What Are the Pros and Cons of Salary Transparency in Job Postings?

People across the country are advocating for further pay transparency. Recent U.S. state laws require employers to add pay ranges to job postings. This can help decrease pay gaps for marginalized groups but can increase pressure on small businesses. However, experts say regulations like these are here to stay.

By Lora Korpar

Many people struggle with determining the salary they should be fighting for. You might ask “What if I’m asking for too much?” or “What if I’m being lowballed?”

You could be receiving less pay than your co-workers. This is a strong concern for women and people of color, who often receive smaller salaries than their male and white counterparts.

The majority of workers also prefer not to disclose their salaries. A survey by LinkedIn’s Workforce Confidence found that only 16% of respondents share pay details with co-workers. Less than a third shared this information with their friends, and only 56% told family members.

Several U.S. states and cities are working to remove the guesswork and secrecy around pay through salary transparency laws requiring employers to add salary ranges to job postings.

“Transparency as far as what the employer is willing to pay for the job that needs to be done is really important and it shouldn't be based on how you get a worker at the lowest possible rate,” said Rachel Ellis, an employment lawyer who helped draft Colorado’s Equal Pay for Equal Work Act.

But how do these laws work in practice? And will they become more widespread? Here, we discuss these laws’ benefits, drawbacks and longevity.

Recent Salary Transparency Legislation

California Governor Gavin Newsom signed SB 1162 on Sept. 23. This law, which will take effect Jan. 1, 2023, requires employers with more than 15 employees to add a salary range to job postings. According to Bloomberg Law, this will affect nearly 200,000 California companies.

“The statutes have penalties that could be quite significant for failing to comply,” said Arlene Yang, an employment lawyer at California-based law firm Meyers Nave. “There can be civil penalties for those failing to post any scale information or providing pay scale upon request from employees or applicants.”

A similar law, the Equal Pay for Equal Work Act, took effect in Colorado at the beginning of last year. States like Nevada, Connecticut and Washington also require employers to disclose pay ranges when offering the job and/or when employees ask.

In Colorado, violating the Equal Pay for Equal Work Act costs $500 to $10,000 per violation. The California law ranges from $100 to $10,000 per violation depending on “the totality of the circumstances, including, but not limited to, whether the employer has previously violated this section.”

Salary Transparency Benefits

These laws aim to reduce pay gaps and remove some guesswork in the job search.

“It helps people figure out what they want to spend their time applying to and what companies they want to engage with as far as looking for work,” Ellis said. “Everyone has a story about going in for a job interview and being hopeful that it's going to be a really good fit, and then they're shocked by the fact that the compensation being offered isn't something they can even consider.”

The laws can also benefit current employees.

“It tells people that are already in the job what new people are being hired at and what the range is, and if you're not in that range, it's time to speak up and have a conversation about it,” Ellis said. “As far as the practical change that's happened, people are feeling much more able to talk to their boss, human resources or their colleagues about what they're being paid. And people are asking for the companies to make corrections.”

“By providing employees with more information about what their co-workers are getting paid, that can help to reduce inequities in the workplace, particularly focusing on trying to remedy longstanding disparities between what men and women are paid and also that people of color tend to have lower pay overall than other people,” Yang added.

Uncontrolled gender pay gap data shows women make 82 cents for each dollar a man makes. The gap widens for Black, Hispanic, Pacific Islander and Indigenous women. Pay transparency helps shrink these gaps because it gives people in marginalized groups a baseline to negotiate for.

Salary transparency can also attract a more diverse workforce. Data from Textio shows Colorado job posts that included salaries used 83% more language “that engages women job applicants” than listings that did not include salary. They were also 50% more likely to use language that appeals to all age groups.

People on the hiring side of the job search process can also benefit from these laws.

“These new laws will also make the process so much easier for recruiters and hiring managers,” said Daniela Herrera, director of recruitment operations and DEI at R/GA. “Now, they will all be able to have open, transparent and honest conversations with their candidates about what both parties can expect from the role, the offer and the hiring process from the very beginning, avoiding unnecessary interview rounds.”

However, salary transparency could be a double-edged sword for employees finding out their salaries are lower than expected.

“If that transparency is revealed, it could lead to dissatisfaction and wanting to then look for another job,” said Sally Clapper, a career coach and career development instructor at the University of California, Berkeley. “It might prompt people to start looking at ‘What are the competitor companies paying?’ And I think that's an advantage for the job seeker in some ways. 

“But if you really like where you are and you find out you're getting paid a lot less than company B is paying, it could create a bit of stress or bring you to a choice point of ‘Do I stay with this company or do I leave?’ which ultimately puts more pressure on the company to make sure that they're creating an environment that employees want to stay in.”

“I believe that unless companies have a strong plan to update their internal [salary] bands in a way that matches the external market, we'll probably see a new ‘great resignation’ wave,” Herrera added.

Salary Transparency Drawbacks

Determining a salary range isn’t always as simple as it seems. Yang said the California law can cause problems in smaller companies that barely reach the 15-employee minimum.

“Some employers may not have a formal set of job descriptions and job classes that have pay ranges,” Yang said. “So that may take a significant amount of work to try to identify what the range is, or whether they need to have different jobs that are currently called the same thing, maybe now called different names, so that it can be differentiated why they pay one differently.”

Also, having too much data can create wide pay ranges. According to a LinkedIn post by Oren Ben-Alferandi de Eden, CPO for Silent Eight, “good data are hard to get and are expensive and the way we talk about jobs is not standardized in any useful way.” The pay for someone with a higher degree or more experience will be higher than for someone without them, inflating the range.

In California, employers will need to track employment data and submit an annual report. They risk legal repercussions if they do not comply. 

Ellis said Colorado’s law caused some blowback because of the legal consequences on non-complying companies. One recruiter organization even attempted to sue an official at the Colorado Department of Labor and Employment, saying salary is “proprietary, highly confidential, and trade secret,” Colorado Politics reported.

“The consequences for not paying fair wages is really the most important part, but it hasn't gotten as much attention because those cases haven't moved through the system yet to be in court,” Ellis said. “Sometimes companies are refusing to [correct unfair pay] and then I think they lose good employees often. And I think that the companies who aren't in compliance are risking huge liability. Some of them are doing it intentionally. And some of them are doing it from a place of ignorance because they don't understand what their obligations are.”

Clapper and Yang added that the law could cause large companies to discriminate against job seekers based in states or cities with transparency laws.

“My experience is that there's always a workaround to certain laws that come out, and larger companies may be able to figure out those workarounds,” Clapper said. “For instance, if you think about Colorado, California or New York City, it's possible that large companies could just stop posting positions in those places.”

Applying Pay Ranges to Salary Negotiations

Clapper said knowing a salary range can be especially helpful to less experienced job seekers unfamiliar with salary negotiation techniques. Knowing a range will give you a more realistic number to aim for.

Some companies might post wide salary ranges, so job seekers should still do additional research to determine which end of the range to negotiate for. Remember to account for your education and experience level. Don’t automatically shoot for the highest number if your qualifications don’t align with it.

Also, companies tend to be less secretive about benefits than salary ranges in job postings. So use that as another indicator of the quality of your compensation.

“Salary is only one part of your compensation package,” Clapper said. “You need to think about what the full compensation package is because it could be health benefits, PTO, work-from-home bonuses. They don't have to be disclosed as part of the salary. So really be aware of what the full compensation package is, as well as the company culture, and if this is a fit for you and your values.”

Job seekers who don’t live in an area with pay transparency laws can also benefit from knowing other states’ pay ranges. If you are applying for a large company, search its Colorado or California pay ranges, then convert it based on your state’s minimum wage and average income.

The Future of Salary Transparency Laws

Salary transparency is a popular idea with many people. A Twitter poll by Bloomberg found that 67.6% of respondents support pay transparency. Another 10.9% said they support it “with exceptions.”

Insurance company Willis Towers Watson’s survey found that some companies also support the idea of adding salary ranges to job postings. Seventeen percent of companies surveyed in U.S. regions that don’t have salary transparency laws in place said they already disclose pay range information. Another 62% are planning or considering doing the same.

“If you have a company that's been doing this before the law was even passed, it tells you something about that company culture,” Clapper said. “And if that's something that you really value, then I think that that increases your desire to work for companies that are voluntarily doing that and not trying to find workarounds.

Ellis said she hopes people drafting laws in other states account for “Sex-Plus Discrimination,” which considers intersectionality, not just gender discrimination.

“You can say ‘Listen, all the white women are being paid more than me as a Hispanic woman,’ and you can look at the impact of the intersectional protected characteristics, and that's critically important,” Ellis said. “One thing the law has not historically been good at is recognizing that the discrimination you face as a woman and as a person of color is not the same as the discrimination that you face as a woman of color. So the law’s got some catching up to do, but Colorado got it right. And that's a hugely important component of our bill.”

Ellis added that more people will expect pay transparency as more states enact laws like Colorado’s.

“Our kids will grow up never going to a job interview where they don't know what the potential for compensation is,” Ellis said.

Top Takeaways

The Importance of Salary Transparency

• States across the country have implemented or plan to implement laws requiring employers to add salary ranges to job postings.
• Salary transparency is key in decreasing gender and racial pay gaps. 
• Requiring pay ranges can be problematic for small businesses without clear data.
• Salary ranges give job seekers a baseline to work with during a pay negotiation.
• Many people support salary transparency laws, and some companies are implementing transparent salary ranges in states that don’t require it.