How the new pay transparency trend could affect your bargaining power or job search

By Hal M. Bundrick

‘Knowledge is power.’ Here’s what you need to know about salary negotiation and what to keep in mind if you’re on the low or high end of the pay scale.

This article is reprinted with permission from NerdWallet.

Knowing whether you are being paid fairly for the work you do is a mystery shrouded in a lack of information. That could change, however, and pay transparency could be the catalyst. There is a growing trend for companies to disclose what a vacancy or current position pays – whether voluntarily or because governments mandate it.

Navigating salary ranges

So far, about a dozen states and municipalities have allowed access to salary information, including California, Colorado, Washington and New York. Companies in jurisdictions are generally required to publish salary ranges indicating minimum and maximum pay. The rules vary: Sometimes only job applicants need to be told, while other times current employees can also request information about their pay range.

Roberta Matuson, president of Matuson Consulting in Boston, advises companies seeking top talent. She believes pay transparency “is a step in the right direction.”

“Knowledge is power. So, you know, if you had no idea that it was possible to make more money, then you wouldn’t even be asking for it,” Matuson says.

Is this the end of wage negotiations?

Pay transparency won’t eliminate wage bargaining, says Lexi Clark, vice president of people at Payscale, a national provider of compensation data and services. Instead, Clark says he’ll encourage discussion of current and future pay expectations.

This will help employees and applicants “understand what their expectations should be and where [salary] the limits are and where there can be flexibility. It levels the playing field between employers and candidates to have a more open and transparent conversation,” she says.

And Lulu Seikali, senior corporate attorney at Payscale, notes that under current laws, employers are not prevented from offering pay higher than the range that is published for a position, as long as the company can provide an objective rationale for the exception.

In the past, companies often based salary offers on what a person earned at their previous job, Seikaly says. “A lot of states have banned it now.”

If a potential employer asks for your salary history, Matuson says, “I wouldn’t say no; I’d say, ‘Well, tell me what you’re offering for the position.’ I’d just turn the question around.”

Will the pay gap be eliminated?

Pay transparency reveals pay ranges, but does it close the gender and ethnicity pay gap? It may be too early to tell.

However, Payscale’s Clark says that organizations that are more open about pay often have well-defined pay structures and are less likely to have pay inequities.

She predicted how the gender pay gap could narrow: “Women’s wages will increase to where they should be – some men’s overpaid wages may decrease slightly to be more in line with what they should to be.”

Read: Salary ranges not too ‘ridiculous’ as transparency laws kick in, report finds

What if you’re on the lower end of the range?

If you find out you’re at the lower end of the salary bracket, Clark says pay transparency will help you communicate with an employer about what you think you’re worth, “And you anchor all of that in data, which is really powerful, she adds.

Matuson says to ask your employer how you can add more value and what skills you need to increase your pay and promotion opportunities.

And it’s not just about money, she adds.

“There are other things you can ask for,” Matuson says. “For example, you could say, ‘It would help me if I could work from home two days a week so I wouldn’t spend $50 or more a week on gas.’ Will it be appropriate?’

Watch: Employers list wide salary ranges in ways that circumvent pay transparency law

And if you’re at the top of the pay scale?

What if you find out you’re at the top of your task force? One result could be a compression of pay at the top of the pay scale, with the highest paid workers facing increasing resistance to wage increases. Should you be worried that you are out of stock and could be among the first employees to be laid off if layoffs happen?

“Well, I think you always have to think, ‘I might get cut,'” Matuson says. But she adds that even if you’re not actively looking for a job, call a few headhunters to determine the pay scales for your current job and potential opportunities.

See also: What can I do to improve my salary? Am I being paid fairly? In a strong job market, here’s how to push for a pay raise

If you’re trying to determine an appropriate salary for where you are in your career, several websites offer tools to help you see an appropriate pay range. Check out Payscale, Indeed, Glassdoor, and for such tools.

More from NerdWallet

Hal M. Bundrick, CFP(R) writes for NerdWallet. Email: [email protected] Twitter: @halmbundrick.


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01-25-23 0501ET

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