The start of the new year meant three more states—California, Washington, and Rhode Island—saw salary transparency laws go into effect. And more are on the way. But as more states and cities mandate these disclosures, many companies are finding ways to essentially ignore the laws.
A study by advisory firm WTW found 31% of employers saying they aren’t ready to comply with the laws and 46% admitting to putting off doing so, fearing possible fallout from current employees.
Salary laws, at their core, require companies to share the pay range for a job during the hiring process, ensuring that applicants don’t get lowballed. The laws vary slightly from state to state, however. For instance, under California’s new code, employers with 15 or more workers are required to list salary ranges on job postings on a company’s hiring page or third-party job boards. Washington State’s extends to print ads as well and requires companies to list any company benefits the new hire will receive. And Rhode Island won’t force companies to post pay ranges on job ads, but they must provide the range to job applicants upon request.
The methods of avoiding these sorts of laws vary by company and aren’t always nefarious. Some simply haven’t had the time, as staff shortages and other priorities have prevented them from updating the information. Others, though, are unfazed by the requirements, as enforcement practices are weak. And some have just excluded applicants in states that have the law.
The penalties aren’t exactly stinging. New York State does not charge a civil penalty for a company’s first violation, and subsequent ones are capped at $250,000. And California has a threshold of $10,000, noting it will charge companies that do not file the annual pay data report $100 per employee on the first violation and $200 per employee for each year it fails to do so moving forward.
Still other companies have used the language surrounding the transparency obligations to subvert its goal. Most states require companies to offer “good faith” salary ranges for jobs. There’s no mandated range, though, which can result in largely useless information.
For instance, the salary range for a Senior Lead Digital Product Manager at Wells Fargo is set between $138,500-$287,600.
That skirting of transparency objectives could be changing, though, as larger states and cities adopt the policies. California alone is on the precipice of becoming the world’s fourth-largest economy (surpassing Germany). And New York City, as of this past November, was the home of more than 4 million private-sector jobs. (In New York City, alone, 61% of job listings on Indeed.com included salary information, compared to 27% a month before the law went into effect, according to Axios.)
That makes it infeasible to outright ignore the laws. Companies that do risk losing out on top applicants, who tend to gravitate toward job listings where they know they’ll be compensated at a level matching their expectations.
And a late 2022 study found that companies that advertise the pay range in their job postings can significantly reduce their recruiting costs. Appcast, a job advertising platform, found that the cost-per-click for ads with pay listed in the title is about 35% lower than ads without pay information in the title.
By the end of this year, an estimated one in four workers in the U.S. will be covered by salary transparency laws. Beyond NYC, New York State has signed its own transparency law, which is expected to go into effect this fall. And South Carolina and Massachusetts are nearing salary transparency laws.
Also, there’s increasing public pressure for salary transparency, which could push some companies that have been hesitant to comply.
“We expect the recent wave of pay-transparency legislation to continue,” Mariann Madden North, American fair pay colead at WTW, said in a statement. “Job seekers and current employees want to know and understand that they are treated fairly and are provided with equal opportunities to thrive and grow within the organization.”