Pay Transparency Laws: How They Could Impact Your Job Search

Job search.
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Relatively new pay transparency laws require employers to disclose the salary range for an open and advertised job position.

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According to Jenn Lim, a global workplace expert, speaker, corporate consultant and CEO of Delivering Happiness, “These laws, which are increasingly being passed in states across the U.S., are empowering employees and are a move to address gender and race pay inequality. While it’s not the end-all solution, it’s a step in the right direction.”

With that in mind, let’s examine the various aspects of the laws and what they could mean for job seekers.

Leveling the Paying Field

The need for such laws emerged when legally protected groups categorized by race, age, and sex, etc. were found to be paid less than their counterpart white males under 40, according to Linda VanDeventer, VP in the Compensation and Career Strategies practice at Segal.

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“Pay transparency laws are each written with different rules. These laws may require salary ranges in job postings, require salary ranges to employees considered for promotions, require job descriptions to be provided, and require bonus/incentive program descriptions to be provided,” she said.

“This is a win for employees, they now have more rights. You have gained increased knowledge about how a job is valued by the specific company you are considering working at. Knowledge is power. More knowledge means you have more facts to use when navigating the job candidate process and negotiating the best offer,” she added.

These laws may be less critical regarding jobs with a single hiring point, such as teachers, firemen, nurses, union employees, who typically are paid based on a “step” program methodology, VanDeventer explains. 

Which States Have Them?

Currently only a handful of states have pay transparency laws, including Colorado, which was the first state to roll them out. California, Connecticut, Maryland, Nevada, Rhode Island, Washington and New York recently joined Colorado, and more may soon follow.

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A Demand for Clarity

Pay transparency is part of a demand for clarity and fairness and a call for more inclusive workplace cultures that support everyone, not just the few.

According to Lim, “With more policies and laws in place, we’re finally seeing the needle move on pay inequity. This will help to put money into the pockets of women and communities of color. However, it’s important to be thoughtful in how employers and employees alike navigate these discussions.”

Repercussions for Unequal Salaries

One of the downsides of these laws, well-intentioned as they may be, is that some employers may face legal repercussions for unequal salaries, and disgruntled employees could quit, Lim explained. “There could be tension or unrest within the workplace that damages morale and productivity when workers realize they have been paid less than their counterparts.”

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A Subjective Practice

Another possible downside of pay transparency laws, VanDeventer explained, is that because of the unique nature of some other jobs, there is not a ‘one size fits all’ salary range. “A lot of subjectivity can go into the establishment of pay levels.”

For example, “While an accountant is typically an accountant across organizations, jobs in marketing, supply chain, sales, operations, etc., are designed to optimize the role to fit each organization’s unique business needs and organizational structure so salaries can vary too.”

Discouraging Applicants

Though pay transparency laws are intended to help workers understand if they are being underpaid, as well as providing a general target for job seekers, Brandon Bramley, founder of The Salary Negotiator, said there’s a lot of room for improvement.

“We’ve only seen how these work against job seekers. It’s a hit or miss on what compensation data the company provides in these ranges — is it just the base salary or does it include the other total compensation components (i.e., yearly bonuses, equity, or a sign-on bonus)? This has also deterred job seekers from negotiating because they think the advertised pay range is set in stone, but we haven’t found that to be the case and have seen companies negotiate above what is posted,” he said.

He says that recruiters are leaning on these ranges to push job seekers into committing to a number before interviewing, learning more about the role, and reviewing the benefits/culture. “This results in possibly accepting a lower-than-market rate and missing out on being paid at the true top end of the pay range.”

Don’t Overreact: Negotiate

VanDeventer warns not to overreact to the salaries you see posted, especially if the range is lower than expected. “Quite frequently, there is potential to earn higher than what is displayed in the job posting. The organization is likely posting the expected ‘hiring range’ which is often a subset of the full salary range. For a highly-qualified individual, there is generally room to negotiate.”

Additionally, organizations often have multiple levels of a job and are more than willing to increase the level of a job for the “right” person, she said. “Employees need to be persistent if this is an organization they are very interested in working for, especially in a tightened labor market.”

Employers Need Strategy

For employers, “This is an opportunity to become strategic and intentional to improve effectiveness of pay communications and how pay fits into the employee value proposition offered (pay, benefits, career development, perks),” VanDeventer said.

“Many organizations do a poor job of communicating how pay programs work and that can lead to disengaged workforces and turnover,” she added.

More Administrative Work for Companies

These laws will, unfortunately, result in more administrative work on the employers’ end. According to VanDeventer, “Some employers fear that everyone is going to ask for the top of the range posted and therefore are grappling with ‘what portion of the salary range’ to post. They are concerned that they could turn off some candidates if they post a range that is too low, and are trying to balance that with the fear that everyone is going to ask for the top of the posted range.”

A Possible Win-Win

In the long run, pay transparency could be a good thing for all, says Chelsea Jay, Career and Leadership Development Coach with Seasoned and Growing. Pay transparency gives employees a “confidence boost,” she said, arming them with knowledge regarding roles and pay, and allowing them to choose what job applications they’re spending their time on.

Pay transparency also prevents frustration for employers and the candidate because both sides come to the table with a mutual understanding of what is available in terms of pay — at least relatively speaking.

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About the Author

Jordan Rosenfeld is a freelance writer and author of nine books. She holds a B.A. from Sonoma State University and an MFA from Bennington College. Her articles and essays about finances and other topics has appeared in a wide range of publications and clients, including The Atlantic, The Billfold, Good Magazine, GoBanking Rates, Daily Worth, Quartz, Medical Economics, The New York Times, Ozy, Paypal, The Washington Post and for numerous business clients. As someone who had to learn many of her lessons about money the hard way, she enjoys writing about personal finance to empower and educate people on how to make the most of what they have and live a better quality of life.

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