Job posting laws create rifts between employee and employer over fair pay
Revealing starting salaries in job postings is starting to get messy for employers.
Just ask Hannah Williams, who launched a TikTok series asking strangers how much they get paid and is hearing from a lot of newly disgruntled workers.
“A lot of messages are about how their company just now started posting salary ranges since they are required by law, and they and their colleagues are finding out that the listing is for higher than what they're currently being paid,” the 26-year-old said.
“Most of the time what happens is they go to their boss and their boss will basically just say ‘there's nothing we can do. We have to have a higher salary because of inflation and it attracts better talent.’”
This employee-employer confrontation is not uncommon after a number of pay transparency laws were enacted this year. More than a third (36%) of 1,300 HR professionals surveyed by the Society for Human Resource Management (SHRM) said this change caused more current employees to ask about receiving a pay raise, the report found.
The issue is this for employers: Given that the job market remains robust, employees — especially younger workers — stunned to discover their pay is far below the advertised one are more likely to walk out.
“Rising inflation and labor shortages have required organizations to increase starting salaries to remain competitive,” Robin Erickson, vice president of human capital at The Conference Board, told Yahoo Finance. “However, many employees who find out that newly-hired peers earn more are quick to look for new jobs themselves, creating a vicious cycle of high turnover and unfilled positions.”
‘Holds employers accountable for any pay discrepancies’
State and local laws requiring pay disclosures are gaining traction with legislation in California and Washington state going into effect Jan. 1 and a similar one following later this year in New York state. Comparable pay disclosure laws are already in place in Colorado and New York City, while Maryland and Rhode Island require salary information to be provided when an applicant requests it.
Overall, pay transparency in job postings has more than doubled, rising from 18.4% to 43.7% between February 2020 and February of this year and is growing, even in areas without disclosure requirements, according to a new report from Indeed, the online job board.
“Eliminating wage gaps and achieving equal pay for equal work is heavily dependent on the presence of pay transparency,” Kristen Shah, Indeed’s career trends expert, told Yahoo Finance. “Not only does it provide job seekers with more control during negotiations, but it also holds employers accountable for any pay discrepancies that exist.”
But in some cases, it appears that companies are ill-prepared for the fallout from these disclosures.
Nearly 1 in 5 organizations (19%) are posting salary ranges without confidence in how current employees will react, according to Payscale’s recent “Compensation Best Practices Report.” And less than half (49%) of organizations train managers on pay communications.
“If you post a salary range for an advertised role that is much higher than what your current employee makes in the same role, that will likely cause a decline in engagement and motivate the employee to begin searching for new jobs — especially if you can’t objectively explain why the discrepancy exists,” Lexi Clarke, Payscale’s chief human resources officer, told Yahoo Finance.
“It is important to not only pay employees fairly, but to explain why their pay is fair. Managers should be able to consistently communicate the rationale behind an employee’s salary,” she said, “including factors such as their job description and responsibilities, and pay premiums or increases over time related to tenure, experience, special skills, location, and performance.”
‘A matter of both respect and equity’
Younger workers are more apt to jump on the pay discrepancies that pay transparency surfaces, according to Erickson.
“Our research found that adequate compensation is a matter of both respect and equity for Gen Zers — and is an imperative,” she said. “With easy access to online tools that promote wage transparency like Glassdoor, Reddit, and Blind, Gen Zers are especially likely to demand what they perceive as fair and equal pay.”
That’s what Kimberly Nguyen, 25, did this month. Nguyen works as a contract UX writer for a major bank and discovered a job posting that sounded like her role: same company, same responsibilities. The pay range listed: $117,200 to $175,800 — much more than she gets paid.
“I make $85,000,” she told Yahoo Finance. “I honestly felt like a second-class citizen because from our team, there have been people who have been converted to full-time employees and knowing that there's such a giant pay discrepancy between us makes me feel disrespected.”
Nguyen tweeted about her discovery and the tweet blew up, racking in 12.4 million views, 12,000 retweets, and nearly 222,000 likes.
She also sent the job listing to her managers and asked if it was possible for her to apply to the position. And then she went and applied anyway.
“I'm pretty sure I'll get a standard auto-reject email or I'll never hear anything,” she said. “And it doesn't look like I will be able to negotiate for more money, either. Because of the nature of us being contractors, our pay is 100% handled by the contracting agency, and we wouldn't be eligible for the listed salary unless we were converted.”
That doesn’t take the sting out of it.
In a follow-up tweet she wrote: “I’ve been asking for a raise for months and they’re out here flaunting they’re willing to pay a new person at least $32k more than me??? For the same job??”
Kerry is a Senior Reporter and Columnist at Yahoo Finance. Follow her on Twitter @kerryhannon.
Click here for the latest economic news and economic indicators to help you in your investing decisions
Read the latest financial and business news from Yahoo Finance.