NYC’s pay transparency law has gotten off to a rocky start

New York City’s pay transparency law was supposed to lift the veil that employers often use to conceal salary ranges from job-seekers, according to city council members who introduced the legislation. But since the law went into effect on November 1, the veil has merely been pierced: Many companies are listing salary bands that double, triple, or quadruple in size, occasionally with ranges so vast they might seem outright farcical.

While the rollout has sputtered, Tony Guadagni, senior principal for the HR peer and practitioner research team at Gartner, explained to HR Brew that organizations are weighing many internal and external factors concerning transparency. It could, for example, stoke jealousy and tension when employees discover new hires will be offered more than they earn. “There’s all these internal equity issues that people have to consider. That’s a big part of what makes this so complicated,” he said

In order to avoid appearing indifferent—or worse, to be openly flouting new regulations—HR departments need to perform ample market research to determine ranges that won’t discourage candidates, HR professionals explained. As Claire Rosenthal, head of people and culture at people enablement platform Leapsome, told HR Brew, pay transparency isn’t about protecting the bottom line, but opening doors for candidates. “From a diversity, equity, [and] inclusion perspective, I think it’s something that’s very laudable,” she said.

Good faith. The pay transparency law has a clause requiring salaries to be listed in “good faith,” defined by the New York City Commission on Human Rights (NYCCHR) as “the salary range the employer honestly believes at the time they are listing the job advertisement that they are willing to pay the successful applicant(s).” Inherent in the good faith concept is a glaring “gray area,” Guadagni contended, as enormous salary bands might indicate that employers are attempting to skirt their obligations.

Kinks and logistical mishaps are expected, however, especially as the country’s largest labor market acclimates to these new requirements. In a noteworthy blunder, Citi listed a compensation range for a client service officer between $0 and $2 million a year, resulting in a bit of online skewering. (Citi later attributed the listing to a clerical error and updated the page.)

“This is an error in the way that that data was pulled from the system,” Guadagni wagered.

Comically large ranges that aren’t the result of error might be a reflection of organizations attempting to wrest control away from candidates in the negotiation process, a time when the balance of power tips in favor of workers, Guadagni said. Publicizing a gargantuan range can also cause brand damage, as it “pisses people off” because “it feels dishonest,” said Chancellor Brunnemer, a former HR manager who worked in Colorado when the state’s salary transparency law was implemented in 2021.

“It would be very hard for an organization to make an argument that they’re doing that in good faith,” Guadagni said.

NYCCHR is accepting anonymous tips from job-seekers about businesses suspected of skirting the law. While they won’t incur penalties for their first offense, repeated violations can result in penalties up to $250,000.

Getting it right. As the sole HR manager at a small manufacturing company in Colorado, Brunnemer was tasked with getting his organization’s house in order to comply with the state’s pay transparency law. He advised tackling some “internal benchmarking” to understand the salaries employees at the company already earn. “How does this affect the employees that already work here?” he asked.

At Leapsome, an international company with offices in NYC, HR underwent a similar process in which market data was compiled and applied to new listings. Rosenthal, the company’s chief people officer, strove to reflect “what the market actually pays for that kind of role when it comes to base salary.”

Leapsome sought to tamp down the threat of jealousy or internal strife by being transparent about the process with its workforce. It created and shared with employees an FAQ about the new pay transparency guidelines and encouraged questions about pay during regular AMA sessions with top brass, Rosenthal said. “We really didn’t want to have these kinds of sentiments where people felt there was something going on behind their backs.”

Moreover, having pay bands that seem realistic can go a long in helping a company realize its DE&I ambitions, she said. At Leapsome, Rosenthal said the goal is to have a “very fair and consistent logic to how you compensate people, which also contributes to closing the pay gap. It doesn’t give individuals or groups of people more leverage on negotiating, but rather treats everyone the same.”—SB

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