New laws force honesty about pay. Companies are catching up.
By Emma Goldberg and Sarah Kessler
DealBook
For a long time, pay gaps were discussed in hushed conversations in the bathrooms and halls. Spreadsheets circulated surreptitiously. But a wave of new pay transparency laws means that figuring out how much a job pays is no longer dependent on a handful of fearless colleagues.
Starting Tuesday, companies with at least four workers that post a job that may be performed in New York City will be required to include salary ranges, whether they advertise jobs online, in a job fair flyer or on internal bulletin board. Similar laws for job ads have been enacted in Colorado, California and Washington state. And since 2017, four other states have adopted laws requiring companies to disclose a pay range to job candidates at some point in the interview or negotiation process, according to the National Women’s Law Center. The New York state Legislature has approved a measure similar to the city’s, but Gov. Kathy Hochul has not yet signed it into law.
“On both sides, there’s that awkwardness when you’re talking about compensation,” said Vishal Vakharia, who runs recruiting for Ribbon, a real estate technology company with over 200 employees that started posting its salary ranges this month. “Having it out in the open eliminates that.”
As transparency rules take effect in some of the country’s largest job markets, their proponents hope that pay disparities for women and workers of color will narrow. In 2020, women earned 84% of what men earned, according to Pew Research Center, and the gap was wider for women of color. In the federal government, where pay rates are public, women made on average 93% of what men earned in 2017.
The laws are changing some of the fundamental ways in which companies determine pay and recruit candidates. Some employers realize that they will face a period of disruption as their workers learn what colleagues are making and ask for raises. But many businesses that are already posting salary ranges said that the effects have been potent, exposing disparities and prompting changes in corporate policies.
Monday.com, which makes productivity software, posted salary ranges for its positions in Denver, where it has about 45 workers. The company, which has roughly 400 U.S. employees, is weighing whether it should do so across the country as it prepares to comply with New York City’s law.
“Well, if this is how the country seems to be trending, let’s get ahead of it and just go for it,” said Mike Lamm, who leads Monday.com’s North American human resources, on a potential policy expansion. “It’s not in place currently, but it’s something we’re considering.”
To Lamm, the new laws offer the opportunity for employers to make sure they’re not setting salaries arbitrarily: “It’s kind of a test for companies in a way.”
When Colorado enacted its rules that require all employers to include salary ranges on internal and external job posts, Tim Meurer worked as a talent acquisition consultant in the state. At most companies, he said, pay was not consistent across positions, partly because recruiters had “an open checkbook” when they made offers. They hired candidates at the lowest price they could get them, regardless of the role’s target range.
Managers expected that revealing salaries for new positions would upset some employees, and they were right. “HR was extremely busy for probably six months where they had to explain exactly why each individual person was paid what they were paid,” Meurer said.
But ultimately, the law changed the system for the best, he said. It forced managers “to really hold people accountable and have documented processes as to why they’re paying people, why they’re moving people’s compensation, why people are titled the way they were titled,” Meurer said.
New York City’s law has been met with some resistance by employers and recruiters, who argue that it will introduce hurdles in an already tight labor market.
The law will be enforced by the city’s Commission on Human Rights; employers face fines of up to $250,000 if they do not comply after a first offense.
“The transition is hard,” said Kathy Wylde, who runs the Partnership for New York City, a consortium of business interests. “An employee in a low-cost area where the salary range is lower, or where the labor market is different, will see what somebody with the same job title is getting paid in New York City and may feel they’re not getting what they deserve.”
But to many workers and business leaders, the disruptions that result from salary transparency simply confirm the need for the laws.
“Compensation was a black-box exercise historically, shrouded in confidentiality and, therefore, tightly in the control of the employer,” said Allison Rutledge-Parisi, senior vice president of people at Justworks, a human resources technology company.
Studies have shown that people are more likely to apply for roles that include salary ranges. About 60% of job postings on Indeed include salary information, and those that do see about 30% more people starting applications. Three-quarters of job seekers say they’re more likely to apply for a posting that includes a salary range, according to an Indeed survey from April.
Starting Tuesday, Indeed will no longer share new job postings in New York City that don’t have salary ranges. The company pointed out that job seekers will be able to filter out positions below their pay standard.
Still, salary transparency isn’t a panacea.
Loren Furman, CEO of the Colorado Chamber of Commerce, said that some companies in the state have posted wide salary ranges so they have more flexibility in offering salaries based on a candidate’s performance and experience. There is no provision in the New York City, Colorado, California or Washington laws that prevents employers from going outside the advertised range when making a job offer.
Some business leaders worry that forcing companies to be transparent about salary will lead them to offer more compensation in the form of less transparent vehicles such as bonuses or benefits. One study of more than 100 medical device distribution firms found that when pay was transparent, employees were more likely to seek out, and employers were more likely to provide, this less visible form of compensation.
“That’s an argument to make all of those perks transparent,” said Kim Scott, a former Google executive who recommends transparent pay in her book, “Just Work.”
Some employers feel that the shift toward pay transparency in large markets such as New York City’s is overdue. Trey Ditto, who runs a public relations company with about 15 employees in the New York area, has long been frustrated by the awkwardness of salary conversations.
“There was always this song-and-dance,” Ditto said. “The company would say, ‘How much do you want?’ and the candidate would say, ‘How much are you offering?’”
Ditto said his company started sharing salary ranges with candidates three years ago. For all the skepticism from people outside the firm, he said his own employees have benefited because the move allowed him to identify inequities in his salary system.
“A recruiter thought I was crazy,” he said. “In the beginning there were people that were underpaid and people that were overpaid. It took a good two years to work that out.”