Pay transparency laws stir worker discontent

Ashley, a 28-year-old accountant, is planning to quit her job at a New York insurance company. After seeing a LinkedIn ad for a new role on her team that revealed recruits will be paid more than her, she hired a career coach to help her change industries.

“It is the biggest slap in the face,” said Ashley, who asked that her last name be withheld because she is not authorised to speak publicly about her pay negotiations.

“Ever since then, I don’t work a minute over 40 hours,” she said. “I do not stay late online. I will not take on extra work.”

Ashley’s employer is among a growing number facing upset staff after posting salary information to job sites.

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New York City’s pay transparency law took effect in November and was followed by similar laws in Washington, California and Rhode Island earlier this year, in a trend that has undone long-standing taboos about discussing salaries in the workplace. A similar law took effect in Colorado in 2021.

As a result, the share of US job postings that include salary ranges has more than doubled since 2020. Some 43.7 per cent of US job postings on Indeed contained salary ranges last month, up from 18.4 per cent in February 2020.

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Though laws vary from state to state, most require that advertisements for any roles that could be based in those jurisdictions contain salary ranges in hopes of reducing discrimination. But since many organisations do not share internal salary data, the postings have given workers their first glimpse at how their peers might be paid. Many, like Ashley, were unhappy with what they learned.

“What makes employers think that the current employees are going to be motivated to do better when they see that someone else on day one is getting the salary that they should have gotten three years ago?” she said.

Labour squeeze

Business leaders said the regulations could not have come at a worse time. The labour shortage sparked by the Covid-19 pandemic has inflated salaries, meaning that to land new hires, companies are offering higher salaries than many of their existing staff are making for similar roles.

Before New York City enacted its own pay transparency law, lobbyists warned that they could create conflict in teams and remove incentives for employees to work hard.

Citibank came under scrutiny after one of its contract user experience writers complained on Twitter that she had spotted a LinkedIn ad for her own role paying at least $32,000 more than her $85,000 salary. She applied.

“I was pretty upset because that was the exact salary range that I was targeting when I applied for this job [and did not get],” said 25-year-old Kimberly Nguyen.

In a meeting called after a teamwide group chat turned hostile, Citi managers told the writers the pay disparity was because they were contractors instead of full-time employees and that the role would not be filled.

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A Citi spokesperson said that the salary range in the job description Nguyen saw was for a UX writer with five to eight years more experience than she has. They also said the staffing agency that hired Nguyen had negotiated her salary.

Activists and community leaders argue that the laws provide vital information to women and employees of colour who otherwise might not have the professional connections to know what kind of salary to negotiate for. Illinois, Oregon and Kentucky are weighing pay disclosure rules of their own.

Broad range

But from the moment New York City’s law went into effect in November, workers complained that the published salary ranges were too broad to be useful. Some ranges had a difference of more than $200,000 between the high and low ends. And bonuses, which can account for a substantial part of a banker’s pay, do not have to be disclosed.

The salary ranges “answer one question but raise several others”, said Tauseef Rahman, a partner at consulting firm Mercer. “Now you know the pay range. The question becomes: ‘What does it take to move up in that pay range?’”

Rahman said candidates were often offended because the companies rarely made offers at the high end of the stated range.

There have been times where we will have a candidate who seems like they’re really good and then we get on calls and the salary comes up and it’s just not a good fit

—  Lilian Chen

But those most upset about the disclosures are the firms’ existing staff. Alan Goldstein, a New York-based executive recruiter, said Wall Street human resource executives blamed the transparency for a wave of resignations after bonuses were paid out at the end of February.

“It upset a lot of people,” he added.

Not all employers say that transparency laws make managing people more difficult. Small business owners, who have struggled to hire throughout the Covid crisis, say that promoting competitive pay ranges has helped them lure applicants away from larger, more prestigious firms.

Lilian Chen, founder of New York-based company Bar None Games which hosts team-building events, said since posting salary ranges fewer applications had come in, but those she had received were better suited to the roles.

“There have been times where we will have a candidate who seems like they’re really good and then we get on calls and the salary comes up and it’s just not a good fit,” said Chen, referring to applicants who withdraw because pay is lower than they expected. “And we kind of just wasted both our time.”

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It is unclear how much workers have benefited from the new salary information. All Nguyen was able to secure from Citi was a performance review, but she said it had been delayed twice. Though Nguyen is still at Citi, she is actively searching for a new job and has become an advocate for a federal pay transparency law.

Many Wall Street banks are shedding staff, making it more difficult for disgruntled workers to find another job at a higher rate, said Goldstein.

Still, Nguyen said that workers were unlikely to back down. “The chaos on my team could proactively be resolved if they just brought everybody’s pay up to par. The whole thing is a manager problem. It’s not mine.” – Copyright The Financial Times Limited 2023