Rising pay transparency is causing an employer information ‘arms race’

Rising pay transparency is causing a new kind of competition among employers — and it’s not necessarily for talent.

Instead, the shift in employers opting to share salaries on job listings has sparked an “arms race” for better starting pay and other benefits, Julia Pollak, chief economist at ZipRecruiter, told CNBC. And more employers are also including a range of non-cash benefits, perks and flexibility options in their job postings, according to a recent ZipRecruiter survey on pay transparency.

The survey found that 72% of employers post pay information on all job listings, taking the percentage of postings with salaries listed into the range of 50% to 60% on ZipRecruiter.

Other job sites are observing similar trends.

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For example, at Indeed, state laws requiring pay transparency have helped push employers to list salary ranges, especially in sectors like software development and technology, Indeed economist Cory Stahle said.

“We’ve seen a pretty dramatic uptick in the number of employers who are actually even including wages on our job postings,” Stahle said.

The number of employers that include wages in their job postings has increased significantly this year, in part due to the impact of laws in states such as California, Colorado and Washington. In addition, the tight labor market and pay transparency are acting as dual forces — with employers posting wages and benefits up front as a way to attract workers who have been difficult to draw in.

While those seeking jobs may find more initial transparency about compensation, the negotiations process when hiring is getting more challenging, said Aaron Terrazas, Glassdoor’s chief economist.

“Recruiters can feel less flexibility and … less ability to negotiate with candidates and raise pay,” Terrazas said.

As a result, pay transparency has not significantly altered average wage ranges listed in job postings, even though those ranges have somewhat widened.

“When we talk about a little bit of widening, it’s not necessarily that these jobs are now all of a sudden having $500,000 ranges,” Stahle said. “We’re talking about a few percentage points.”

Beyond any material impact on wage levels, rising pay transparency has had the largest effect on how employees and employers behave during the job-seeking and hiring processes.

Employers are using pay transparency to attract candidates who are actually willing to receive the pay that is listed — and discourage others from applying “instead of wasting recruiters’ time,” Pollak said.

“I think many of them are kind of patient and prepared to hold out for those candidates prepared to sort of suck it up and accept what they’re giving,” she added.

The challenge that pay transparency presents to employers is that jobs with pay information tend to draw more applicants, as knowing the salary helps applicants determine if a job could support their current cost of living. To address these issues and allow for negotiation, some employers have narrowed the maximum wage limit.

As it becomes normal to know the salary for a job when applying, employees stand to benefit from becoming more aware of other perks, too.

For private industry workers, benefits account for 29.4% of compensation, compared to 31.4% for civilian workers overall, according to the U.S. Bureau of Labor Statistics.

“Pay transparency in some ways moves the competition away from salaries, away from wages and toward non cash benefits, or toward equity comp, toward flexibility,” Terrazas said.

In fact, knowing how much a job pays beforehand could actually take a factor out of jobseekers’ reasoning, as they consider other things that “are really important” but masked by salary, said LaCinda Glover, a senior principal consultant at Mercer. These include job culture, benefit programs, managerial issues and career development.

In the year to come, pay transparency “will start putting pressure on organizations to look at other factors as pay becomes a little bit more of a known fact,” Glover said.