage can be even lower, according to labor data.
Pay transparency laws also put job candidates in a better negotiating position, said Peter Stergios, an employment attorney with McCarter & English LLP in New York. "You're not so likely to be taken advantage of by lowballing tactics by an employer."
But the law may also pressure HR departments to invest in compensation tools and services, which utilize market pricing and salary benchmarking to ensure their pay ranges are competitive, said Trevor White, an analyst at Nucleus Research. Firms with salary data, such as LinkedIn, "will be well-positioned to add these types of features for organizations publishing jobs," he said.
Pay transparency laws attempt to address systemic inequity but can still be controversial. In 2020, the Rocky Mountain Association of Recruiters sued the state of Colorado in federal court over its pay transparency law. It argued, in part, that the law requires employers "to make fundamental changes to their recruiting systems."
But Colorado officials stated in court papers that the wage gap imposes an average penalty of $7,000 per working Colorado woman each year, with a total lifetime loss of between $400,000 to $1 million. Requiring employers to disclose their salary ranges at the start of the hiring process "curtails discrimination in compensation" by making employers determine a salary range "based on objective business reasons rather than risk basing salary on the sex" of the job candidate, according to the state of Colorado. The judge in the case rejected a preliminary injunction sought by the recruiters.
The pay transparency law could create some headaches for HR, said Paul Rubenstein, chief people officer at Visier, a workplace analytics firm. If a firm advertises a job between $75,000 and $125,000, "I now have said I'm not interested in any talent that makes more than $125,000," he said.
Advertising the range could prompt some candidates who you might want for a job not to apply. "Do you want to hire people just based on price?" Rubenstein said. That may be a negative consequence of these laws, he argued.
Compensation data that shows what other employers pay may lag the job market by six months or so, Rubenstein said. A delay in compensation data may be a problem. Market pay may be increasing at a rate that's faster than the salary data being reported by compensation services, he said.
ChartHop, a people analytics firm in New York, posts the wage range in its job ads but also includes this note: "Should you feel strongly that we are not in line, we highly recommend you to reach out and let us know."
Ian White, ChartHop's founder and CEO, said there can be situations where the pay range is wrong, or a candidate has skills that are not listed in the job ad. The "should you feel strongly" note provides a way for a candidate to apply for a job, even if that person believes they should receive more than the advertised pay range, he said.
"Indicating some flexibility in the messaging is always good," White said, but he added that about 95% of ChartHop job candidates feel the ranges are appropriate.
There's a belief that wage transparency may make the hiring process more efficient. Employers may get a better pool of applicants because it's people that they know will accept the offer, said Nicole Haff, who heads the litigation department at Romano Law PPL in New York.
The wage range disclosure may be eye-opening for existing employees, who may get regular cost-of-living adjustments that have not kept pace with the market value of their skills, Haff said.
The New York City law takes effect in mid-May. The New York State Senate is considering a state-wide bill.
Solange Charas, who spoke in support of the legislation at a public hearing late last year for PowHer New York, an economic advocacy group, said pay transparency laws benefit both employees and organizations.
Charas, who also heads HCMoneyball, a human capital and analytics firm, said that transparent companies perform better. "And they do better because they engender more trust -- not only in the employees but in their customers," he said. Employees who feel trust are more engaged.
Patrick Thibodeau covers HCM and ERP technologies for TechTarget. He's worked for more than two decades as an enterprise IT reporter.