The Changing Landscape of Salary Transparency in Tech

A change is coming to job listings in New York City.

In the most sweeping law yet as part of a growing trend of greater workplace pay transparency, New York City will soon require that companies list a salary range when advertising a new job opening. Under the New York City Human Rights Law, it will be unlawful for companies with at least four employees to advertise a "job, promotion, or transfer opportunity" without providing the minimum and maximum salary for the role. The rule will become law and go into effect on May 15.

"Every New Yorker should have the right to determine whether they will be able to support themselves and their family when they apply for a job," Manhattan Councilwoman Helen Rosenthal, a co-sponsor of the bill, said in a statement. "It is time to level the playing field, and restore some dignity to New Yorkers seeking employment."

The pros of pay transparency

Data has shown that pay transparency can help women, people of color and applicants from other marginalized backgrounds — groups that are historically underpaid across industries in comparison to their white and male peers — achieve pay equity. Plus, more pay transparency gives job applicants more negotiating power, and decreases their chances of getting lowballed.

Although pay discrimination is illegal in every state, a non-negligible gender wage gap still exists in America. White women earned 84% of what men earned in 2020, according to Pew Research Center, and women of color earned even less. Advocates of the new law say it may also help the current labor shortage, which is causing strain for companies who need workers.

An additional benefit of salary transparency is that it can streamline the hiring process. This helps applicants immensely, of course, but it also helps organizations that are hiring. Supporters of the new law say employers get a stronger pool of job applicants, a self-selecting group that already feels the listed salary is acceptable. And current employees at companies can use the salary ranges posted in job listings as context to see how their own salaries stack up against the going rates at other companies.

How tech employees began practicing pay transparency

First and foremost, salary transparency is a worker’s issue. Its most modern roots began as a grassroots movement among employees who shared their anonymized salaries in Google Docs. This phenomenon — “Google Docs Activism” — has happened across industries and sectors. In tech, this began at Google when a former employee, Erica Baker, started circulating a spreadsheet to expose pay inequities. Baker said this spreadsheet, which showed a gender gap among peer bonuses at Google, was less than welcomed by the higher-ups at the company. Two years later, the New York Times reported that the spreadsheet, which had up-to-date 2017 base salaries and bonuses, appeared to show women earning less than their male counterparts in five out of six pay levels at Google.

Today, however, salary-sharing spreadsheets are common practice even beyond tech companies. Sharing one’s salary via spreadsheet is less intimidating than having a one-on-one conversation to answer the question of how much money you make, and there’s extra motivation to participate — when someone shares the Google Doc with you, you get to see the collective data too.

In tech, this form of activism has exposed systemic bias against female employees. Last year a spreadsheet documenting female workers’ salaries in tech expanded to more than 2000 entries. The spreadsheet includes information on options and other company benefits, as well as years experience for context.

The goals of the spreadsheets are many: they make clear pay disparities at companies, and they give employees the information to ask for more money — or at least what their peers are earning.

How companies enact pay transparency

The hope of the employee-spearheaded spreadsheets is that eventually, companies would assume the responsibility of being clear about how compensation is derived. And all sorts of benefits stem from that — for example, HBR found that companies that are required to disclose salaries are most likely to reduce the gender gap.

Matthew Bischoff, a partner and co-founder at Lickability, a software studio creating award-winning mobile apps, told The Org that Lickability enacted its pay transparency policies in July 2020, after talking about doing it for years. Lickability has an internal Notion page with different employee levels, and each level has a salary as well as the names of the employees at that level. It was just one part of a broader mission at Lickability to give employees more transparency company-wide.

“We wanted to have pay transparency policies for numerous reasons but the main ones that come to mind were weeding out disadvantages in negotiating compensation which tend to disproportionately affected underrepresented groups, simplify our levels and promotion process and give folks clearer benchmarks and incentives to work toward if they want to,” Bischoff told The Org. “Also it was part of a much larger transparency process in which we opened our full accounting and books to employees and opened our board meetings. These were all things a large number of our team voted for when we asked how we could most beneficially be more transparent.”

Other companies have taken salary transparency into their own hands in different ways. In 2013, social media company Buffer published all of its employee salaries online. Since then, it has taken on a formula approach, simplifying its pay structure so that salaries are not negotiated, but calculated. You can input your job title and location to calculate what you’d make at Buffer. Here’s a bit of context from Buffer about its approach to calculating its salary ranges for employees:

"This multiplier is still applied by using a teammates’ location to determine one of three geographic bands, based on a high, average, or low cost of living area. We use data from Numbeo to figure out which band applies for each teammate. For high cost of living areas we pay 100% of the San Francisco 50th percentile, average is 85%, and low is 75%.

We figure out each teammate’s geographic band by comparing the cost of living index of a teammate’s location to the cost of living index in San Francisco."

After Buffer established this policy, software company Gitlab and Zoom competitor Whereby have both followed suit, in a bid to increase gender equality in tech. And our company, The Org, also publishes its salary ranges publicly, in a spreadsheet for anyone to view, with the belief that salary transparency helps attract the right talent, and will lead to a more efficient hiring process.

Similarly, Basecamp's founders Jason Fried and David Heinemeier Hansson have been vocal about how the company determines compensation. Basecamp pays at the top 10% of San Francisco market rates for any given role. This is significant because Basecamp is fully remote and many employees live in very low-cost geographies. “No scheme of pay is perfect, but at least with a model like this, nobody is forced to hop jobs just to get a raise that matches their market value,” Hansson posted in 2017 on Basecamp’s blog.

We’ll have to wait until the spring to see how New York City’s new pay transparency law affects businesses. But if Buffer is any indication, there’s plenty for organizations and employees to look forward to: The company credits salary transparency, and its annual pay transparency analysis reports, as a main reason for its ability to reduce its gender pay gap to 5.5% in 2021 from 15% in 2020.