Should Pay Ranges in Job Posts Become Mandatory by Law?
The idea that pay ranges should be included in job listings has been gaining a lot of traction around the world. But instead of simply making it the norm, salary transparency as a law has shot to the forefront of every hiring manager’s mind with the recent passing of new legislation in New York City.
The New York City Council recently passed a bill, set to take effect in April, that will require private employers to post the salary range for all open jobs. This legislation’s main goal is to improve pay transparency and address inequities that often disproportionately affect women, POCs, and other marginalised groups.
This isn’t a brand new concept though. Similar pay transparency laws already exist in other American states, but you can also see it across the pond. In Latvia, for example, a law that makes it mandatory to post expected salaries on all job advertisements came into effect in 2019.
Other European countries aren’t quite as straightforward about pay transparency, but there are frameworks in place to address the same issues. The European Commission’s Directive on Pay Transparency and Equal Pay, published on 4 March 2021, takes a stab at rectifying some inequities by identifying hidden or unintentional pay inequalities. It gives workers the right to access information about how their average pay compares to what their colleagues are paid for doing the same or equal work, but this hasn’t directly translated into the first step; wage info available even before application.
Be that as it may, there are still pros and cons to including a salary in your listings. Let’s take a look at some of them.
Close gender and racial wage gaps
As mentioned up top, the main reason for this kind of legislation is to improve pay transparency and address inequities, the pay gap in particular. Employers who are serious about DEI need to consider pay transparency as part of their strategy. When current employees and prospective candidates know how their earnings compare to their peers’, there is less room for bias to creep in. It also significantly shrinks the difference between what men and women make. While salary-transparency goes a long way towards reducing the gender pay gap, it actually goes further and transcends gender by fostering inclusivity.
Viability confirmation for candidates
Candidates will know what the market is paying and it immediately confirms whether the job will be a financially viable option. This is backed by data from a 2018 LinkedIn survey, in which 61% of respondents said compensation was the most important part of the job description. A Glassdoor study had similar results, with 67% of respondents saying that salary is the main thing they look for in ads.
Streamline conversations later in the hiring process
The part of the interview where the candidate gets asked what their expected salary is gets cut down significantly or gets skipped entirely, because the pay for the position is disclosed upfront. This saves a lot of time and negates a potentially awkward back and forth between the candidate and hiring manager. It ultimately reduces the time it takes to fill and attract qualified job candidates.
Fosters candidate trust
Advertising the pay range for a position upfront is a good indication of a company’s aptitude for transparency and starts the relationship with potential candidates off on the right foot. It automatically implies that the employer is serious about hiring for that role ASAP and that they are trying to be fair about it. It’s easier to see that they offer fair, equal pay and that there’s a clear path for professional growth. With that kind of trust, you can build and retain a diverse, equal, and inclusive workforce.
What are the main drawbacks of revealing the pay range?
Gives less negotiation leverage
Traditionally, the salary is hidden and it’s left up to the employer to discern what the candidate’s current salary is, what their expected salary is, and, of course, what the company is willing to pay. By capping the expected salary, you may be at risk of losing excellent candidates that you would have otherwise been willing to negotiate higher for.
There’s also the fear that if a pay range is included, candidates will opt for the higher end, even if that figure is reserved for top talent with the highest qualifications. Receiving an offer at the bottom end – and accepting it – may lead to resentment down the line, because some candidates simply do not know how to negotiate their worth.
Puts recruiters at a competitive disadvantage
When you make compensation public, it makes it easier for the competition to poach your employees. It’s much easier to see what you’re willing to offer top talent and have a competitor try to outdo you. While compensation is the most important factor in most candidates’ applications, your employer brand could be the determining factor. Candidates have distinct preferences, interests, and skill sets that absolutely have an impact on their decision to join your company. Putting an emphasis on your company culture, the benefits, and the prospects for growth – both professionally and monetarily – could sway them in your favour.
Creates resentment among existing staff
If a company posts a salary, then their current workers can see and identify any discrepancies. They will know that they’re being underpaid. Any difference in pay has to be explained and if it can’t, then chances are that it’s unfair.
The notion that coworkers shouldn’t be allowed to discuss their pay with each other also fosters a sense of distrust and secrecy that is ultimately detrimental to employers and employees. According to 2021 research from the Institute for Women’s Policy Research, nearly half of full-time workers surveyed reported they were subject to a pay secrecy policy of some kind between 2017 and 2018. Even though it is illegal in most countries to prohibit employees from discussing salaries, it is often still discouraged in more informal ways.
Research shows that companies who are forthcoming about their wages can attract better, more diverse talent, making salary transparency a good strategy for creating a more equitable workplace. However, posting a range can shrink your talent pool and leave less room for negotiation with top talent.
Our own LinkedIn poll has shown that the majority of voters are in favour of making pay ranges in job postings mandatory by law.
Whether disclosing the salary in the advertisement will become the standard or mandatory in more cities around the world remains up for debate.