A peculiar convention of getting hired in the U.S. is that a question job seekers may want to ask first is often addressed last: How much does the job actually pay? In the working world, it remains common for employers to keep that vital information under wraps, keeping applicants in the dark while giving hiring managers a competitive advantage in setting pay.
Now, a growing number of U.S. states are moving to shed light on the issue of starting salaries. New laws are requiring companies to disclose the pay range in job postings and on their websites. The rules represent a growing push for more transparency on compensation and aim to even the bargaining power between employers and employees, empowering workers while also narrowing long-standing pay gaps for women and people of color.
In California, under a law signed last week by Gov. Gavin Newsom that takes effect January 1, 2023, companies with more than 15 employees must include salary ranges for jobs and share the same information with current employees. In New York, a law requiring private-sector employers to disclose salary ranges in job postings awaits Gov. Kathy Hochul’s signature. And Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington have enacted their own pay transparency laws.
In New York City, a law that takes effect November 1 requires businesses to include a “good faith” salary range for every job that is advertised. Employers are not required to disclose information on bonuses, benefits and other forms of compensation.
“Going forward, every time a job is posted on an Indeed-type website, in the workplace, or advertised in a newspaper or online, [job seekers] should expect to see a salary range for that position if the job is in New York City or could be done in New York City,” Domenique Camacho Moran, a New York-based employment attorney at Farrell Fritz, told CBS MoneyWatch. “The aim is to make sure there is pay equity based on the job performed as opposed to who might be applying for the job.”
In other words, if an employer advertises a job that pays between $60,000 and $90,000 a year, anyone who applies for the position can expect starting compensation within that range, regardless of their age, gender or race.
“This is a situation that in the past tended to favor the employer, who could ask about your salary and not reveal what it was going to offer,” said David Gordon, a partner in New York City law firm’s Mitchell, Silberberg & Knupp’s employment practice.”This is part of an overall shift of information from employer to employee that will aid certain employees in negotiating their compensation.”
The New York City law works in tandem with a January 2020 law that prohibits employers in the state from asking prospective and current employees about their salary histories, which was also enacted to help close pay gaps and end potentially discriminatory compensation and hiring practices.
The laws will help workers decide what jobs they will apply for based on salary range, while also discouraging employers from seeking “discounts” on employees, who might otherwise accept a smaller paycheck.
“Employers are in a position where they have to think very carefully about what they in good faith believe a particular position should pay,” Jason Habinsky, chair of Haynes Boone’s employment practice in New York City, told CBS MoneyWatch. “Employers have to show their cards and put them on the table first. You can’t make decisions based on someone’s membership in a protected category.”
The salary must be disclosed as a range, and not in the format of “up to” or “at least” a certain figure.
“A potential risk is that certain employers are not going to operate in good faith and instead of providing a good faith range, in order to cover themselves they’ll provide a much broader range than they ordinarily would have provided to give themselves an opportunity to decide what they’re going to pay someone,” Habinsky said. “It doesn’t serve the purpose to say someone gets paid between $5 and $5 million.”
Could lead to more word-of-mouth hiring
Under the New York City law, companies aren’t required to disclose compensation components including bonuses, benefits, commissions or tips. And the rules apply only to external job ads and internal postings. That means if an employer lands a new hire by word-of-mouth, they are not required to disclose the role’s pay range in advance of making an offer.
“The law does not prohibit employers from hiring without using an advertisement,” said New York employment lawyer Josh Zuckerberg. “There is no law that says you have to advertise positions.” That could lead to more word-of-mouth hiring.
“Certain types of employers may call head-hunters and say, ‘We’re looking for this type of position, what can you find for me?’ — if you don’t want to be broadcasting the salary,” Zuckerberg said. “There’s a chance there will be less transparency, not more.” own pay transparency laws.
“Potential fallout”
The hot job market has been driving up wages for workers and compelling employers to pay top dollar to attract talent. An employer could very well have to pay a new hire more money to perform the same job function as an existing employee, potentially creating tension and divisions in the workplace.
“There is a lot of potential fallout as a result of this law. You could have a current employee who will see what prospective employees are getting paid, and that can result in disgruntled employees and hurt feelings,” Habinsky said.
Any employer with four or more workers, at least one of whom works in New York City, should prepare to comply with the new regulations, according to workplace and employment attorneys.
“It would be prudent for any employer that doesn’t want to run afoul of the law to have someone in place monitoring any job postings internal or external to ensure they comply with what the law requires,” Gordon said.
Human resources staff also should be prepared to explain any pay discrepancies, said Carol Goodman, chair of Herrick Feinstein’s employment practice.
“It will probably raise a lot of questions and HR departments should be prepared to field questions from existing employees who may call in and say, ‘I see a posting for a similar position as I am holding but my pay is lower,” she said. “HR pros will want to be prepared to speak with their employees about that.”