A growing number of states and municipalities are enacting salary transparency laws, a stepping stone toward eliminating wage discrepancies based on gender, race and other unfair practices. One immediate result, however, is a patchwork quilt of regulations that can be confusing and challenging for businesses, especially smaller ones, to comply with.
It’s something companies have to contend with, however, given the trajectory these laws are taking and the fact that job seekers are largely in favor of it. A notable 67% of employees agree employers should be more transparent with their pay practices and 35% strongly agree, according to a report by Lattice, a provider of performance and compensation management services.
A separate report by employment search engine Adzuna found that 22% of job seekers believe salary transparency on job postings should be employers’ top priority, and around a third of job hunters said they would not attend a job interview without knowing what the employer is willing to offer.
Here are a few important ways the push for greater pay transparency will change the way employers think about job listings.
Even without a law, expect pay transparency to become the norm
Pay transparency laws have been proliferating across the country, with a growing number of states including California, Colorado, Connecticut, Maryland and Washington enacting some type of salary transparency law.
Dave Carhart, vice president of advisory services at Lattice, favors a strategic approach where businesses proactively evaluate their stance on transparency, even if it’s not an absolute requirement.
“Companies are putting a lot of additional work in now so they can not only comply, but also have an effective compensation strategy in that environment where they are needing to provide more transparency,” said Carhart, whose company began sharing salary ranges early last year.
“Once people work at companies where salary transparency is the norm, it will seem odd, or secretive, for companies not to share it, even if there’s not a legal requirement to do so,” Carhart said.
Business owners should be transparent, even if it’s not required by law, because of the benefits to both job seekers and employers, he said. A candidate who is interested in earning $100,000 isn’t likely to apply for a job advertising a $50,000 salary, so applicants are likely to be more appropriate for the role. “It saves both sides time and energy,” he said.
Number of workers is key, as is location in remote work era
The laws vary by jurisdiction in terms of which companies are covered and the nuances of how to comply. California’s new expanded law, for instance, which goes into effect Jan. 1, applies to companies with 15 or more employees. New York City’s salary transparency law, meanwhile — set to go into effect Nov. 1 — includes employers with four or more employees, provided at least one works within New York City.
All businesses will need to understand how the growing body of laws may apply to them, said Peter Glennon, founder of The Glennon Law Firm in Rochester, New York. This is especially important as more companies seek to hire remote workers, said Glennon, who has been involved in wage and employment matters in more than 20 states.
Some companies have opted not to recruit in certain states because of their salary transparency laws, explicitly excluding remote candidates who hail from these states in their job postings.
Carhart believes this is a tactical mistake. Creating an effective compensation strategy and making decisions on salary that a company can defend — rather than exiting or avoiding certain markets — leads to better business outcomes, he said. “This isn’t something where avoidance is an effective long-term strategy.”
Employees may have to be paid more across the board
With salaries for new employees becoming more transparent, it could force the hand of many businesses to raise salaries for all employees, said Ben Johnston, chief operating officer of Kapitus, which provides financing to small and medium-sized businesses. Long-term employees will see their company paying a higher market price to bring in good talent, Johnston said. As a result, they will “probably be knocking on their boss’s door asking for higher wages,” he added.
This could be challenging for some businesses, so it’s something they at least need to plan for as they seek to grow in an inflationary wage environment.
Job postings will still go beyond dollar signs
Many small businesses pay less than larger companies, and these differences are likely to become more obvious as the salary transparency trend flourishes. It’s advisable for small businesses to focus more intently on “intangibles” in their job ads, said John Arendes, chief executive of Traliant, an online compliance training provider. This includes factors like quality of life, work-life balance, flexible work options, full-remote, and other benefits, said Arendes, whose company began posting salary ranges for all jobs within the past 12 months.
The ability to work remotely, in particular, could be enough to swing the pendulum. Remote work search queries skyrocketed 300% from July 2021 to July 2022, according to a jobs study compiled by Semrush, an online visibility management and content marketing SaaS platform.
Indeed, candidates are looking for more than just a top-notch salary.
“Small businesses have to figure out how to compete on differentiators that larger companies just can’t give — and a lot of it is about work-life balance,” Arendes said.