Compliance

Pay transparency can actually be good for employers, according to these experts

Much has been said about the benefits of pay transparency laws for employees, but there are benefits for companies, too.
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· 3 min read

Prior to 2021, companies could conceal salary bands like exotic treasures locked behind a vaulted door. However, legislators have recently pried the doors open, passing a series of salary transparency laws in various states and districts. Many of the new rules, notably in the large employment hubs of New York City and California, mandate that employers list once-guarded salaries on all job listings as a matter of routine compliance.

Widespread transparency laws have been lauded as potentially transformational for job-seekers. Research indicates that the legislation could chip away at generations of gender and racial wage inequalities, and tens of millions of candidates no longer have to guess what kind of salary package might materialize at the end of an interview process.

But the incentives for companies to publicly disclose salary bands extend far beyond evading government penalties, two sources explained to HR Brew. When employers are transparent, it increases employee trust, said Jamie Coakley, SVP of people at the IT support firm Electric. On the other hand, “For companies that do have equality issues or pay disparity, this can be a really scary time,” she told HR Brew.

Part of building trust, and the recruitment pipeline, involves posting salary ranges that actually help candidates, instead of comically gargantuan bands. “Companies don’t budget like that,” Coakley said. “They don’t say, ‘We might hire a product manager next year for $60,000 or $300,000.’” But listing salary ranges in good faith can offer the dual benefit of fostering candidate trust in a company and ensuring that job-seekers won’t be surprised when an offer comes down the pike.

Good for companies, too. Disclosing ranges allows for a more targeted recruitment approach and, presumably, a broader field of candidates who actually want the job, Krissy Katzenstein, a partner specializing in employment and compensation at Baker McKenzie, explained to HR Brew.

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Specifying the candidate funnel should be enticing to companies in light of the recent labor market shortages, particularly in more service-oriented sectors such as leisure and hospitality. With a more targeted group of candidates, companies can be more certain that recruits are willing to work for publicly disclosed salaries. “It can have a positive benefit of screening out applicants who simply wouldn’t do that job for that rate of pay, and saving the resources in recruiting,” Katzenstein said.

There is also the issue of trust. As the pandemic threw traditional workplace dynamics into uncertainty, fostering trust between employees and employers became even more paramount for HR leaders. Salary transparency can only strengthen the bond, Katzenstein said. “What we’ve seen is that [it] ends up resulting in employees feeling like they have information, as opposed to the information being inaccessible.”

Changing tide, an increasing norm. With several states and NYC enacting pay transparency laws allowing candidates to access salary information in various ways, Katzenstein sees something of a potential domino effect at play. “I think the trend will be that we see pay ranges posted in states even where it’s not required, because…we have so many employees in the states where it’s already required that we may see that it becomes a national standard, even if not federally legislated,” she said.—SB

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