A strange convention in US recruiting is that a question job seekers might want to ask first is often answered last: How much does the job really pay? In the working world, it remains common for employers to keep this vital information under wraps, keeping applicants in the dark while giving hiring managers a competitive edge in determining pay.
Now, a growing number of US states are moving to shed light on the issue of starting wages. The new laws require companies to disclose pay ranges in job postings and on their websites. The rules represent a growing push for more pay transparency and even target bargaining power between employers and workers, empowering workers while also narrowing long-standing wage gaps for women and people of color.
In California, under a law signed last week by Gov. Gavin Newsom that goes into effect Jan. 1, 2023, companies with more than 15 employees must include salary ranges for jobs and share the same information as current employees. In New York, a law requiring private sector employers to disclose salary ranges in job postings awaits Gov. Kathy Hotchul’s signature. And Colorado, Connecticut, Maryland, Nevada, Rhode Island and Washington have enacted their own pay transparency laws.
A “good faith” salary range is required.
In New York City, a law that goes into effect Nov. 1 requires businesses to include a “bona fide” salary range for every job advertised. Employers are not required to disclose information about bonuses, benefits and other forms of compensation.
“From now on, whenever a job is posted on an Indeed-like website, workplace, or advertised in a newspaper or online, [job seekers] we should expect to see a salary range for that position if the job is in New York or could be done in New York,” Domenique Camacho Moran, a New York employment attorney at Farrell Fritz, told CBS MoneyWatch. “The goal is to make sure there’s pay equity based on the work performed as opposed to who might apply for the job.”
In other words, if an employer advertises a job that pays between $60,000 and $90,000 per year, anyone applying for the position can expect starting compensation within that range, regardless of 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 disclose what they were going to offer,” said David Gordon, a partner at the New York law firm Mitchell, Silberberg & Knupp . practice.”This is part of an overall shift of information from employer to employee that will assist some workers in negotiating their compensation.”
“Employers must show their cards”
The New York law runs alongside a January 2020 law barring employers in the state from asking prospective and current employees about their salary history, which was also enacted to help close the wage gap and end compensation practices and potentially discriminatory recruitment practices.
The laws will help workers decide which jobs to apply for based on the salary range, while also discouraging employers from seeking “discounts” from workers who would otherwise accept less pay.
“Employers are in a position where they have to think very carefully about what they believe in good faith that a particular position should pay,” Jason Habinsky, chairman of Haynes Boone’s employment practice in New York, told CBS MoneyWatch. “Employers have to show their cards and put them on the table first. You can’t make decisions based on someone being in a protected class.”
Salary should be disclosed as a range, not as “up to” or “at least” a specific number.
“One potential danger is that some employers are not going to operate in good faith and instead of providing a bona fide range in order to cover themselves, they will provide a much wider range than they would normally provide to give themselves the opportunity to decide what they’re going to pay somebody,” Habinski said. “It doesn’t serve the purpose of saying that someone is paid between $5 million and $5 million.”
It could lead to more recruitment through word of mouth
Under New York law, companies are not required to disclose compensation information, including bonuses, benefits, commissions or tips. And the rules only apply to external job postings and internal postings. This means that if an employer hires a new hire through word of mouth, they are not required to disclose the role’s salary range before submitting an offer.
“The law does not prohibit employers from hiring without using an advertisement,” said New York employment attorney Josh Zuckerberg. “There’s no law that says you have to advertise positions.”
This could lead to more recruitment through word of mouth.
“Certain types of employers might call headhunters and say, ‘We’re looking for this type of position, what can you find for me?’—if you don’t want to disclose the salary,” Zuckerberg said. “There’s a potential for less transparency.” , no more”.
The hot job market is driving up workers’ wages and forcing employers to pay top dollar to attract talent. An employer could well have to pay a new hire more money to perform the same job function as an existing employee, potentially creating tension and division in the workplace.
“There are a lot of potential consequences as a result of this law. You could have a current employee see what prospective employees are being paid, and that can lead to employee resentment and hurt feelings,” Habinski said.
Any employer with four or more employees, at least one of whom works in New York, should prepare to comply with the new regulations, according to workplace and employment attorneys.
“It would be prudent for any employer who does not want to run afoul of the law to have someone monitor any job postings internally or externally to ensure they comply with what the law requires,” Gordon said.
HR staff should also be prepared to explain any pay discrepancies, said Carol Goodman, chair of Herrick Feinstein’s employment practice.
“It will likely raise a lot of questions, and HR departments should be prepared to field questions from existing employees who may call and say, ‘I see a posting for a similar position to the one I hold, but my pay is lower,'” he said.. “HR professionals will want to be prepared to talk to their employees about this.”