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Salary ranges are now required by law on New York City job ads, and HR teams overseeing some 4 million private-sector workers in the city have spent the year preparing.
They’ve had their work cut out for them to revisit their pay scales, make internal pay adjustments, overhaul their applicant tracking systems, train managers on the changes and, maybe most consequentially, prepare for an onslaught of questions and concerns from employees once the salaries are out.
By and large, the intended consequence of such salary transparency laws is to empower job seekers to know how much a role will pay before they even apply, which economists and advocates say is key to closing the racial and gender wage gaps.
But there are also a rash of unintended consequences that might pop up: It could breed tension in the workplace, disgruntled employees could quit, companies could face legal and reputational risks, and businesses may lose their competitive edge in a tight market, just to name a few.
Here’s why hiring experts say listing salary ranges is really only the beginning of salary transparency efforts.
Posting pay is ‘not a one-time job’
In a lot of ways, Nov. 1 was really just the start date for employers to kick off their salary transparency efforts.
“It’s not a one-time job,” says Robert Boersma, vice president of operations at Talent.com, a recruitment platform. “It’s ongoing work to continuously educate your managers to have those conversations, then to communicate on a consistent basis how employees create value for your business, and how the compensation components reflect that.”
Those conversations are bound to come up with prospective hires just as much as with current employees, says Cassandra Rose, head of people at Fringe, a lifestyle benefits marketplace.
She’s keeping an eye on two ways the law will affect her work in the months ahead: Does including salary bands upfront change how many people apply to their jobs, the types of candidates applying to their jobs, and do candidates actually feel more empowered to discuss pay in early hiring interviews?
And second, a lot of people will be equipped with their salary bands going into annual reviews and raise season. Will they use pay range information to discuss a merit increase?
Could people quit?
If businesses fumble in explaining not just what people are paid but why, it could lead to a fresh wave of quitting in an already tumultuous time in the hiring market, says Tony Guadagni, senior principal of research at Gartner, the consulting firm.
Rose is pragmatic in weighing the good intended consequences with the disruptive unintended ones. Salary transparency “helps people typically underrepresented and underpaid to get a better leg up, but creates another problem of those who feel they should be compensated more, whether that’s true or false, feeling like they should go someplace else. It could lead to high attrition, possibly for no good reason.”
Following its pay transparency law, Colorado saw an uptick in people looking for jobs. However, it’s not entirely clear how much of that was people being pulled back into the workforce from the sidelines, or workers quitting old jobs for new ones.
If anything, workers may already be planning to quit and more motivated to search in earnest when they’re armed with more salary information, Boersma adds.
Leaders have to double-down on their competitive edge fast
With visible pay ranges becoming table stakes, hiring leaders will have to work harder to make sure job descriptions showcase all the perks, benefits and a great company culture that set them apart in the hiring market. This will be especially important for smaller businesses that can’t pay as competitively as big corporations in their market.
To that end, Rose says the changes could cause some businesses to leave New York City if they can’t pay at the top of the market and they see a drop in qualified applicants in the region.
But moving around doesn’t mean they’ll escape future salary transparency laws, which are also coming to California, Rhode Island and Washington state come 2023.
“Even if you think laws in New York City or Rhode Island or Colorado or California don’t apply to you, just know that these are the first of many to come,” she says. “They’re going to put pressure on other places. I advise businesses get ahead of it before it’s a requirement you have to race against.”
Check out:
$2 million ranges, deleted job posts: NYC’s salary transparency law is off to a rocky start
Cold and flu season is here, and people are showing up to work sick again
28-year-old former teacher now makes $110,000—how working for a company with pay transparency helped
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