Salary transparency laws have been cropping up over the past several years. States and cities across the country have acknowledged that there are persistent wage gaps that have limited lifetime compensation largely for women and POC. However, there are consequences and challenges to these laws that leave many with mixed feelings.
Overall, these laws create transparency for applicants and current internal staff as they move through their careers. Current employees can see how they are being paid in comparison to new hires. Plus, it allows candidates to decide whether they can ‘afford’ to take a new position before starting the interview process. This leads to less time wasted for employers and candidates during the interview process. Employers can avoid interviewing candidates who will turn them down based on the salary and candidates won’t apply for jobs that don’t fit their pay requirements.
Additionally, employers will be forced to tighten up their interview schedules, job descriptions, and budgets – something that we often find delays the interview and offer process. This leads employers to lose out on ideal applicants that just aren’t willing to wait until an employer gets themselves organized across TA, hiring managers, and HR.
However, there are many challenges that arise for employers, especially for technology jobs where competition for talent has not slowed. Minimum salaries can be completely arbitrary. Often, initial ranges for tech positions can be quite broad as the “right” people for a tech position could have very different skillsets and backgrounds.
Likewise, companies who are inexperienced with hiring technical talent or are just beginning to build out their internal tech team may not target their salaries or salary ceiling appropriately. They are learning on the fly that they need to increase their budget for a particular job to get the desired employee. Thus, it would also change the reasonable and “good faith” salary range that NYCCHR is requiring.
There is also a risk of losing out on a good applicant who doesn’t meet the threshold for the minimum salary listed but is a motived candidate who has proven their eagerness to learn and fits in well with the team.
Finally, employers may experience pay compression – where there is only a marginal difference in the pay offered to new employees versus what tenured employees are currently making. The competition for skilled technology workers means that employers may be under pressure to offer higher starting salaries to new employees to meet organizational goals and attract better candidates. However, new salary range transparency laws allow tenured employees to see the difference in their own pay (which tends to rise more slowly year over year). This may lead to low morale and potentially higher turnover among current staff.
New York City’s salary transparency law is neither the first nor the last to appear. California will start to enforce their expanded law in January of 2023, Colorado already has something on the books, and New York State awaits the Governor’s signature for a statewide salary range requirement. No matter the law, there will always be challenges and benefits. And, there will certainly be growing pains as we adapt to them over the next several years.