Wage transparency laws coming to a state or city near you

On November 1, New York City’s pay transparency law took effect, requiring the majority of city employers to provide “good faith” salary ranges for their open positions. The law echoes similar legislation in Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington and California, whose law goes into effect Jan. 1, 2023. However, with NYC being home to many of America’s most prominent corporations, this law provides an interesting glimpse into how pay transparency will truly impact the hiring market, as similar legislation is likely to pass in other states and major municipalities in the coming years.

In the law’s opening weeks, a significant loophole has emerged that employers are using to bypass the requirement to provide “good faith” salary ranges. Specifically, some city employers have posted ranges as wide as nearly $500k, leaving candidates uncertain about the reality of the salary. While these employers are technically complying with the law, they are typically providing the wide ranges to avoid the potential pitfalls of publicizing salary data and may actually be putting themselves at a talent attraction and retention disadvantage. However, employers who choose to embrace transparency can gain a significant boost in America’s ongoing war for talent.

Accurate ranges will attract applicants

October’s BLS and JOLTS reports demonstrate persistent difficulties for employers looking to attract talent, as job openings nearly double the number of unemployed Americans. Perhaps the jobs on offer don’t seem appealing for many Americans, but more likely ambiguous job listings are to blame, especially those without a realistic salary range. Providing an accurate salary range can significantly increase the number of applicants. In fact, nearly 8 in 10 employees expressed that they’re more likely to submit an application to listings with realistic salary ranges, according to our 2022 Compensation and Culture Report.

Additionally, our Employee Expectations in Hiring Report found that 68% of employees would consider a lower salary if an organization was transparent around compensation from the start, which proves the critical role of transparency in earning a candidate’s trust. Job descriptions with accurate ranges also reduce the possibility that an employer’s preferred candidate(s) go through the entire interview process only to withdraw or decline the job offer upon learning the salary is below expectations, wasting both the candidate and the employer’s time. With that in mind, accurate and transparent job listings are a true win-win for both parties.

Transparency goes beyond pay

Organizations can also attract more applicants by providing additional clarity on the other important aspects of employee life at their company. On the attraction side, the number one reason 87% of employees applied for a new role was the position and its tasks. Transparency starts here. Employers must ensure their job postings provide a clear description of the open roles and their respective tasks to give candidates a realistic picture of the job. This will automatically attract candidates with a sincere interest in the role, and help weed out those who are applying to jobs en masse. The perks and benefits that come with joining an organization are also very valuable to job seekers, as 81% of employees are more likely to apply to roles with comprehensive descriptions of employee benefits and perks, than roles without those descriptions.

Transparency goes beyond just providing an accurate salary range, and the most attractive job listings will paint as clear a picture as possible of what being an employee truly looks like; including job responsibilities, employee benefits, workplace policies (remote/hybrid/in-person, hours, PTO), and compensation. Showing candidates the full picture of what it’s like to work at the company enables candidates to make a well-informed decision about whether the position fits their goals and expectations before they apply, eliminating considerable uncertainty from the hiring process.

The value of internal transparency

With so much recent emphasis on external transparency, the value of internal transparency often falls off the radar. Today’s talent gap is a result of employers struggling to both hire and retain employees, and a transparent internal culture can boost efforts on behalf of the latter. After all, organizations would have fewer job openings, and in turn, less pressure to hire if they were able to maintain higher retention rates. For employers in areas where transparency is, or soon will be a requirement, publicizing salary ranges comes with the risk that current employees will notice higher salary ranges for open roles similar to theirs, breeding potential discontent. Adopting greater internal transparency around why employees are paid their current salary not only reduces this risk, but also paves the way for a stronger employee-employer relationship.

Related: How employers can use pay transparency laws to their advantage

Our survey found that 1 in 10 employees believe their organization doesn’t pay fairly because leadership provides no insight into how pay is decided. Clearly, employee suspicion is present regardless of external transparency. To alleviate suspicion, leadership should look to standardize and openly acknowledge the processes that determine employee compensation, and in particular how promotions, raises, and bonuses are decided. Implementing an automated system to aid in compensation decisions can not only help employers provide clear performance, tenure, skill set, and education-level benchmarks for pay raises, but also reduces the role unconscious biases may play. Employees should know exactly where they stand regarding earning promotions, larger bonuses, and general pay raises. In turn, this will build good faith within employee populations, and help keep them around.

Currently, seven states have wage transparency legislation on the books and as more cities (Jersey City and Cincinnati, in addition to New York City) and states sign transparency bills into law, it’s clear that the movement is here to stay, and employers who embrace it stand at a significant hiring and retention advantage. Providing accurate salary ranges and a comprehensive description of what life looks like at your organization will help attract truly interested candidates and streamline the hiring process. While external transparency may unsettle some employees, responses that emphasize a more open culture around how compensation is determined, and leverage automation, will go a long way towards a higher retention rate. Today’s workers place considerable value in transparency, and so should the employers looking to recruit and retain them.

Tanya Jansen, Co-Founder of total compensation and continuous performance management solution beqom.