Agency Business Business Leadership

New York City’s looming pay transparency law could be a big headache for agencies

Author

By Kenneth Hein | Editor

February 25, 2022 | 8 min read

Salary ranges in adland have long been obfuscated, left to the ad trades or threads on Fishbowl to suss out. That’s about to change for New York City-based agencies as a new pay transparency law comes into effect May 15. According to top recruiters, who of course are always in the know about fair compensation, agencies need to address this law head on or talent could be quickly heading the other way.

People walking away

Agencies may see talent walking in the other direction if they aren’t transparent about salary ranges

The concept of fair compensation in adland is all over the map. Often, hardworking junior employees are compelled to jump to another agency just so they can get the pay bump they need to survive, while senior executives are known for receiving lofty paychecks, replete with incentives and iron-clad contracts.

Now agency employees may have another motivation to move on: the stark realization that they are being underpaid compared to their peers in the marketplace or even within their own company. Beginning May 15, agencies and other businesses with more than four employees in New York City will be required to post salary ranges according to a new law.

In the short-term this could prove to be a big headache for agencies, and others, who aren’t paying employees fairly. “Imagine if someone sees a similar job posted in-house for more than they are making? They will not be happy unless there is a good reason for that gap,” says Pree Rao, head of Egon Zehnder’s North America CMO practice.

Management is going to need to brace itself as employees are likely to ask for raises. “For most of our clients, sharing salary bands with new hires is not an issue because that disclosure already happens during the interview process,” says Debra Sercy, managing partner, Grace Blue. “Rather they are concerned with existing staff gaining access to salary bands being offered for new hires in such a competitive marketplace – and expecting their raises in 2022 to reflect what might be an anomaly that will settle down when the economy stabilizes or corrects.”

For hourly wage earners or those with entry-level positions, listing the salary range is a good thing, says Juel Talent Group’s Elizabeth Zea. But for more senior roles, it is not as clear cut – especially in advertising. The factors that come into play are many: years of experiences and global expertise (especially if the candidate has worked in other markets), as well being fluent in multiple disciplines like brand and performance marketing.

It becomes even more complex for senior creative roles, which are based “on the hugely subjective criteria of ‘producing great work’ as opposed to the achievement of standard performance metrics,” says Sercy. “That being said, base salary bands for each role in the creative department are easy to set, even if they can be very broad.”

Agencies may look for workarounds to avoid posting salaries

By design the new law is to create equal pay by narrowing gender and racial pay gaps. Failing to advertise a position that features a salary range that employers would pay in good faith will be considered an unlawful discriminatory practice.

“This law is a great opportunity for New York City agencies to live their diversity, equity and inclusion commitments in a consistent and actionable way, particularly as executives hone their retention and recruitment efforts amid the Great Resignation,” says Simon Fenwick, 4A’s executive vice-president, talent, equity and inclusion. “Accountability starts with transparency, and most especially pay transparency.”

Still, many businesses are unhappy – not with the spirit of the new law, but how it is being implemented, as well as how quickly. “This law is taking a lot of NYC-based employers in our industry by surprise, particularly those who are small and mid-sized,” says Sercy.

With May 15 coming up fast, there are a number of aspects of the law that are unclear. Marisa Sandler, an employment lawyer and litigator at Tannenbaum Helpern Syracuse & Hirschtritt LLP, spelled out these issues in her column last month: What exactly does it mean to ‘advertise’ a job, promotion or transfer opportunity? Does the salary need to include bonuses and commissions? And how does this impact positions outside of New York City?

There appears to be a number of ways to dodge the law as it stands: creating a broad salary range (e.g. advertising that a role pays $50k to $150k based on experience); offering bonuses or incentives not yet required to be listed; or simply not posting the job and just leveraging recruiters for big roles. “Unfortunately, as a result of this law, NYC-based organizations will be less likely to publicly post senior roles, making them less equitable,” says Zea.

Perhaps the biggest issue for businesses is the added layer of bureaucracy and cost. This will be especially troublesome for small and mid-sized companies, says Alan C Guarino, vice chairman, Korn Ferry. “This legislation is not going to get people paid any more or any less for the particular job that is posted. All it does is create more complexity for the company advertising the job and puts an increased burden on smaller companies that don’t have formalized compensation schemes. This appears to be ‘big government’ meddling in the free market.”

Indeed, this law is a hot button issue, not only in New York but also other states where similar measures are being enacted including California, Colorado, Maryland, Nevada, Rhode Island and Washington. Massachusetts and Pennsylvania have also introduced legislation that is similar.

The war for talent gets even more complicated for adland

The benefits for employees are clear. Ideally, this will help equal pay become less of an aspiration and more of a reality. Employees will have a better understanding of their market value and a clear sense of whether it’s worth their time and effort to throw their hat in the ring for certain roles.

For employers, this is an opportunity for transparency – or else. “If employers do not have salary bands in place or have not made them available for staff review, they better move on to create them and ensure existing staff are paid the same fair market rates as new hires, or they risk losing their most valuable talent to higher-paying competitors,” says Sercy.

Rao agrees. “Employers who don’t address potential issues right away, with proper action and communication, may have major morale and retention issues on their hands. But if they do address them, there is an opportunity for the opposite effect.”

A lot of responsibility is falling on human resources professionals to prep for this shift, and managers will need to have answers for their teams when questions about money come up. “Ultimately, leadership teams need to become more comfortable with the often charged conversations around compensation overall,” says Sercy.

Still, even if companies do everything correctly, talent may leave not only their agency, but also the industry as a whole. The dynamics “are pretty much universal and equally true for the advertising and marketing industry. Talent may shift in and out not only of individual companies, but of the space itself if the grass is greener elsewhere,” says Rao. “After all, people will be able to see not just whether a particular opportunity is worth it, but also gauge whether the next step up the career ladder in a particular vertical is as compelling as it would be on a different path.”

For more, sign up for The Drum’s daily US newsletter here.

Agency Business Business Leadership

More from Agency Business

View all

Trending

Industry insights

View all
Add your own content +