Why New Pay Transparency Laws Are Good For Recruiting

Discussions about money — specifically salaries — are moving out into the open. Recent studies show pay transparency attracts more job candidates, particularly Gen Z jobseekers, who are more comfortable talking about salaries than previous generations were.

New York City this month joined seven states and several cities across the U.S. that have enacted legislation requiring employers to disclose salary ranges — either in job postings, after an initial interview or if an applicant requests that information. California, the nation’s largest state, is expanding its 5-year-old pay transparency law to require published salary ranges starting Jan. 1. Similar legislation is pending in New York State.

From where I sit, pay transparency is good for employees and employers — and not just because it’s another step toward pay equity.

Potential employees can use transparent pay to decide if a posted salary is financially viable for them. Employers can take the opportunity to reassess their pay structures to ensure that pay is fair for their workers with similar skills and in similar roles. Posted pay ranges provide a starting point for negotiations — something that’s especially valuable for new college graduates just entering the job market.

Pay transparency should be a key strategy for any company looking to build a stronger early talent pipeline. Here are three reasons companies could be proactive about disclosing salary ranges.

Pay transparency can help companies attract more applicants.

Pay transparency laws are already starting to have an effect: A recent survey found that nearly one in six companies that disclosed pay data attracted more job candidates.

Generation Z — today’s early talent — tell us they’re more likely to apply for a job if they see a salary range. They’re much more comfortable discussing salaries than previous generations. Our own data shows that salary is far and away the No. 1 reason why Gen Z chooses a particular employer and sticks with a job. In fact, when asked to rank their top factors related to gender diversity that might compel college students to apply to a company, Gen Z put pay equity above seeing women in leadership roles, having dedicated programs to support women and employing a chief diversity officer.

Companies that keep salary information close to the vest risk losing applicants and draining their talent pool. A recent survey of adults who have looked for work within the past five years found that a third of them would not go to a job interview unless they knew the pay.

It can enhance equity and diversity efforts.

Salary disclosure laws are intended to promote fairness as we continue to learn more about chronic wage gaps between men and women and disparities rooted in race and ethnicity. Handshake data shows that companies get 13% more applications from Black students when they include salary information in job postings.

Public salary disclosures won’t rectify all of these long-standing pay equity issues, but they let early talent know that companies are serious about working to fix them.

It can improve company morale.

It’s clear that not every company is thrilled by this trend toward greater pay disparity. A survey of North American employers found that nearly a third say they are not ready to take this step.

Companies that delay might undermine efforts to attract and retain employees. When job applicants don’t see salary information on a posting, they’re likely to think a company is hiding something or might underpay them. It further suggests that a company might be untrustworthy.

Yet another survey found that 60% of employees — especially Gen Z and Millennials — would consider switching jobs to gain more pay transparency than they have at their current company. Indeed, studies suggest pay transparency has positive effects on job satisfaction, job performance and workers’ perceptions of their employer.

If trends continue, pay transparency could be the law of the land. Before that happens, it makes good business sense for companies that want to attract early talent to adopt pay transparency policies.