Salary transparency is coming to NYC: Here are lessons learned by states with similar laws

Job applicants perform a delicate dance when trying to learn the salary of a role they’re applying for. They want to project interest no matter the pay, but at the same time, it’s, well, work. And then there’s the challenge of finding the best answer to the hiring manager’s inevitable question: What is your salary expectation? 

Many applicants no longer have to worry about that since a growing number of states are adopting salary transparency laws. When New York City’s own law goes into effect May 15, employers who are based in the city and have four or more employees, will be required to share the minimum and maximum salary for open roles in job postings. 

The law aims to end gender and race-based pay gaps. In 2021, women earned 98 cents for every dollar a man made, according to a PayScale report, which took into account factors like education, years of experience and occupation, and found there is no attributable reason other than gender. Black women earn 97 cents for every dollar earned by a white man with the same job and qualifications.

New York City’s three-sentence law leaves much room for interpretation, particularly since employers are asked to act “in good faith.” Despite any confusion, there are lessons to be learned from states such as California, Connecticut, Colorado and Nevada, that already adopted similar laws. 

Competitive compensation

The Colorado and New York City laws require internal and external job postings to include salary ranges. That obviously means that job seekers can see the compensation — but so can industry competitors. 

“These laws provide a huge amount of market research for companies, which traditionally has not been accessible,” said Daniel Kadish, a labor and employment associate at the New York office of Morgan, Lewis & Bockius. “A lot of organizations have heartburn over it.” 

Katherine Saint is one of them. Saint, president of the tool manufacturer Schwerdtle in Bridgeport, Conn., is concerned about the law’s impact on employee retention, since she invests heavily in her 20 employees with on-the-job-training, mentoring and technical classes. 

“It hands the competition a road map on salary,” said Saint, whose family business is 143-years-old. “Competitors can go a little bit above what I’m offering to get people.”

Connecticut’s salary transparency law went into effect in October. Many described it as ambiguous, particularly since it requires salary ranges to be “disclosed to applicants.” 

“The first question a lot of businesses had when this was put in place is, ‘what is an applicant,?” said Chris DiPentima, CEO of the Connecticut Business & Industry Association.

It may sound like a ridiculous question, but the definition of an applicant is pretty wide, according to DiPentima. “Is an applicant someone who just replies to my job ad? Is it only a qualified applicant, meaning someone who has the skill set to meet the requirements of the ad? Or is it someone who’s gotten to the interview phase?”

Similar questions surround New York City’s law, particularly the somewhat nebulous line that requires employers to “act in good faith.” It’s possible that employers will advertise a huge salary range to cover their bases, given it’s virtually impossible to prove they didn’t act in good faith. 

And the ability to hire remote workers in different states raises a slew of questions. Will companies based in states without salary transparency laws skip candidates who live in states with them? And are those companies even required to provide out-of-state candidates living in states with those laws with salary ranges?

That’s yet to be seen, but it could also accelerate resignations and churn, said Kadish.

“Traditionally, it was hard to know what a new role was going to pay until you went through the interview process and talked to the relevant managers,” added Kadish. “Now, it will be much easier to just go online and look at job postings to see what people are paying. They can use that information to consider leaving or renegotiating their salary.” 

Getting prepared

Either way, employers are advised to get ahead of the law by conducting a salary audit to correct underpaid employees’ salaries. Longtime employees run the most risk of being underpaid, a result of staying at a company long-term and only receiving small, incremental raises. 

In California, where a salary transparency law has been on the books since 2018, employers must provide applicants with a job’s salary range upon request. 

“Some employers really struggled with it,” said Jessica Hawthorne, senior vp of human resources and operations for the California Employers Association. “But for the most part, it actually makes things a little bit easier, because you force yourself to write a job description, and determine how much you’re willing to pay for it. 

Hawthorn said many members even post the ranges in job listings because “you don’t have a bunch of people applying for the job who don’t want to work for what you’re willing to pay them.”

3 Questions with Bryan Adams, CEO of employer branding agency Ph. Creative

Will the steady stream of resignations slow any time soon?
We’re about to see the next wave of the Great Resignation. I think there’s a couple more coming. One is a result of Bonus Doomsday. I’ve got contracts in the inbox of a number of candidates that I’ve offered jobs to. They’ve verbally accepted the jobs but they’ve said they can’t sign until bonus day. I’m hiring them on bonus day.

When will the wave after that occur and why?
The next one is because of people jumping out of the fire straight into the frying pan. There is a lot of movement because the market will pay considerably more. There are opportunities for people to make $50, $60, $100,000 more than they were making last week because of the market frenzy. When the dust settles in a few months time, they’ll look around and think, ‘this company doesn’t align with my values.’ So we’re going to see another wave of people moving, again because they’ve made decisions transactionally based on things that aren’t quite as important as they thought they were.

How will this impact HR and recruiters?
There will be fatigue in every talent attraction department. They’ll wonder, ‘What are we getting wrong here?’ I’ll tell you. You’re hiring people based on the transactional offer, and the capabilities from a skills perspective. You’re not pausing and thinking strategically enough to put that bar really high and start to hire based on fundamental principles of the employer brand. — Tara Weiss.

By the numbers

• 92% of 506 HR decision makers polled, said it is vital for them to offer menopause support to retain talent.
  [Source of data: Peppy Health report.]
  
• 90% of 3,000 U.S. parents polled said they would likely leave for the same job with better family benefits.
  [Source of data: Ovia Health’s Future of Family Friendly report.]
  
• 31 million working-age Americans have experienced, or are still experiencing, lingering Covid-19 symptoms, with some reporting symptoms a year after infection.
  [Source of data: Brookings’ Is ‘long Covid worsening the labor shortage’ report.]

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