New York City’s Pay Transparency Law: Here’s What You Need to Know

New York City’s new pay transparency law went into effect on 1 November, requiring the majority of employers to report salary ranges in job postings. Supporters believe this step will help reduce racial and gender wage gaps, but experts suggest that employers may encounter huge obstacles.

Let’s take a closer look at what the law covers and how it could affect your hiring success.

What should you know about the new pay transparency law?

  • The new law states that any job advertisement, promotion, or transfer that would be performed at least partially in the city must include “good faith” salary ranges, regardless of the medium. “Good faith” means the maximum amount of money the employer honestly believes would pay a successful candidate, at the time of the job listing.
  • Remote, part-time, and internship are also subject to the law.
  • The principle applies to employers in the city with 4 or more employees or 1 or more domestic workers. Plus, owners and individual employers are also considered to be 1 of the 4 employees.
  • If the New York City Commission on Human Rights determines that you violated the rule, you can be fined up to USD 250,000 for discrimination. But if you comply within 30 days after the first warning, fines won’t be issued.

What is the purpose of the law?

The law is aiming to fix racial and gender pay gaps that have grown significantly over the past few years, in nearly all occupations. 

Government reports show that in 2020, women earned only 84% of what men earned, and the disparity between salaries of people of color and white workers sharply increased too. The City Council reported in September that for men, the median salary is USD 83,201, while for women, it is  USD 60,327. Speaking of racial groups, Asian employees earn 85%, Hispanic employees make 75%, and Black employees get paid 71% of what white workers earn.

Also, other reports suggested that COVID widened the wage gap as Black unemployment remains above average, and has set women’s labor force participation back more than 30 years. 

Will the law be effective?

With workers looking for more flexible job opportunities, city agencies are experiencing unprecedented labor shortages. Therefore, authorities responsible for investigating city labor rules might not act with full efficiency in dealing with violations.  

How will the law affect job seekers?

As a result of the new transparency law, job seekers could gain more leverage in salary negotiations.

Before the new law, some employers including huge corporations tended to give extremely broad salary ranges in their job postings which made it almost impossible for candidates to build a realistic picture of what to expect.

Although transparency laws have been effective in several other states, such as Colorado and Maryland, none of them has had a nationwide impact on the workforce. But due to New York City’s diverse and solid talent pool, we can anticipate a huge shift in the disclosure of pay ranges, according to Reuters

Therefore, be prepared for a more conscious and confident applicant attitude. 

What does it mean for employers?

New York City-based business groups have backed the law’s purpose, but many of them said figuring out the consequences of posting ranges may be challenging for them.

Some are concerned about small businesses’ future competitiveness in talent acquisition, saying that with upfront pay ranges, large enterprises can easily outbid them.

Moreover, changes in team dynamics and employee motivation are likely to occur soon for employers of all sizes. As full transparency will allow current employees to get information about how much their peers make on different roles, comparing themselves to others might lead to disappointment and direct their attention toward areas that generate higher pay.But before you’d have a headache about how to navigate the new pay transparency – whether you’re a New York City employer or not –, remember that you can turn this transformation into a positive. Candidates would try to find out wages at your firm anyway. Although salary is not always the deciding factor, applicants regard pay transparency to be essential to trust an employer brand, especially Millennials. When candidates know upfront what a position is worth, they are more likely to apply.

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