One of the major assets of an organization is its employees. Without the hard work and efficiency of the employees, a firm will not be able to enhance and improve its productivity and performance.  

In recent times, states such as New York and Colorado have instilled a pay transparency law, that allows employees to have an effective understanding of their payscale and the remuneration that the firm plans of providing. 

However, numerous employers are deflating the salaries in their job listings, thereby not providing the actual amount that they will be offering to the employees. 

The article showcases the different aspects of the pay transparency law and provides an understanding of its effectiveness.

What is Pay Transparency Law?

One of the trickiest aspects of hiring new employees for a firm is salary negotiation. Employees have been keen to find an appropriate and suitable job, which not only requires their skills and expertise but also provides them with their deserved salaries and paychecks. Furthermore, gender and racial pay gaps have also affected the overall recruitment and hiring process of numerous firms.

Washington DC and California issued the pay transparency law on January 1st, 2023, which requires employers to provide a minimum to a maximum range of salaries that the firms are willing to pay to their employees. This helps negate the issues of gender and racial discrimination towards paychecks. It also provides employees with an advantage, offering them a thorough understanding of the payscale that they will receive from the firms. 

The pay transparency law provides a mandate to numerous organisations, ordering them to reveal and showcase their pay range to the employees. The main objective of the law is to abolish the gaps caused due to gender pay and racial discrimination. However, this law has been a discomfort to numerous organisations, including top leading companies such as JP Morgan, Google, and many others. 

Resistance by Firms to follow the new Salary Transparency Law 

The Pay transparency law applies to any firm in New York and Colorado that has more than four working employees. With the initial implementation of the law, numerous firms were resistant to showcasing their pay range as it would have an impact on their hiring process. 

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The law requires organisations to provide their maximum pay range to minimum pay range for both external as well as internal hiring. Firms are required to provide their offerings to any employee on the verge of promotion opportunities, as well as transfer opportunities. 

However, the Partnership of New York City association has started circulating regulatory advice to numerous organisations. The emails consist of the different regulations regarding adopting the pay transparency law. Furthermore, if any organisation fails to comply with the law have to face fines and consequences if they do not cooperate with the new laws. Even though organisations were resisting the implementation of the law, firms have now started implementing it and offering transparent pay during job listings. 

Why are Employees deflating salaries in Job Listings?

The pay transparency law has been one of the most talked about laws in New York and Colorado. Companies are providing their maximum to minimum pay range in their job listing, following the transparency rule in their salaries. However, according to numerous HR executives and managers, the salaries that are provided in the listing are not entirely transparent. 

The maximum salaries that are uploaded during the listing are actually in the middle range. This is to not highlight the actual salaries of the employees to the existing employees of the firm. Employees these days look for companies that offer an efficient payscale range, thereby choosing a competitive pay method. To hire talent and enhance their overall productivity, potential employers are not providing their maximum salary ranges. 

This has not only affected the overall hiring process of the firm but also created mistrust among its existing employees. According to Melanie Narajo, vice president of people at Ethena, “There has been a fear among HR people, as the pay range and information might not be well interpreted by the people, which in turn, would affect the overall hiring process”. Furthermore, after the Colorado transparency pay law was introduced, numerous companies reduced their job listing, due to the ruckus that pays transparency would create among employees.

Will this strategy of the Employers deflating salaries backfire?

Numerous employers feel that employees might expect the maximum range of salary, which is not feasible for the firms to offer. This, in turn, has created a ruckus among numerous organisations, as the existing employees might require a pay raise if the maximum salaries are offered to new hires. 

According to numerous HR executives, maintaining the existing employees of the firm would be tough. The new hires and the existing employees might be in the same job role, yet one would receive a higher pay range if the entirety of the payscale is revealed. This has made organisations deflate their salary ranges in the job listing. 

However, according to numerous business professionals, this might backfire as it is considered to be direct negligence of the law. According to a principal in an employment law firm, the Jackson Lewis’ Denver office, the law might be more stringent after its full-force implementation in Washington and California. 

Firms throughout New York and Colorado, with more than four working employees, are seeking ways in which they can offer the right amount of pay scale to their employees. They are also looking for ways to keep their existing employees satisfied without the risks of high turnover. In recent times, every organization looks for new talents that would provide them with a boost in their performance. 

On the other hand, employees look for the different benefits and pay ranges that the firms are willing to offer for their hard work and efficiency. Providing a transparent and honest pay range to the employees will help improve trust and loyalty between the firm and the employees. 

On the other hand, employers are finding the recruitment and hiring process complex after the initiation of the new pay transparency law. Various officials and business professionals are asking firms to be transparent in their pay range and look for ways that will help them maintain an effective relationship with both the new employees and the existing employees.

Conclusion

After a thorough understanding of the new pay transparency law, enforced in cities such as New York and Colorado, it can be evident that firms are finding it difficult to reveal their pay scales. Even though the law focuses on eliminating gender pay discrimination and racial discrimination, it also has a huge impact on existing employees. 

One of the major fear of the firms is the expectations that the employees might gather after revealing the maximum pay range. This, in turn, would create a ruckus among the existing employees, thereby causing a major problem in hiring. However, firms are seeking effective measures and strategies to negate the threats that the law imposes. 

With the help of an efficient understanding, employers will be able to provide transparent pay, as well as maintain healthy employee relations. Lastly, the current strategy that firms are following by not disclosing the entirety of their pay range might backfire as failing to comply with the law will impose fines on firms. 

Thus, it can be stated that employers should not deflate their salaries during job listing, and provide employees with a transparent pay range. 

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Find out how Compport can help you manage all your Pay Transparency process, book a demo today!

Frequently Asked Questions

Q1. What is the pay transparency law?

The pay transparency law requires employers to provide a minimum to a maximum range of salaries they are willing to pay to employees. It aims to eliminate gender and racial pay gaps.

Q2. Why are some employers deflating salaries in job listings?

Some employers are deflating salaries in job listings to avoid highlighting the actual salaries to existing employees and to attract talent with competitive pay offers.

Q3. Will deflating salaries backfire for employers?

Deflating salaries in job listings may backfire for employers as it can create mistrust among existing employees and potential turnover. It is also considered a direct negligence of the law.

Q4. How can firms improve trust and loyalty with employees regarding pay scales?

Firms can improve trust and loyalty by providing transparent and honest pay ranges to employees, ensuring fairness and addressing pay discrimination.

Q5. What are the potential risks of deflating salaries in job listings?

Deflating salaries can lead to employee dissatisfaction, increased turnover, and non-compliance with the law, resulting in fines for organizations.