Nov 1, 2022 - Economy

Pay transparency shakeup could mean salary pushback

Illustration of the eyes emoji with pennies instead of pupils.

Illustration: Brendan Lynch/Axios

Get ready to learn a whole lot about how much companies pay their workers. Starting Tuesday, New York City employers must disclose salary information in job ads, thanks to a new pay transparency law that will reverberate nationwide.

Why it matters: This isn't just a Big Apple thing. Pay transparency is catching on around the country, as part of a push to shrink gender and racial pay gaps. It's upending the way companies handle compensation, and how employees and job candidates negotiate for more money.

  • California's pay transparency law takes effect in January — meaning two of the nation's biggest job markets will also be the most transparent.

What's happening: Employers have spent months getting ready for this. They'll now have to post salary ranges for open roles — but many didn't have any established pay bands at all, says Allan Bloom, a partner at Proskauer who's advising companies.

  • Already, firms like American Express, JPMorgan Chase and Macy's have added pay bands to their help-wanted ads, reports the Wall Street Journal.

How it works: Companies with more than four employees must post a salary range for any open role that's performed in the city  or could be performed in the city.

  • Violators could ultimately be fined up to $250,000  though a first offense just gets a warning.

Zoom out: In a world where salary information is secret, employers have the upper hand.

  • A pay transparency law similar to NYC's went into effect in Colorado last year. Before that, "I think by and large, companies were getting away with underpaying people," Tim Meurer, who worked in talent acquisition in the state, told Dealbook last week.
  • More transparency means companies may need to pay more for talent — at a time when wages are already rising in a tight labor market.

Reality check: It's a pretty squishy requirement. The law requires only that salary ranges be in "good faith" — and there's no penalty for paying someone outside of the range posted.

  • It will be difficult for enforcement officials to prove a salary range is in bad faith, Bloom says. "The low-hanging fruit will be [going after] employers that don't post any range whatsoever."
  • Many of the ranges posted online now are pretty wide. A senior analyst role advertised on the Macy's jobs site is listed as paying between $85,320 and $142,080 a year. A senior podcast producer role at the WSJ advertises an "NYC pay range" of $50,000 - $180,000.
  • The wide ranges could be particularly reasonable if these roles can be performed remotely, as some companies adjust pay according to location.

Meanwhile: There are other, more hidden ways companies can discriminate in compensation — such as the issuance of stock options or bonuses.

Our thought bubble: When presented with a range, job candidates often only see the top number, recruiters have long told me. Posting these bands opens the door for higher expectations from candidates and current employees, who will want to earn the max.

The bottom line: More sunlight is a good thing for workers and likely could help reduce pay inequities — especially around lower-level roles that don't involve stock-based pay.

  • Employers, meanwhile, should brace for pushback and questions from current employees looking to get a raise.
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