Pay transparency laws are changing the rules for salary negotiations
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California Gov. Gavin Newsom signed a law Tuesday that will change the rules of negotiating salary in the state. Among other things, it requires most companies to publish salary ranges in job postings. It’s the latest and biggest example of a growing trend of salary transparency laws.
Colorado came first, instituting salary posting requirements at the beginning of 2021. A similar law rolls out in New York City in November and in Washington state in January, and a law in New York state awaits the governor’s signature. The idea is that reducing secrecy around compensation will help close stubborn pay gaps for women and people of color.
When Denver contract administrator Amanda was looking for a job a few years ago, salary discussions were kind of an afterthought. She asked that we not use her full name so she could speak freely about current and past employers. At her last position, she said salary numbers didn’t come up until well into her second interview.
“To be honest, I was so kind of shocked by how low the salary was that I almost didn’t take it when it was offered to me,” she said.
But she had already invested so much time and effort, she took the job. And she promised herself never again: “I literally won’t apply to positions that don’t show salary anymore.”
Because Amanda works in Colorado, that hasn’t been hard. She started a new job earlier this year.
“The increase in salary I got this last time was much larger than anything I’ve seen before,” she said. “I just think that this gives everybody a little bit more power and knowledge.”
Pay is generally the most important factor for job seekers, so putting that right up front could lead to more job-seeking activity, said Andrew Flowers, a labor economist at recruitment software company Appcast.
“It attracts more job seekers who are frankly shopping around, and in the long run that can help recruiting,” he said.
An Appcast analysis of federal data showed labor force participation — the share of people working or looking for work — increased faster in Colorado after the pay transparency law went into effect compared to neighboring Utah, where pay transparency is not required.
“For many job seekers outside of Colorado, looking for work is like searching for a home on Zillow with no home price,” Flowers said.
But the changes to the labor market weren’t all positive. Appcast also found that job openings in the state fell compared to those in Utah.
And it might have something to do with a phenomenon Denver tech worker Chris Chacon noticed while searching for a job last year.
“I would see in a job description that ‘Nobody from Colorado is welcome to apply.'”
“When I first saw it, I didn’t know about the law,” Chacon said. “I thought maybe it had to do with, like, our marijuana laws. It’s such a weird disclaimer.”
But as more states and cities add these salary posting requirements, they’ll become harder for employers to avoid.
Jennifer L’Estrange leads HR consultancy Red Clover in New Jersey and said many clients are planning to add salary ranges to job postings regardless of their location.
“And then we know that if the law changes in that state, we’re OK,” she said.
But it’s not as simple as just taking the budgeted amount for a position and publishing it, L’Estrange said. Companies need to strategize about whether a salary range will target candidates at the high or low end of experience, consider what competitors are doing and what effect that salary information could have on current staff.
“What they have to offer for new hires might be slightly higher than people who they have already in the organization who have more tenure or more experience,” she said.
So companies need to be prepared to adjust some existing salaries or have a good explanation for why those differences exist.
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