Why Pay Transparency Laws Create the ‘Right Environment’ for Candidates: Expert

Pay transparency laws have become increasingly popular in the US as supporters argue that they help achieve gender and race pay parity.

According to Dave Turetsky, vice president of consulting at Salary.com, they can also help attract more applicants for available positions at a time when the US is still experiencing labor shortages.

“What’s happening is you’re creating the right environment so people can understand what they’re being asked to do and how much they’re going to get paid for it,” Turetsky said on Yahoo Finance Live (video above). . “Too often, we have people who go into interviews without really understanding what the salary is going to be for that position until they get very deep into the interview process, and that creates a lot of mistrust.”

Sandra Presley, 57, is interviewed at a job fair for restaurant and hotel workers in Torrance, near Los Angeles, June 23, 2021. REUTERS/Lucy Nicholson

New York City is the most recent place to enact a pay transparency law. Starting November 1, all job postings in the city must post a salary range for the position, and companies that fail to do so will face a fine of up to $250,000. The New York State Legislature has approved a similar one, which is awaiting Gov. Hochul’s signature.

Other states with similar laws include California, Colorado, Connecticut, Maryland, New Jersey, Nevada, Rhode Island, and Washington.

“No law goes far enough,” Turetsky said. “But what we are trying to do is establish an environment where there is better information for both the job applicant and the employer. Having that understanding and that proper understanding about what is going to be paid in this job gives the candidate a very good understanding about whether or not this is the right job for them. It also self-selects some people who might be wasting their time kicking tires because they won’t be interested in that job if it’s not paying enough.”

WTW’s 2022 Payment Clarity Survey found that 17% of North American businesses publish payment range information in US locations, even where it is not required, while 62% you are planning or considering doing so in the future.

Among companies that currently disclose pay rates, 16% reported an increase in the number of candidate applications and 27% are seeing more inquiries from prospective employees.

According to Turetsky, salary transparency also helps candidates decide whether the positions they are competing for can help them grow and develop their careers.

“That potential employee needs to ask themselves: What are the next steps here? Where can my career grow?” Turetsky said. “So they have to be better informed to be able to ask the right question. What is the promotion potential? If I think my salary will be close to that maximum, I really need to ask myself: What is the next step for me?

While this could be a possible solution to the country’s current labor shortage, Turetsky noted that one downside of pay transparency laws means that “the right people may not be hired” for the job if the pay ranges They don’t meet their salary expectations.

“But to be honest, in this competitive skills market, I really doubt people are going to turn down just because the pay range may not exactly meet their hopes and dreams,” he added.

Approximately 16% of companies with pay transparency have reported an increase in the number of candidate applications, according to a WTW survey.  REUTERS/Andrew Cullen

Approximately 16% of companies with pay transparency have reported an increase in the number of candidate applications, according to a WTW survey. REUTERS/Andrew Cullen

Another caveat is that salary transparency laws only apply to base salary, which means that specific information about benefits and bonuses is not required in listings.

Still, Turetsky is confident the push will “absolutely” continue for more states to adopt these laws.

“This is inescapable now,” Turetsky said. “We have the Internet, and you can still find out what pay ranges are on the Internet. So once the big markets in New York City and California start moving toward transparency, there really won’t be going back. It will really now be a cascading effect of other markets now assuming this.”

Adriana Belmonte is a reporter and health care policy and policy editor for Yahoo Finance. You can follow her on Twitter @adrianambells and contact her at [email protected]

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