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What to Do If Salary Transparency Has You Feeling Underpaid

What to Do If Salary Transparency Has You Feeling Underpaid

Wednesday, 2 November, 2022 - 06:00

New York City’s new pay rule takes effect today, requiring companies with at least four workers to include a “good faith” estimate of a minimum and maximum salary in new job listings (including internal promotions and transfers). More pay information for workers sounds like a good thing, and it typically is. But if you’re hoping to check those listings to see whether you’re fairly compensated in your current job, there are some caveats to be aware of.


Caveat 1: You might not be able to use new job postings to tell whether you’re currently being paid fairly.


How helpful the new rule is really depends on employers. If they’re including genuine salary ranges, then the information can be instructive. If not, it’ll just be noise.


Some companies are posting large ranges, in which the maximum salary is $50,000 or even over $100,000 more than the minimum. That’s not all that helpful. And it could backfire on employers if existing employees see the maximum amount and want to know why they’re not at or close to that level, says Tae-Youn Park, an associate professor of human resource studies at Cornell University.


And remember, the pay transparency rule is just about salary, so bonus and equity compensation isn’t disclosed. For some industries, such as tech and finance, salary is a relatively small part of the overall package.


There’s also the risk that if New York City companies don’t want to comply with the new rule, they may start to get sneaky. Rather than post for open jobs, they’ll turn to social networks or other less public ways of recruiting candidates, says Park. That could ultimately be a negative for those with smaller networks who could miss out on opportunities.


Caveat 2: You might not be able to use job postings at other employers to see how you stack up.


Different companies may pay different wages for similar work; a bigger company may pay more than a small one, for example. Your current employer may defend lower wages by pointing to their unique work culture, or to the non-salary parts of a compensation package — from health benefits to remote work flexibility.


Of course, if you see a job similar to yours advertised at a higher salary, you should be proactive and reach out to your manager to discuss it — especially if it’s at your existing company, or at a similar rival.


If you wait until year-end reviews, you’re often too late since compensation decisions have already been made. Managers at New York City companies are being trained on how to respond when employees come to them with compensation questions, so be prepared to detail why you deserve to be paid more in line with the salary range included in the job listing.


Vicki Salemi, a career expert at Monster.com, says existing workers should highlight the advantages they have over a new employee — and flag any additional responsibilities they’ve taken on while there’s been a vacant position. Go beyond the new job postings, too. If all this talk about pay transparency has you concerned that you’re underpaid, reach out to former bosses and colleagues who may be more willing to share what they were making when you worked together, Salemi says.


If you’re successful in getting a raise, be sure to find out when it’ll take effect.


For workers outside of New York City hoping to use the new salary ranges in job listings to their advantage, keep in mind New York has a higher cost of living and salaries tend to be higher.


Caveat 3: Pay transparency might have some aggregate benefits, but it doesn’t mean everyone will benefit.


Research on Canada’s pay transparency laws show that more information compresses wages closer together, so there’s less inequity. This can mean that top earners see lower wage growth. It’s possible that if the labor market cools off and the US enters a recession, there could be more pressure on employers to keep wages down amid more transparency.


A separate study into what happened when salaries of National Hockey League members were suddenly disclosed found that players wound up altering how they played. Those who were underpaid started focusing on scoring goals more than defense and team performance suffered. You can imagine how that might play out for certain jobs in an office setting.


Ultimately, how you feel about how fairly you’re being compensated will come down to your manager. Park’s research shows that pay transparency tends to have a negative impact on the perception of fairness in the workplace, unless a manager does a good job clearly communicating the procedures in place for pay decisions.


So yes, ask your boss if your current salary falls below the posted range for other jobs like yours. But be prepared for a frustrating answer.


Bloomberg


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