The number of states and cities requiring companies to post salary ranges in their job advertisements is growing.
As of November 2022, employers with four or more employees, at least one of whom is in New York City, must include pay ranges in job postings if the position may be performed in New York City, either in-person or remotely. As of January 1, employers in California with 15 or more employees — at least one of whom works in California — must do the same. Similar laws exist in Colorado and Washington; other states require that employers disclose ranges upon request or after an interview.
Fintechs, which often draw talent from banks, other fintechs or technology firms, may now see their salaries stacked up against higher-paying competitors. It may also be challenging for them to calculate compensation ranges that capture the attention of high-quality talent. On the plus side, the requirements could help fintechs gather better data about their competitors and confront questions about pay equity within their organizations.
“Many [fintechs] have relatively low salaries compared to banks so it makes it harder, certainly in New York or California, and highlights that you need to have competitive salaries,” said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm for the finance sector. Before, even if an applicant knew intellectually that they would be paid less at a fintech than at a bank, confronting hard numbers brings it top of mind.
Although the laws are still evolving, fintechs such as Novo, a challenger bank for small business owners, are considering how the laws will impact the wages they advertise and what they offer their employees.
“Some people’s immediate reaction to pay transparency is that it is a clear positive for employees, who now have access to more information, and a negative for companies, who now have to give away information to employees to their bargaining disadvantage,” said Michael Ryan, senior counsel at Foley & Lardner. “The issue is not nearly so black and white. Employees will have access to more information than before, and it likely will be a positive for them in negotiating compensation, but companies will also have an easier path to gathering compensation information about their competitors than they did before.”
Grant Sahag, vice president of operations at Novo, sees pros and cons to the laws in their early days.
On one hand, it has encouraged the company to audit its existing compensation levels and ensure there is equity among employees. It makes the application experience more efficient for job candidates, who can filter themselves out of roles beneath their desired pay grade. And the macro effect is good for pay equity, said Sahag.
“One major impact of transparency law is to continue to help us think about our job leveling and job architecture framework,” said Sahag.
These laws have made other aspects of hiring inefficient.
“When you are at the intersection of banking and technology you are recruiting from two different employee pools, banking services and tech. There is a smaller sliver of fintech and maybe banking tech,” said Sahag. For “hybrid” roles, such as strategy and operations, Novo could conceivably recruit people from a variety of backgrounds, including consulting, banking or technology. But the compensation bands are trickier to pin down for a job posting because people from different backgrounds may have higher expectations about salary, and a rate that is too low may turn off someone with relevant experience.
“With a unique role, job category compensation data might not match the wide range that exists in the market,” said Sahag. Before salary transparency became the law in certain areas, Novo would be likelier to post its desired minimum years of experience for a role, which would still capture people at different levels. For example, if the ad requested at least four years of experience, “people with six, seven or eight years of experience may still apply for that role,” he said, although they may expect a premium over someone with the minimum of four years.
Salary ranges are supposed to be “in good faith,” but some companies have been called out on social media for advertising comically large ranges. For instance, an ad posted by Citi that has since been deleted included a salary range of $0 to $2 million.
“Companies that post huge, unreasonable salary ranges in an effort to avoid true compliance with pay transparency laws are more than likely violating the pay transparency requirements in most, if not all, states with such laws,” said Ryan.
Although he has not seen enforcement to date, perhaps because the laws are so new, there are grace periods to come into compliance, but at the moment it’s unclear what constitutes a violation. “We highly suspect that enforcement will pick up in 2023 and beyond, as the requirements become clearer and more ubiquitous,” Ryan added.
Novo’s recent open roles for New York City reveal tight ranges; for example, $87,000 to $100,000 for a lifecycle marketing associate.
“We don’t post a wide range because we want authenticity,” said Sahag.
Iwan Barankay, associate professor of management at the Wharton School at the University of Pennsylvania, acknowledges that gauging the proper range may be a pitfall for companies.
“If it is just a little too low, they might not be able to attract the highest talent out there,” he said. However, being overly generous may encourage applicants to negotiate pay at the top end.
One way to zero in on talent for, say, a software engineer when a company is not targeting a particular level, is to post individual ads for software engineers at different levels with narrow ranges, rather than one broad posting with a large range, advises Lulu Seikaly, senior corporate employment attorney at compensation management firm Payscale.
Another question fintechs must face is whether to voluntarily include salary ranges in job ads, even if they are not required to.
Johnson advises reporting what you have to. Seikaly, on the other hand, feels it is a branding opportunity.
“If a company is posting a salary range and it’s attractive, that tells me this organization truly values their employees, they are paying competitively and they are not afraid to show it,” she said. Seikaly, who lives in Texas, has noticed more technology roles based in Austin voluntarily disclosing pay, likely because they are competing with companies in the Bay Area and “they understand to attract the best talent they will have to post ranges,” she said.
According to Payscale’s 2023 Compensation Best Practices Report, 27% of survey respondents, who are involved in some aspect of their company’s compensation process, shared pay range for a job with prospective employees for the first time in the job posting, regardless of whether it is required by law, compared with 18% who first shared it in a job posting only when required by law.
Another question is how these laws will affect pay equity and mobility within an organization.
“I believe that pay transparency is really important, but it’s only one portion of creating a great environment for our employees,” said Sahag. “It’s understanding leveling [or defining what a role entails] and providing development opportunities for them.”
Novo is rolling out a leveling program in its India office and has hired a director to finalize a similar program in the U.S. The program will define job levels and the expectations to move up, implement more consistent feedback and develop a game plan for people to ascend in the company.
Salary transparency at Wise, which enables low-cost international money transfers, predates U.S. state laws going into effect; the company says it started including salaries in job postings across its global offices in late 2019.
“[Salary transparency laws] does give us more intel into market data,” said Candace Smith, regional people operations lead for the Americas at Wise. “From a candidate standpoint it gives them a better understanding of their opportunities in the market and ensures they are aware that [what Wise offers] is a competitive offering.”
Currently, it is working on transparency within Wise. It began an initiative in 2022 to make salary bands for each level in a team visible to everyone across the company. The initiative will be finalized this year.
When respondents were asked in Payscale’s 2023 compensation survey about whether recent pay transparency legislation has driven the organization to change or improve their compensation practices, 37% said that they were rapidly trying to improve their pay data, pay structures, and pay equity, while 11% reported investing in equitable pay structures for the first time. Thirty percent said they already have pay transparency and 11% said they were resisting the practice.
Even without formal pay transparency measures within companies, employees may use data from postings to advocate for themselves.
“Pay increases could happen as existing employees may start asking about their own compensation and pay transparency will highlight any potential wage disparities and inequities,” said Christine Randazzo, a principal in PwC’s workforce transformation practice in the U.S., via email.
“Organizations can get ahead of this by conducting compensation benchmarking to assess whether adjustments are needed based on the current market and hiring practices, and should examine whether their career architecture and salary structures are competitively positioned.”