Broad pay ranges may hurt an employer’s chance of recruiting female talent

In the US, employers can typically post broad salary ranges for open roles while still complying with many of the pay transparency laws now in effect across the country.

But doing so may narrow companies’ applicant pools and hinder their ability to attract diverse talent, recent research from Cornell University’s Industrial and Labor Relations (ILR) School suggests.

The research, published in the Journal of Applied Psychology, finds women are more likely to apply for jobs with narrower salary ranges than men. This in turn affects their propensity to negotiate, and ultimately, their salary potential.

Such findings run counter to the overall goal of pay transparency legislation, which is to close gender pay gaps. To ensure that broad ranges don’t deter certain applicants from applying, HR teams should provide additional context about how compensation is determined within pay ranges, Alice Lee, an assistant professor at Cornell’s ILR School, told HR Brew via email.

Pay ranges can impact applicants, negotiation tactics. Lee, the lead author of the research, said she and her colleagues analyzed nearly 10 million US job postings and experiments, and identified a “consistent pattern” across four studies: “Women show a significantly stronger preference for jobs with narrower salary ranges compared to men, driven in part by greater aversion to financial uncertainty.”

What’s more, applicants who favor positions with narrower ranges are also less likely to negotiate their salary. The studies found they were more likely to be satisfied with lower-tier salary offers, and asked for less money when they countered the initial amount offered to them.

Such findings indicate “pay range design functions as a recruiting lever, not just a compensation detail” for organizations that want to build “diverse talent pipelines,” Lee said.

How employers can avoid a gender applicant gap. The research does highlight one step companies can take to ensure female applicants aren’t deterred from applying to open roles. One of the studies found that when applicants were given “brief context alongside the salary range,” such as what a typical starting salary looks like, and how the company determines final offers, “the gender gap in application preferences effectively disappeared,” Lee said.

Providing such context is “the most direct step” employers can take to address potential applicant disparities, she added.

Despite the fact that most employers are now complying with pay transparency laws, information about how they determine salaries within published ranges can still be fairly opaque, Tauseef Rahman, a partner with Mercer who advises clients on these issues, said.

“When we survey employees directly, they’ll say, ‘I don’t know why I’m being paid what I’m paid, what it takes to move within the pay range and increase my pay,’” Rahman said.

In other words, “being compliant doesn’t make you transparent.” Given these trends, “it doesn’t surprise me that you can have situations where broad ranges can be less clear and put people off,” he said.

Evolving legislation may soon spur companies to share more context and detail about their compensation, potentially steering them away from broad ranges. New Jersey plans to require employers to post an upper range no higher than 60% of the minimum salary, while California recently enacted an amendment to its pay transparency law requiring employers to give a “good faith range estimate” of the salary they plan to offer upon hire, rather than throughout the lifespan of a position.

The EU Pay Transparency Directive, which takes effect this June, will also require multinationals to be more precise with their ranges, Rahman said.

“We’re on the precipice of organizations realizing that they are going to need to rethink transparency as a topic much more strategically.”