Salary transparency laws are supposed to help workers understand the minimum and maximum earning potential for a new job, whether they see it on a job posting or ask a hiring manager about the range during interviews. So far, some cases have only caused more confusion, like in New York City where companies were called out for posting jobs with $100,000-plus pay bands.
And in recent weeks, data shows there's reason to believe some employers are even deflating their pay ranges and posting caps lower than what the job could call for — showing that even with pay transparency, you still should negotiate your final offer.
Some salary caps could actually be closer to the middle of a job's earning potential, according to Bloomberg reporting based on interviews with HR executives and pay experts, who say range deflation has come up a lot on industry webinars regarding new laws.
When transparency bills were proposed and passed in major areas like New York City and California, businesses rushed to payroll specialists to ask: What kinds of ranges are we expected to post? The entire range of minimum to maximum? The median to the max? The minimum to the median?
"Employers come to us and think they can willy nilly post a range," says Lulu Seikaly, a senior corporate attorney focusing on employment law at Payscale, "and we have to tell them, 'Slow down, you can't just do that.'"
When it comes to setting compensation ranges, pay experts say the maximum should be about 40% to 60% higher than its minimum. For example, a job that pays a minimum of $50,000 should have a salary cap around $70,000 to $80,000.
But online, the average salary range on job listings is just 28%, based on data from CompTool and accounting for more than 12 million job listings from more than 100 job websites, per Bloomberg. That would mean the job with a minimum of $50,000 could be listed as having a cap of $64,000 — even if the company could have an $80,000 budget for it.
Seikaly thinks employers are posting artificially low ranges so they don't give away their pay strategy to competitors, or in order to give themselves more room should the candidate still want to negotiate up when they get an offer.
"There's a fear candidates will come in and want the top end of the range," she says, so employers hope that capping it lower than what's actually possible gives them room if needed — like if the candidate ends up having more qualifications than originally expected, or they're located in a more expensive market than anticipated, or the company is having a hard time hiring for the job and wants to be competitive.
As written, while the laws require employers to list the minimum and maximum salary range on a job ad, many don't require them to actually make an offer in that range.
"If in fact, along the way, there's a legitimate, non-discriminatory business reason to change the pay, the employer is free to do that under the law," Domenique Camacho Moran, a New York-based attorney with Farrell Fritz, previously told CNBC Make It.
But employers should make sure any such instances are an outlier and not part of a pattern, otherwise they could be investigated and sued or fined.
All of this is to say that it's still important to negotiate your salary, even if the job posting lists the range, Seikaly says. Follow the standard advice of researching your market value online or with industry peers based on your job title, experience, skills, geography and other qualifications. Consider what fringe benefits you expect or can negotiate for, too, such as equity, a more flexible working arrangement or an education stipend.
"While pay transparency won't eliminate salary negotiation, it will give candidates the confidence to speak more openly about their expectations of pay," Seiklay says. "The burden is now on the employer to determine the pay range, rather than the employee to initially voice an expectation, which levels the negotiation playing field."
Plus, she adds, "if a candidate can make a compelling argument to an employer for a salary outside the posted range, maybe that employer can agree to what the candidate is asking for."
Check out:
Here are all the new salary transparency laws going into effect in 2023
$2 million ranges, deleted job posts: NYC's salary transparency law is off to a rocky start
Men and women asked for raises at the same rate this year—men were more likely to get one
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