As the NYC Pay Transparency Law is set to take effect on November 1, 2022, the immediate effect of this law will be that all job listings for companies based in NYC will be required to include pay ranges.
Pay transparency is a pay-related communication policy in which a hiring organization will voluntarily provide pay-related information to applicants and employees on the payment system and pay ranges, as well as allowing employees to freely share information relating to their own pay.
Organizations around the world have adopted this pay transparency practice, which is said to:
- Foster a positive corporate culture
- Engage employees
- Help narrow the gender pay gap
- Encourage diversity and inclusion
- Attract and retain talent
- Increase an organization’s brand value
- Positively impact employer and employee relations
- Refine recruitment processes
A recent publication in SHRM quotes the following statistics:
“Women earn 82 cents for every dollar earned by men, according to a study released this year by Payscale. The gap widens when comparing white men to women of color. American Indian and Alaska Native women face the biggest disparity, earning 71 cents for every dollar a white man is paid. Hispanic women earn 78 cents, while Black women are paid 79 cents.
Meanwhile, Payscale found that Black men earn 90 cents for every dollar paid to white men, Hispanic men make 91 cents, and American Indian and Alaska Native men earn 88 cents.
These inequities have long left women and people of color with less buying power, and the gaps are especially pronounced during periods of high inflation.” (Source: SHRM)
As with any change, there are two sides to consider when implementing new policies, and it is best if organizations are aware of these caveats and take them into account when implementing policies.
Pay compression – Front-line managers will need to manage potentially disgruntled employees as pay information is made transparent. Managers then take steps to reduce pay disparity and performance incentives become exceedingly similar, compressing the differences of pay level to keep all employees satisfied when real pay is being compressed to avoid complaints which are understandably psychologically draining. This can have a negative effect on high-performing employees.
Reward negotiation – Since pay transparency reduces the likelihood of a pay raise for employees on the higher end of the pay bracket, employees may seek to secure other means of rewards from their managers… In the form of health benefits, additional training, etc. This creates a disparity which is harder to observe but will still exist.
Personalized rewards – Managers and supervisors see little option but to fulfill these requests to retain talent and still differentiate rewards for performance.
How to make pay transparency work?
Clear objectives – Have a robust performance management and rewards system, which states clear Key Performance Indicators and has transparent and consistent monitoring mechanisms in place to quantify job performance to provide a justifiable platform for rewards and rewards pay.
Training – Equip frontline managers to deal with employee complaints and queries which will arise as a result of pay transparency. Empower supervisors and managers by providing them with training regarding the policies and establishing clear lines in which to escalate complaints.
Restructure reward systems – Consider transparent reward systems too and mitigate the unfairness. With a robust performance management system in place, reward structures become easier to implement.
Implementation of the law:
- Companies in NYC that are advertising promotions and transfers in NYC are required to enclose salary ranges for the position.
- Rates to include the minimum and maximum rate (in good faith) at the point of posting.
- These are for positions performed within the city limits of New York City.
- This law affects employers with at least four employees.
- This legislation aims to address pay disparity affecting historically disadvantaged applicants.
- The law does not apply to temporary positions that are advertised by temporary staffing agencies.
- Because the term “Advertise” is not defined in the law, there is no distinction between internal and external job postings.
- The Law does not define the term “Salary.”
We await further guidance by the New York City Commission on Human Rights as the law’s effective date approaches.
With so many variables to consider, performance management, rewards and recognition policies, and, of course, training managers and supervisors may appear to be the last thing on an HR practitioner’s mind – despite the fact that they should be at the forefront of making this new law work for your organization. Do you have a trusted HR partner who can help you with this process?
For assistance in setting up your training or implementing the Employee Monitoring requirements, please reach out to My HR Department. Helping Our Community Stay Informed and Ready For The Future!