Study: Pay Transparency Reduces Recruiting Costs

Roy Maurer By Roy Maurer December 12, 2022
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​For years, polls have shown that job seekers want to see what a job pays before they apply. Now, a new report has found that advertising pay ranges in job postings—specifically in the title—also cuts recruiting costs.

The cost-per-click for ads with pay listed in the title is about 35 percent lower than ads without pay information in the title, according to an analysis conducted by Appcast, a leading job advertising platform. Cost-per-click is calculated by dividing the total number of clicks a posting receives by the cost to promote the listing. In other words, job postings with pay information get more clicks than those without.

Appcast analyzed postings for 10.8 million jobs, including 1.5 million that included pay information in the job listing title. The analysis did not include signing bonuses mentioned in the job listing title.

"It pays to be transparent," said Andrew Flowers, lead labor economist at Appcast. "Throughout the year, the gap in cost between posts with pay ranges and those without has been widening. As for why the cost-per-click is lower, it's about bidding. Employers realize they can bid lower on their job ads that mention pay in the title, and yet those ads will get the same or higher engagement from job seekers. It makes sense that you will get more engagement from a job ad if you mention the pay upfront in the title."

When broken down by industry, the difference in cost-per-click becomes even more striking for certain sectors, such as education (53 percent lower) and health care (52 percent lower).

"Advertising market-rate pay information in a job title is one of the easiest methods to attract new candidates and gain a competitive edge over other employers," Flowers said.

Mariann Madden, North America fair pay co-lead at advisory firm WTW, said the findings on cost savings are intriguing in addition to the other benefits of pay transparency, such as improved candidate quality and time-to-fill.

"The quality of applicants should be better, because they are more informed and can better determine whether or not they even want to apply," she said. "Implementing pay transparency is also a more effective way to manage the hiring process, and saving time upfront on pay expectations should improve time-to-fill."

Flowers added that while job seeker interest is higher in states with mandated pay transparency, Appcast found that the number of job postings in those states is lower. For example, Colorado saw a decline in job postings when its pay transparency law went into effect in January 2021. Some employers circumvented transparency requirements by excluding applicants from Colorado.

New York City's Wage Transparency Law went into effect on Nov. 1, making it mandatory for employers to share the salary or hourly wage in job postings. Since then, about 60 percent of job listings have had employer-provided salaries, according to Glassdoor data. But reporting indicates that while a majority of employers are complying with the statute, the salary ranges have expanded, sometimes to ridiculous lengths.

Beginning Jan. 1, 2023, California- and Washington-based companies with 15 or more workers must disclose salary ranges or wages for open roles.

"We expect the recent wave of pay transparency legislation to continue," Madden said. "Job seekers and current employees want to know and understand that they are treated fairly and are provided with equal opportunities to thrive and grow within the organization."

Flowers said Appcast's research team is currently studying the cost-per-click impact of including pay ranges in the body of job postings and will release those findings soon.

Preparing for Change

If employers can find better-matched applicants using less-expensive job ads, why aren't all employers publishing their salaries? Madden said many employers just aren't prepared for the pay transparency movement.

Despite increasing pressure to disclose pay, 31 percent of employers surveyed by WTW said they aren't ready and 46 percent said they were putting off doing so, anticipating possible fallout from current employees.

"The companies not sharing information often don't have the confidence in their pay programs and have concerns about employee reactions to transparency," Madden said. "The foundational building blocks need to be in place first to be confident about pay structure."   

She added that HR and people managers are receiving a tidal wave of questions at companies where pay transparency has been introduced.

"A lot of education is needed to help recruiters, HR and especially managers communicate effectively about the approach the organization is taking on pay equity," she said. "It's important to establish a strategy around how employers approach these laws. Will it just be compliance-only, done on a location-by-location basis, or will it be more comprehensive, applied nationwide? Will you communicate pay ranges only in job postings or more broadly to employees? And are you ready to do that?"

The WTW survey found that 17 percent of companies are already disclosing pay range information in U.S. locations where they are not required to do so by state or local laws. In addition, 62 percent of organizations are planning to disclose or considering disclosing pay rate information in the future, even where there are not local mandates requiring them to do so.

Madden advised completing a thorough review of what is currently in place once employers decide on a strategy. "Do you have the necessary job frameworks, the pay structures, the governance and administration in place to communicate the change effectively? If you must design or redesign pay ranges, conduct a pay equity analysis to understand where any gaps lie, because the last thing you want to do is start posting pay ranges that cause pay inequities," she said.

WTW recommends sharing pay ranges more broadly with internal employees. "They are active stakeholders—think about your brand and employee experience," Madden said. "I work with a lot of clients that have ERGs [employee resource groups] pressuring them to address pay equity. Workers are driving change. And we know that pay is a driving force for candidate attraction and retention."

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