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How Much Pay Transparency Do We Need?

New York City made headlines recently when it announced it was going to require employers to list salary ranges in all job postings, starting in April of 2022. The new requirement for pay transparency isn’t unique to the Big Apple–California and Colorado have implemented similar requirements.

While most would argue that pay equity and transparency are good things, is there such a thing as too much transparency? Our research points to the specific kinds of transparency that are most important to job seekers.

The drivers of salary transparency

Proponents of the salary posting law claim that it will reduce inequity in the hiring process and help to more readily identify systemic pay inequities, which historically impact women and minorities the most. They also highlight the fact that it will avoid wasted time by both employers and candidates when the potential salary for a job does not align with the job seeker’s expectations. Why go through a whole interview process only to find out at the end that pay expectations are not a match?

For candidates, the law clearly has some benefits to it. For employers, however, there is a potential downside to consider. According to Professor Teresa Ghilarducci, who teaches economics and policy at the New School of Social Research, research shows that “if salaries are kept secret, the employer pays less than they otherwise would.” In a market where employers are already increasing wages to attract skittish talent, any added pressure on profits may be of concern.

The upside of posting pay

Yet, while some employers may balk at government intrusion into their recruiting process, there is some evidence that posting pay ranges may actually help them to attract talent. In beqom’s research report, Employee Expectations in Hiring, it was revealed that more than six in ten Americans (61%) are more likely to apply to a job that shares a salary in the job posting. 

Not all job seekers are equal. The preference for jobs that share salary ranges in the posting is greater among Millennials and Gen X – less amongst the younger Gen Z and the older Boomers. This suggests it is less of an issue for entry level and senior jobs, while more of an issue for mid-range positions.

Inc. magazine suggests another benefit to salary transparency in job postings: it fosters a positive company culture. According to their recent article on the subject, “It is a display of integrity and mutual respect, which builds confidence and instills trust. In return, it creates a more positive company culture where staff trust that their employer respects them--and with that, values them and their time. And with that, they are more likely to remain happily employed at their company.” So the practice can be turned into a brand-boosting advantage, presumably even more so in areas where it is not a legal requirement but a potential competitive advantage.

Can we talk?

Talking about pay is always a sensitive subject, both in the interview process and during salary reviews. Our research shows that while candidates expect pay transparency throughout the interview process, only four in ten (41%) feel comfortable asking about compensation in the initial screening or first interview. Perhaps that is why they are more likely to apply for a job when the salary range is clear upfront.

Transparency within the organization

Beyond knowing what their own job will pay, many job seekers also want to know what criteria are used to determine pay, so that they can understand the impact of factors like location or experience. While only 38% prefer to discuss pay transparency in the initial screening or first interview, over two-thirds (68%) might take a lower salary as long as there was transparency about salary benchmarks at the organization. That seems to come back to the issue of fair pay. As long as I know my pay is fair, I can be happy with it.

Make transparency work for you

Even if you are not hiring in New York City, California, or Colorado, you may want to consider including pay ranges in your job postings, especially if they are not entry level or senior positions. This could make your job stand out, boost your brand as an employer, and attract more candidates. 

But whether you post salaries or not, it is still wise to establish pay ranges that make sense for your industry, roles, and talent markets, with consistent and transparent criteria for assigning pay to individuals. Yet don’t be a victim of your own rules. They exist to serve you, not the other way around. Consider exceptions carefully to ensure you can get or keep key talent, just make sure you do not have patterns of pay inequity.

How can you be sure you are in fact paying fairly and without bias? Invest in compensation technology that helps you to benchmark your pay scales internally and externally, and to analyze your compensation data to uncover pay gaps and identify risks

For more tips on hiring in today’s changing job market, download our free Employee Expectations in Hiring Report.

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