DE&I   //   May 29, 2023

Are pay transparency laws really working?

Pay transparency laws went into effect in some major U.S. cities and states over the past year, and so far workplace experts say the rules aren’t working as well as intended.

One of the main issues has been employers posting wide salary ranges, making the information less useful to job seekers and potentially hurting their own recruitment efforts. Six months on, and not much has changed.

About 45% of U.S. job postings on Indeed this April included salary information, but only 22% of those postings included an exact number, according to a new report from the hiring platform. The rest give a pay range, with actual pay to be determined based on an applicant’s qualifications, experience, location and other factors.

“Employers just don’t want to disclose a number,” said Josh Bersin, an analyst and CEO of The Josh Bersin Company, a research and advisory firm focused on corporate learning, talent management and HR.

Employers have typically remained tight-lipped on salary information and disapproved of employees sharing their pay with each other, so they are “very careful about what they’re going to put on those job ads,” he said. 

But now they’re having to give one — or at least the high end and low end — and those providing clear salary information can potentially have a leg up in a tight labor market, according to the report.

“The risk with having these wider pay ranges is we don't actually know what people are making."
Cory Stahle, economist with Indeed’s hiring lab.

Pay ranges growing for some while others narrow 

Pay is actually getting less clear in some sectors where ranges are widening — particularly in tech hubs and metro areas with new pay transparency laws.

Seven of the 10 areas with the largest one-year increase in advertised salary ranges were in California and Washington, where pay transparency laws recently went into effect. Seattle saw the largest increases with ranges growing from 14% to 21% over the past year.

Ultimately, higher paying occupations, such as pharmacy roles, medical information roles and scientific research and development had the biggest increase in salary ranges.

“The risk with having these wider pay ranges is we don’t actually know what people are making,” Cory Stahle, an economist with Indeed’s hiring lab, said.

But offering clearer salary information is an important differentiator that can lead job seekers to apply to certain roles over others, he said.

Other benefits are often opaque

For higher wage roles, widening ranges might also be due to employers offering other incentives like stock options and bonuses, Stahle said. Pay transparency laws across states and localities vary regarding whether benefits must be included in job postings.

Under Colorado’s law, postings must include a pay range and benefits, including bonuses, commission, and other compensation, along with general benefits offered like healthcare coverage and paid time off. New York City’s law does not require employers to include additional benefits in job postings.

“As much as a company is super transparent, potentially on the salary, they may not be so transparent on bonuses and equity, and maybe that’s where you could find even more disparity that men are making more than women,” Maria Doughty, president and CEO of The Chicago Network, a women’s leadership organization, said.

Internal pay equity efforts spurred

The new laws are part of a broader movement for greater pay transparency and equity as workers feel more comfortable talking about their pay with coworkers, Bersin said. “In the past, nobody talked about their pay, but now everybody talks about their pay, and [companies] ended up creating all these inequities,” he said.

Closing gender and racial pay gaps is a primary goal of the new rules, with men on average still earning $1,219 per week while women make $1,002, according to data from the U.S. Department of Labor. Gaps are even larger for Black and Hispanic women.

With new regulations, workers can also now look online and find job postings for similar roles at their company with potentially higher pay, and may realize they’re underpaid and take it up with managers.

The shifting norms and new rules could now force employers to be more equitable on pay internally, Bersin said. 

Pay equity is also more influential on an employee’s engagement in their role than the level of pay itself, he said.

“They should have a formula essentially, that demonstrates to themselves and to the outside world why this job is worth this much money. A lot of companies don't have a good policy for that."
Josh Bersin, HR analyst and CEO of The Josh Bersin Company.

Best practices

Employers should institute fair pay policies where they calibrate every new job against similar jobs before they post it, said Bersin. “They should have a formula essentially, that demonstrates to themselves and to the outside world why this job is worth this much money,” he said.

“A lot of companies don’t have a good policy for that,” he added.

Another policy some states have adopted that could be even more helpful in achieving pay equity are those prohibiting employers from asking applicants about their previous pay, Doughty said. 

A number of U.S. states and cities have laws banning employers from asking applicants about their salary history. “If women have historically not been paid the same as men, they are always going to be paid less because they’re going to be starting at a lesser amount,” Doughty said.