- New pay transparency laws take effect. New York City and Westchester County’s pay transparency laws will take effect Nov. 1 and 6, respectively. Both require a “good faith” salary range for every job, promotion and transfer opportunity that is advertised.
- Expanding legislation. New York City and Westchester County join a growing list of jurisdictions across the U.S. that are requiring employers to be more transparent about compensation during the hiring process.
- National approach. Compensation and legal experts agree that many organizations will need to adopt a national approach to pay transparency rather than piecemealing together a compliance strategy for individual jurisdictions as they come.
- Pay range strategies. Organizations should strive to have more narrow pay ranges, but factors such as competition, job level and geo pay differentials can complicate these efforts. However, communicating where a candidate or existing employee sits within a range and why is critical to pay transparency efforts.
Starting Nov. 1, employers posting jobs available to candidates in New York City will need to include a “good faith” salary range for every job, promotion and transfer opportunity advertised.
The Big Apple will join a growing list of jurisdictions where pay transparency laws are in effect or soon will be. Those jurisdictions include Washington, Nevada, Connecticut, Maryland, Rhode Island and Colorado. Maryland requires pay to be disclosed for job postings upon request. Connecticut and Nevada require disclosure during the hiring process, and Rhode Island will require such disclosures starting Jan. 1, 2023.
Westchester County, located in the Hudson Valley north of New York City, has similar legislation taking effect Nov. 6 and California’s new pay transparency law takes effect Jan. 1, 2023.
NYC and Westchester County Law Specifics
The New York City and Westchester County laws, like Colorado and California law, require employers hiring in either jurisdiction to disclose the minimum and maximum annual base salary or hourly wage for a job, promotion or transfer opportunity in any advertisement for the position.
The laws amend the New York City Human Rights Law by making it an unlawful discriminatory practice to advertise a job, promotion or transfer opportunity without including in the advertisement the range of base salary (or wage) the employer believes, in good faith at the time of the posting, it would pay for the advertised position.
Recognizing the possibility of remote work and clarity relating to geographic scope, the laws specifically apply to positions that are required to be performed, in whole or in part, in Westchester County and New York City, whether in person, in the field or remotely.
Both laws apply to all employers with four or more employees or one or more domestic workers if at least one of those employees works in New York City or Westchester County.
Moving to a National Approach
As pay transparency legislation continues to expand across the United States, compensation and legal experts believe employers that are piecemealing together compliance strategies are missing the forest for the trees.
“Organizations need to come up with a national plan if they haven’t yet,” said Tauseef Rahman, partner and career business leader at Mercer. “It is imperative to go beyond just meeting the legislative requirements, and make sure the foundational elements of pay transparency are strong.”
Susan Brown, senior director of North America compensation at multinational technology conglomerate Siemens, said the company is currently working toward a national approach to pay transparency but noted that doing so is very company dependent.
“There has to be a national response at some point, but I think it’s up to the companies to determine what’s that tipping point for them,” she said. “There are some that are so centralized in a single location that maybe they don’t need to respond as quickly as others. A company like Siemens that’s in almost every state pretty much — at some point, there’s too many states to keep up with and we have so many remote workers that it makes sense to come up with a nationwide solution.”
Brown, who said Siemens is having monthly strategy discussions on the topic of pay transparency, added that before organizations establish a national approach, they need to determine what their objective is, which will inform strategy.
“Are you just trying to comply? Are you trying to attract talent? Are you trying to signal the market,” she said. “So, there’s all kinds of considerations that you’d have to think about in your national approach, and that’s why it’s not just a push of a button and you’re done.”
Pay Range Considerations and Communication
The primary focus of the recent pay transparency legislation is on providing salary ranges in job postings. Thus, the question many organizations are contemplating is how broad of a range should be provided?
Christine Hendrickson, vice president of strategic initiatives at Syndio, said companies should eschew overly large pay ranges.
“These larger ranges are really turning off job applicants,” she said. “There’s a natural incentive to avoid those expansively wide ranges and I would bet we’ll see a narrowing of those ranges due to those downstream consequences.”
Brown said organizations sometimes might lean toward larger ranges, as they are thinking purely from a competitive standpoint. Therefore, it’s often a balancing act between trying to attract top talent without revealing too many details about overall pay strategy.
“I think many comp practitioners would say ‘We have a compensation strategy, and we have compensation levers that make sense for our business and is potentially a competitive advantage,’” she said. “You might not want to give all those details away for competitors to mimic.”
Additionally, organizations must factor any geographic pay differentials into the equation, which could lead to broader ranges to cover all bases.
“If you post a remote job, are you going to show the Colorado-based ranges, and is that the same range you’re going to show in New York? Or do you broaden it out, so it covers all geographic areas?” Brown questioned. “It sounds easy at first, but it gets complicated very fast.”
Nicole Bufanio, senior change and communication consultant at Mercer, said an alternative approach to posting broad ranges is posting the “hiring range,” which is a portion of the range where a new hire or newly promoted employee is typically placed. However, there are potential drawbacks to this path as well.
“Posting a hiring range may result in candidates who are seeking higher pay or not understanding pay opportunities at an organization opting out of the application process altogether,” Bufanio said, “which means a company may be losing out on certain essential talent, especially for in-demand roles.”
Ranges will likely vary based on the level and individual job, Brown said. Thus, at a more senior job level, a pay range is likely to be much broader than an entry-level position, despite the percentage variance being the same. Additionally, she noted, the range for a senior-level accountant may be different from a senior-level engineer, simply based on the market for those roles, despite having the same internal pay band construct.
The next element for organizations becoming more transparent as part of an overall talent acquisition and employee value proposition strategy is explaining where candidates or existing employees sit within a salary range and why.
“Owning the narrative around how pay works — what the company’s performance philosophy is, what factors into an employee’s pay such as performance and even the local market for talent, and how the pay progression happens — is essential,” Bufanio said.
“Contextualizing pay as a component of the entire employee value proposition is critical, especially since not every organization can consistently pay at the top end of the market.”
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