Pay transparency laws usher in head-scratching pay ranges in job postings

The biggest shortcoming so far of new state salary transparency laws is preposterously wide pay ranges, often covering more than a six-figure span.

For instance, the base pay range for a database engineer at Apple in Cupertino, Calif, is listed between $130,000 and $242,000. At Tesla, a business analyst position in Palo Alto, Calif., offers $68,000 to $234,000 — a range of $166,000.

Even more mind-blowing, the range for a software engineer at Netflix in Los Gatos, Calif., is typically $90,000 to $900,000, according to the company’s website, a difference of $810,000.

It’s as if employers are winking at the law, or even making a joke of it. But at the very least, they aren’t making it much easier for job seekers or current employees to peek beneath the compensation covers in a meaningful way.

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“The laws say you should post the ranges that you reasonably expect to pay,” Julia Pollak, chief economist at ZipRecruiter, the employment search site, told Yahoo Finance. “Not wild, crazy zero to a million dollars.”

What companies ‘would reasonably expect to pay’

In California and Washington state, laws requiring employers to post salary ranges on all advertised job postings went into effect on Jan. 1. A similar one will follow later this year in New York state. Comparable pay disclosure laws are already in place in Colorado and New York City, while Maryland and Rhode Island require salary information to be provided when an applicant requests it.

By the end of this year, roughly 1 in 4 workers will be covered by a state or local law that requires businesses to be transparent about their pay ranges, according to Payscale data.

While it seems such wide ranges undermine the point of the laws, there’s a method to the madness, according to experts.

“Part of the reason is that they need to specify the range that they would reasonably expect to pay,” Pollak said. “And there is just such wide wage variation within companies, not just across companies. It’s quite typical for many companies to hire people at a much lower rate because they are risk averse…so companies often will hire people at a much lower starting rate than they expect to pay them even by the end of that year.”

Many employers are adding up everything they offer, not just providing a paycheck expectation, according to Emily M. Dickens, chief of staff and head of public affairs at SHRM, The Society for Human Resource Management.

“It’s compensation as a whole package — not just as the base salary — and you have to assign a value to those other benefits. That’s one of the flaws in this,” Dickens told Yahoo Finance. “You’re competing with other organizations, and we’ve got a talent shortage as it is, so you’re going to want to put the highest salary range you could put in there so you can compete.”

Many of the previously mentioned posts also alluded to this.

“This market range is based on total compensation (vs. only base salary),” according to the Netflix posting. The Tesla posting put it this way: “The total compensation package for this position may also include other elements dependent on the position offered.”

There are cases where wide salary ranges really do provide valuable information, Pollak said.

“In tech companies, compensation might average $300,000 for software engineers across the company, with junior hires earning $100,000,” she said, “and a small group of employees recruited for specialized skill sets or retained for building high-value products earning substantially more, in the $600,000 to $1 million range.”

Location also matters, especially with the increase in remote work opportunities. Cost of living varies city to city and region to region that employers must account for.

“Remote jobs are likely to be a gray area that will take some work to clarify,” Kory Kantenga, a senior economist at LinkedIn, told Yahoo Finance. “Given that many employers index wages to local labor market conditions, it is possible — if not likely — that the salary ranges for remote jobs will be meaningfully larger than for onsite roles.”

Another factor underlying the gaping salary ranges: “It’s going to take time for companies to develop pay philosophy and disciplined pay systems and procedures to meet the new laws,” Pollak said.

“Until now, what happened in many interviews is that recruiters would say things like, ‘what were you hoping to make in this role?’ And the candidate’s chutzpah and confidence mattered more for the compensation level than the role or the budget.”

‘To some degree, this information…is going to help’

For job seekers and those looking for promotions at their current employer, having a bead on what a position is likely to pay can be empowering.

“To some degree, this information, even when the range is wide, is going to help job seekers,” Pollak said. “It’ll help them to focus on jobs that actually provide the pay that they want, rather than going down a rabbit hole, writing out a whole application, then finding that the job pays much less than they need.”

Such large ranges may help some job candidates feel emboldened to ask for more money generally at the outset of the interview process. But don’t overdo it, Jayne Mattson, a career coach, warned.

“The salary ranges might be wide, but it doesn’t mean you’re worth the higher salary,” Mattson told Yahoo Finance. “Everyone needs to know and understand what their value is in the job market. Are your skills up to date? Have you solved problems the company is encountering? And are you clearly able to convey your worth in the interview?”

If that still comes up short and you get an offer on the lower end of the pay range, don’t despair, said Maggie Mistal, an executive career coach.

“Rather see it as a first step in negotiations. Most employers, in my experience, offer less than they can afford to pay because they expect you to negotiate,” Mistal said. “Don’t take it as a done deal.”

In other words, go ahead and counter Netflix for at least a half-million dollars.