Signed into law in 2022 by New York Governor Kathy Hochul, New York’s pay transparency law in 2023 is all set to go. Effective from 17 September this year, the pay transparency law will now enforce regulations that ensure employers who want to advertise a job posting are clear about what salaries applicants could expect for the position. The salary transparency law is not the first of its kind, with states like Washington, Colorado, and California already having enforced similar regulations earlier.
How Does the New Law Work in NY?
Employers with four or more employees are required to disclose the minimum and maximum annual salary or hourly wage within the job postings, whether on their websites, in print ads, or on any third-party job portals they use. New York’s pay transparency law in 2023 applies to a larger number of businesses as laws from previous states were directed at employers with 15 or more employees. This pay transparency law necessitates that companies provide the salary range in “good faith”, which means “the salary range the employer honestly believes at the time they are listing the job advertisement that they are willing to pay the successful applicant(s),” according to the New York City Commission on Human Rights.
The salary transparency law applies to employers based in New York City, as well as those that have at least one employee working out of the city. The four employees of the employer do not all need to work in the state; employing just one domestic worker requires the business to work under the city laws. The New York City Commission on Human Rights (NYCHR) and Law Enforcement Bureau have been cited as the two bodies that will likely oversee the enforcement of the law.
What Is Included under the Pay Transparency Law?
To summarise what the pay transparency law is:
- It does not supersede any local laws and regulations
- It applies to employers with 4 or more employees
- It requires the minimum and maximum salary range or hourly wage to be disclosed in the job posting
- The pay transparency law includes jobs to be performed in New York State or workers outside the state who report to a New York manager
- Employment Agencies are covered by the law but temporary help firms do not have to include such details while advertising for candidates to join their pool
- It includes all advertisements, that is, any written description of an available job, promotion, or transfer opportunity that is publicized to a pool of potential applicants
- The salary amount posted should not include fringe benefits such as insurance, severance pay, retirement planning assistance, overtime pay, etc. Those details can be mentioned separately if the employer desires
- Violation of the 2023 pay transparency law, with failure to correct the issue within 30 days, could result in civil penalties and fines up to $250,000
How Will Employees Benefit from the Pay Transparency Law in 2023?
Employees will now have the salary range for the position they are applying for upfront, so they can be better prepared for contract negotiations and make an informed decision on where they want to apply. The pay transparency law is an attempt to reduce the likelihood of companies underpaying employees, as applicants will have a chance to look at what competitors in the industry are offering as well. This will help boost the amount companies are willing to pay in order to maintain an edge and attract the right talent.
In January 2020, Section 194-a of the Labor Law in New York State announced that employers could no longer ask applicants for any details regarding their salary history or any of their previous benefits. With the additional pay transparency law in 2023, employers will have no option but to set wage ranges as per what they can pay for a role, without relying on candidate history or what they think a candidate might be willing to accept. The salary transparency law in NY should also help curb discriminatory practices against women, LGBTQ+ applicants, or other minority communities, as the salary offered to these groups will have to largely be the same for all new hires.
How Will the New Law Impact the Hiring Process?
The law is all set to shake up the hiring process as employers try to determine a scale for each position that will be appropriate to advertise. Reports from CNBC indicate that employers are already testing the limits of what might be constituted as “good faith”, posting extreme ranges that no longer provide a clear picture of what applicants can expect for themselves, “$50,000 to $145,000 for a reporter opening, $125,800 to $211,300 for a senior technical writer, $106,000 to $241,000 for a general counsel position”.
While some companies are maintaining ambiguity with the wide wage ranges, others appear to have withdrawn postings completely for now. Employers will likely wait for competitors to set the bar and follow up with their own numbers later. A Wall Street Journal report indicates that companies may refrain from making job postings at all, choosing instead to have search firms locate candidates for them or have applicants mail in their resumes to a general pool.
Challenges Employers Might Face in Complying with the New Law
Companies appear to be struggling with setting a pay scale that will satisfy all ranges of applicants without disturbing their current employee ecosystem. Many are wary of the conversations they might have to have with existing employees who encounter the job posting and feel unfairly compensated. The posting will have to be crafted with great attention to industry standards while also reviewing what they can do for their current internal team. Employers might also choose to exclude NY city candidates from their hiring process similar to what happened in Colorado, but this might lead to other legal complications as well.
The Pay Transparency Law of 2023 Might Be the Way Forward
With many states working on their own forms of pay transparency, it is likely that regulations like pay scales in job postings will become the norm across the country. While third-party platforms still refrain from making it a requirement for fear of scaring away their clientele, we might be headed toward a time when it will be compulsory everywhere. Laws such as this ensure that an employee’s best interests are kept in mind, where fair compensation is provided for their work without bias and discrimination. While many companies will face the initial discomfort of setting the scales right and establishing a standard, enforcing such laws will ensure transparency in the hiring process and is the first step in promising a fair opportunity for all applicants.