For Job Seekers: Opinion: CA Pay Transparency Act, What Does It Really Mean?

For Job Seekers:

Opinion: CA Pay Transparency Act, What Does It Really Mean?

Sabrina Deltoro, Founder & Recruiting Director

Delson Talent Consulting

January 12, 2023

The California Pay Transparency Act (CPTA) is a new law that aims to promote pay equity and reduce wage discrimination by requiring employers to provide salary range information on job postings. The act, which went into effect on January 1, 2023, applies to all public and private employers in California with at least fifteen employees.

WHAT DOES THIS MEAN FOR YOU AS A CANDIDATE?

On the surface, this may seem great. I know many candidates dislike talking about salary, and anyone trained in negotiation knows to ‘leave nothing on the table’ so to speak; candidates don’t like to give a salary number first. Now, candidates will have a starting point for their negotiations and salary ask. This means that you no longer have to rely on inaccurate salary estimates from Glassdoor, or negotiate blindly, as you will now have a better understanding of the pay range for the job you are applying for before you even start the interview process. Having this information can be particularly helpful for candidates who may not have a lot of negotiating experience or who may be unsure of what a fair salary is for the position they are applying for, or who are currently underpaid. Ideally, by knowing the salary range for the job, candidates can better understand where their own salary expectations fit within that range and can negotiate for a salary that is fair and reasonable when the time comes.

Similar to the Senate Bill 973, which was passed in 2021, the CPTA is meant to promote pay equity and reduce wage discrimination by leveling the playing field for job seekers to ensure that they are paid based on their qualifications and the requirements of the job, rather than their past salaries. Now, with CPTA in place, if a company has 15 or more employees, you will see a pay range stated directly on job postings. Here is an example of what a stated range may look like:

“Compensation includes a base salary of $107,000.00 - $180,000.00. The salary rate may vary outside of the anticipated range based on factors such as the ultimate location of the position and the selected candidate's experience. Position is eligible for additional compensation that may include commission (annual, monthly, etc.) and/or an incentive program.”

SO WHAT’S THE DOWNSIDE?

Here’s where I think this gets a bit sticky. Ever heard of Illusory Superiority? In the field of social psychology, illusory superiority is a condition of cognitive bias wherein a person overestimates their own qualities and abilities, in relation to the same qualities and abilities of other people [1]. How common is Illusory Superiority? In a 2001 study, “87% of MBA students estimated they were doing better than most of their peers” [2] Ultimately, it’s more common than you may think; most people believe themselves above average. This can’t be true, due to the definition of average!

So, when candidates see a salary range of say, $107,000 to $180,000, many people will believe they deserve the top of the range, and will apply for the role and enter into the interview process with this assumption. When a candidate has an initial interview with a recruiter, the recruiter should be qualifying the candidate’s expectations, but it’s up to the candidate whether or not they give a number. Let’s say that when asked, the candidate tells the recruiter that the listed range is on par with their expectations, and the recruiter can’t get more information out of them. Hopefully at this point, the recruiter will quote a smaller, more realistic range (that’s what we do here at Delson Talent), based on that person’s experience specifically, but not all recruiters do this, as not all recruiters are given enough information about Company salary to give a fair estimate.

What happens then? Well, let’s say the candidate goes all the way through the interview process, reaches the end, and the Company wants to make an offer. The entire time, this candidate has been operating under the assumption that they are a $180,000 candidate. The company makes what they believe is a strong offer for $150,000. The candidate, who was initially extremely excited about the company and opportunity is now much less enthused. From here, two things can happen: One, the candidate walks away, having wasted their time and the company’s time. While wasted time is rarely a good thing, the cost here is a few hours and a 2-3 week delay (or more) for the Company to fill the role. Or two, the candidate accepts the role because they may really hate their current role, be unemployed, or, although they were expecting a higher offer, the compensation offered is still more than their current role, so they take the job.

What now? Well, they’ve accepted the role, so the position is filled, but they are no longer excited about the opportunity. This negative candidate experience will bleed into their employee experience, and the candidate will start their employee journey with less enthusiasm than they would have if they had never seen that $180k number. It would then be fair, in my opinion, to expect this employee’s tenure to be shorter than average, thus increasing turnover at the organization. This is a lose-lose; lose for the employee who will be quickly looking for another role, and a lose for the employer who now has to backfill the role.

WHAT CAN WE DO TO PREVENT THIS?

As a candidate, I urge you to go into the application and recruitment process with realistic expectations. Think of the range like the old MCAT; it might be out of 45, but no one gets a 45. Having realistic expectations will set you up for success. I recommend going into interview processes with an idea of what your skills and labor are worth for your location and industry. Do some research ahead of time so you know what to expect. You know what the bottom of the range is- start there. Ask people who are in a similar role in a similar industry what they are currently making. Ask your colleagues the same. However you do it, please, be realistic and set yourself up for success instead of crushing disappointment.

One final thing to note is that many job postings, like the example above, will have language stating that the pay rate could “fall outside” the stated range, based on a variety of factors. If you are viewing a job posting that matches your skills, but the top of the range is a little bit lower than you expect, apply anyway. I believe companies will not be putting the very, very top of their pay bands, due to the reasons stated above.

So, what does the CPTA really mean for candidates/employees? Beyond the potential for disappointment, and a starting point for negotiations, in my opinion, it means very little. I believe that the CPTA was put into action for altruistic reasons, but ultimately, I believe it will only result in disappointment, hurt feelings, and a diminished employee experience.