Is there too much leeway in New York City’s ‘good faith’ pay transparency law?
Four million private-sector New York City workers will now be able to see the salary range on all job postings.
The landmark legislation went into effect on Nov. 1, which coincides with a wave of other pay transparency movements across the country. At the end of September, California Gov. Gavin Newsom signed a salary-transparency bill into law, which makes it the largest state to require salary information on job ads for companies with 15 or more employees starting Jan. 1, 2023. A similar law exists in Colorado and all of New York State will catch up to the city by next year.
“The intended outcome of this is to help close the racial and gender wage gap,” said Robert Boersma, vp of operations at Talent.com. “Salary transparency is a well-recognized tool to close that gap. It comes down to it’s easier to change policies than to change biases.”
A Talent.com survey found that one third of employees in NYC reported having experienced salary discrimination — more than half of them were women.
In New York City, the law states that employers with four or more employees must post the minimum and maximum salary for a particular role when it’s listed on either an internal job board or external job-search sites like LinkedIn, Glassdoor, and Indeed. What’s not required is including things like if the job offers health insurance, time off, overtime, 401(k), or other benefits.
Ahead of Nov. 1 employers have spent months preparing, since many didn’t have established pay bands at all. According to data from job search engine Adzuna, New York City already had around 6% of companies posting salaries as of August, which is double the national average of 3%. So far, firms like American Express, JPMorgan Chase and Macy’s have added pay bands to their help-wanted ads, according to The Wall Street Journal.
The salary ranges are in ‘good faith’
The NYC law uses the language that it should be a “good faith” salary range. The guidance defines “good faith” as the salary range the employer “honestly believes at the time they are listing the job advertisement that they are willing to pay the successful applicant(s).” The problem is that could lead to some ranges being pretty wide. For example, a senior analyst role at Macy’s is listed as paying between $85,320 and $142,080 a year.
New research from job search engine Adzuna found that 28% of people feel no or little salary clarity, and lack of salary transparency was their biggest frustration when job searching. Paul Lewis, chief customer officer at Adzuna, said that if a listing requires a larger salary range, it would also be helpful to identify where someone would fall in it depending on years of experience, for example. Boersma and Bryan Adams, CEO and founder of employer brand agency Ph.Creative, agree, saying that salary transparency can help recruit.
“Salary transparency has the opportunity to either be a trust gainer or a trust loser for potential employers to earn with job seekers,” said Boersma. “It’s not useful for anyone to see a range from $50 to $1,000 an hour. You can create employee trust right off the bat by having a range that is more reasonable, and job seekers are going to see that.”
Having such a wide range may also affect the type of candidates who apply, said Adams, who warned that companies should be prepared for under-qualified applicants if a high salary is listed. “Be prepared to differentiate and demonstrate relevance to the candidates you’re looking for,” he added.
Another benefit of posting the salary range is that it saves time for applicants. The Talent.com survey found that nearly all job seekers (98%) in NYC want to know that information before applying. The Adzuna research found 54% of U.S. jobseekers declined a job offer once they found out the salary. And employers won’t want to pursue a candidate through the interview process, only to find their salary expectation is higher than the company’s budget for the role.
“It’s almost like starting off a race by blindfolding yourself,” said Lewis of employees applying to jobs with no salary listed. “You might be able to run fast, but if you can’t see where you’re going, what’s the point?”
The struggle for small to mid-sized businesses
Ahead of the Nov. 1 deadline, large companies included their pay ranges on jobs. However, it isn’t necessarily the easiest switch for employers, especially if they are small to mid-sized companies.
“It’s a lot of work, and might be something new or a little foreign,” said Sid Upadhyay, CEO and co-founder of WizeHire, which helps small businesses write and post job ads. “The place where a lot of small businesses are having challenges is that if they haven’t been hiring a lot, they might have a lot of disparity within their organization. It’s going to force companies to reconcile with that disparity.”
For example, someone hired in 2020 versus 2021 might have differentiated pay, which needs to be addressed before someone is hired in 2022.
“It’s one more hat for a small business owner to wear,” said Upadhyay. “Now we need to think about compensation banding, levels, promotions and how to do that more equitably. It’s good and a new skill that small businesses will have to build.”
The switch to include a salary on job postings might also lead current employees to ask awkward questions. “They’re going to find out that people make more or less than them and they don’t know why, they don’t like it and they are going to want answers,” Kara Govro, senior legal analyst at HR company Mineral, told WorkLife in October.
Small businesses have a leg up here in that they are able to have one-on-one, thoughtful conversations with employees when it comes to pay transparency that might not be possible in a larger organization.
Govro recommends having systems, documentation and scripts in place for mid-level managers, who might ultimately benefit from pointing them to HR. “I think this is going to lead to a better, fairer, more equitable pay landscape for everyone,” said Upadhyay. “It’s going to the right people spending time with the right candidates and the right candidates spending time with the right companies that they want to work with.”