New York City's Wage Transparency Law takes effect Nov. 1, and employers—including businesses outside the city with job ads for remote work—are realizing one of the unintended outcomes of complying with the law may be pay compression.
The New York City Pay Transparency Law amended the New York City Human Rights Law, making it an unlawful discriminatory practice to post any job listing that does not include the minimum and maximum salary or hourly wage offered for the position. The law "comes as part of a trend to promote wage equity for groups who, historically, received lower compensation—such as women and people of color," stated Carol Goodman and Meaghan Roe, attorneys with Herrick in New York City, in a joint e-mail.
Pay Compression
"Pay compression occurs when there is minimal difference in pay between tenured employees and new hires despite differences in their respective knowledge, skills, experience or abilities," said LaKeisha Caton, an attorney with Pryor Cashman in New York City. The publication of salary ranges might exacerbate the problem of pay compression because employers may feel pressured to offer higher starting salaries to attract strong applicants, while the salaries of tenured employees remain stagnant to balance the increased costs, she said.
"As a result, new hires could earn nearly the same compensation, or more, than tenured employees in the same position," Caton said.
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