Pay transparency legislation is intended to ameliorate pay disparities that largely affect women and ... [+]
If New York Governor Kathy Hochul signs a new law mandating the inclusion of salary or compensation ranges on job descriptions, the state will follow the path of Colorado and Washington state where pay transparency laws are currently in effect. The new law will become effective on November 1 in New York City, and statewide next year.
In California, a similar bill is awaiting the signature of Governor Gavin Newsom. The governor has a deadline of September 30 to either sign or veto the bill.
Pay transparency legislation is intended to ameliorate pay disparities that primarily affect women and other underserved groups. It would also normalize discussions around money. For workers, the disclosure of salary and compensation on job listings is long overdue and will be a huge win for employees—but a huge headache for employers.
It is not against the law to share salary information with co-workers; however, companies assert pressure to dampen the flow of this important data. Without access to salaries, employees don’t know if they are being paid fairly or not.
Once the salary bands are prominently displayed on job descriptions, everyone will know how much the role is paying. This includes job seekers, current employees of the company and workers at competing firms within the same sector.
The veil of secrecy will be lifted. The disclosure of pay packages will garner the rapt attention of everyone as it will be the first time people get a glimpse into what their bosses and co-workers are earning. It will be only a matter of time before the salary information is disseminated around the office and makes its way onto social media.
The New Law May Lead To Internal Fighting And Hurt Feelings
Businesses must be prepared for disgruntled workers. You’ll soon see people griping that they work harder and have better results than their co-worker who earns more than they do, and demand a raise. In-fighting and hurt feelings will ensue. There will be accusations of discrimination and potential lawsuits, asserting prejudice as the reason for being paid less than what other workers in the same role are being paid.
Another challenge is that some people have an unrealistic perspective of their value and work product. These workers aggressively assert that they’re the ones who do the most work, produce the best results and should be handsomely rewarded.
In some instances, they could be right, but more often than not, they are not aligned with reality. It will then come as a big shock to many employees that they are not worth what they thought they deserved. The dissonance may be too much for them to process and an ugly situation could arise.
Moreover, if a person is currently hunting for a job, due to rampant inflation and a tight job market, especially at this time of year when people like to stay at their firm until they receive a bonus and raise, firms will need to pay a premium to attract top talent to switch jobs. The higher compensation may cause tension with current employees who joined the company recently and are paid less than the newcomers.
Employees will be naturally curious and check out job descriptions to gauge what other companies are paying. There will be hurt feelings, leading to anger, as prospective new employees are earning the same or more than a person who has been at the company for a few years. The current employee will feel cheated, complain to their boss and may decide to leave.
People at other companies will know what their rivals are being paid. This will empower them to push to get raises to the level of other firms or threaten to quit or just follow the quiet quitting trend in protest.
A Big Pain Point Will Be Resolved
One of the biggest complaints of job seekers is that they’ll be forced to spend months interviewing with three to 10 managers, only to later find out that the compensation offered is less than they are already earning. It is a colossal waste of time and energy. If the person knew the salary range upfront, they would never have embarked upon the search in the first place.
Companies May Game The System
Some companies may try to circumvent the laws. Instead of providing an accurate salary, the business will offer a wide range in compensation. Instead of clearly stating that the base salary is $100k, the job advertisement may give a range between $50k and $150k. The huge chasm between the numbers could make a mockery of transparency. It gives cover for businesses to obfuscate what is the actual pay.
Additionally, Partnership for New York City, a business advocacy group, is proposing that the New York governor amend its pay transparency bill to exclude New York companies from having to disclose salary data in job ads for remote roles performed outside of the state. This is to inhibit transparency behind the fact that New York City businesses will pay less to out-of-state workers living in lower-cost cities. Also, if this amendment gets passed, what’s to stop companies operating in Manhattan from transitioning jobs to remote roles out of New York to evade the pay transparency law?
How Businesses Can Benefit From The New Law
Smart and progressive corporate leaders could use these new pay transparency laws to enhance their image by embracing the program. These firms will enact clear pay grades that are open for all to see. Setting pay levels based upon disclosed criteria, such as length of service, productivity, quarterly assessments and other metrics, will make it easier for management, as they won’t have to engage in salary negotiations and disputes constantly. Transparency will inherently build trust in the company and workers will respect the candor and openness.
Knowing how much their competitors are paying, employers can offer a premium to the prevailing wages to attract, recruit and retain the best talent. Their generosity will result in job hunters flocking to the company, siphoning off the best and brightest of their rivals.
Corporations aren’t always trying to take advantage of their workers. Some are blissfully unaware of the compensation paid out at other organizations. These businesses likely have difficulty recruiting and retaining employees, as they erroneously believe that they offer competitive and fair salaries and benefits.
Companies that offer pay transparency will attract more job seekers, as they know their time won’t be wasted with a lowball offer. Knowing the pay package incentivizes applicants to go through the long and rigorous interview process without dropping out. The new openness will shed light on any pay inequities.
It would be prudent for companies to start researching any potential problems, such as patterns of unfair pay practices.
Raises Will Be Made To Smooth Out Inequities
The “loyalty discount” is a term used in recruiting circles that describes the plight of loyal, long-term employees earning less than younger, newly hired staff members.
When a white-collar professional in a field, such as Wall Street, switches jobs, they’ll often receive a 10% to 20% increase in pay, as an inducement to leave their current employer. Since job switching has become normalized, many people have moved more frequently. The percentage increases start adding up, and their compensation may be substantially higher than people with considerably more experience, but are not inclined to change jobs. This creates a wide discrepancy in compensation among workers. Pay transparency can help smooth out the difference and reward loyal, hardworking employees.
