Before you read on, as the writer, I wish to make it known that I’m a huge proponent of pay transparency. The many reasons for this will be discussed below; however, I will also discuss the other side of the issue and include arguments from those who oppose pay transparency to be fully transparent. It’s only fair that I make my bias clear from the start so that readers can decide for themselves whether what I’ve written here will be of value to you.
In 2018, a poll showed that 53% of employers who answered were considering more transparency throughout their hiring process, particularly for pay. So even four years ago, most employers shared my views, and today, it seems the trend in HR is gaining further traction. And, as mentioned earlier, I, for one, am pleased with this.
The pay transparency trend started in California in 2018 when employers were required to reveal the pay to an applicant after the first interview; however, it was only a requirement if the employee was brave enough to ask. Subsequently, we have seen similar laws passed in Maryland, Ohio (Cincinnati and Toledo), Washington, Connecticut, Nevada, Rhode Island, and Colorado.
Pay transparency law is now gaining traction with the latest movement in NYC—but it has not been an easy birth. On January 22, 2022, laws were passed in NYC that employers with four or more staff would have to provide pay transparency with ranges that include the minimum and maximum for job roles posted within the city.
The fledgling law met immediate backlash from government officials and private business employers across the city. Five boroughs of commerce argued that corporate employers might use higher compensation levels to attract a more diverse executive team. The notion was that the maximum range might be much higher than historical ranges previously used to attract talent.
The law has now been amended for clarification, and the impact of the delay is that we will not see enforcement of the law until November 2022. This arguably allows businesses more time to make sure that their policies and procedures are in place to avoid the potential fines that can be incurred if they are found to breach the guidelines.
Why is transparency so important?
If we are to say goodbye to old working practices that have plagued the hiring process of yesteryear, we must move forward with laws such as pay transparency. Transparency, in all forms, solves many issues that we currently experience with hiring. Below I’ll discuss the main advantages and why I’m an advocate of the law.
Reduction of pay gaps
The elephant in most rooms is the gender pay gap. While some argue that it doesn’t exist, I cannot get on board with that. I have lived in the hiring industry for my entire career, and there has certainly been a gender pay gap, with women being considered less appealing hires because of the potential for things such as maternity leave. No matter how much hirers don’t like to admit it, it’s a fact. Now, with more transparency, we can wave goodbye to that proverbial rubbish and move forward with a stronger stance for equality at all levels.
Some backlash against this law claim that companies could use higher maximum compensation to falsely attract and mislead BIPOC executives. I’m sceptical of the validity of the argument since I believe this was a well put together excuse. On many occasions, the reality is that roles are being advertised that may have duplicate existing hires already working in an organisation. Or current employees may consider themselves equal in certain parallel job roles and titles. This can cause a problem where if a company uses too high of a maximum, that could, in turn, spark mass negotiation internally. I believe that if we’re all required to do this, eventually, equilibrium will be reached, which is why I’m such a strong proponent of pay transparency for all.
Higher engagement in the hiring process
At the heart of why 99% of us work is because we have bills to pay, a lifestyle we have become accustomed to, aspire to, or a path we wish to follow. Pay is a major determinant of whether someone chooses to accept a role. Personally, working on the side of attracting job seekers for over 15 years, I can tell you that most jobs with a salary range have major advantages over ones that don’t.
Most relevantly, the candidate can self-shortlist with much more accuracy, as they typically know what they’re worth in the market or what they’re looking for compensation. This saves the recruiter or employer time and engages the right talent, who enter the hiring process with eyes wide open since their expectations are already intact. Arguably this could even increase the level of successful conversion for relevant candidates.
Trust is possibly the most important thing you want in your organisation as a company—it’s the basis of all things that build culture, and a good culture simply cannot exist without trust.
The transparency laws are forcing behaviour that will, in the long run, serve as a bedrock to trust within the organisation. Of all the positive reasons that I’m an advocate of this law nationwide is that the positive externalities of trust are fundamental to building better companies and better employment experiences, which I’ve been working to build my entire career.
We are well beyond looking at people as a commodity, and I hope for a future that drives towards equality, transparency, respect, and, most importantly of all, choice. And I (along with everyone else) can make choices much more accurately when I have all the necessary information needed in front of me.
Of everything we talked about in this article, the biggest benefit of this law and what will be true for the other states, cities, and jurisdictions that hopefully follow this is creating a greater sense of equality within the workforce. Compensation has been a massive driver of inequality and the segregation of genders, races, and classes. This transparency movement is a major push toward bringing down these harmful silos.
My only bias and discrimination should be based on performance and productivity. If you work hard, have good experience, and deliver greater value to an organisation, that should only ever be when there is a difference in pay scale.
Let’s keep driving toward a better future of work; this law is certainly a step in the right direction.