Dr Vassilia Orfanou, PhD, Post Doc, COIO, LUDCI.eu
Writes for the Headline Diplomat eMagazine, LUDCI.eu
From Guesswork to a Published Range
Salary negotiation has traditionally begun with an information test. The employer knows the budget; the candidate is asked for expectations. That arrangement rewards market knowledge, confidence and willingness to risk rejection. It does not necessarily reward the person who will perform the role best.
Under Directive (EU) 2023/970, applicants must receive the initial pay level or range before the interview or in the vacancy notice, and employers may not ask about pay history. The reform does not eliminate negotiation. It changes its starting point.
Instead of asking what the employer might be hiding, the candidate can ask what justifies placement at the lower, middle or upper end of the range. The discussion moves from discovery to evidence: experience, scarce expertise, measurable results, managerial scope, market demand and the complexity of the role. A published range creates a reference point, but the quality of the negotiation depends on whether that reference point is meaningful.
| Transparency changes the negotiation from “What can I ask for?” to “What evidence places me within the range?” |
Why Salary History Matters
Previous salary is a powerful anchor. When employers use it to shape an offer, yesterday’s labour-market outcome becomes the starting point for tomorrow’s pay. That is efficient for the employer but can preserve underpayment across job changes. A worker whose salary was depressed by discrimination, career interruption, weak bargaining or a low-paying sector may carry that disadvantage into a role with entirely different value.
Evidence from the United States supports the logic behind salary-history restrictions. Hansen and McNichols’ early analysis of state salary-history bans found that the gender earnings ratio increased by approximately one percentage point in states adopting bans, with stronger effects for some older workers and parents. Other research indicates that knowledge of prior pay can affect both wage offers and employers’ interpretation of candidates.
The EU rule therefore does more than remove an uncomfortable interview question. It interrupts the automatic transmission of historical pay into a new employment relationship. Employers must price the role and the candidate’s value rather than negotiate primarily against the lowest credible number from the past.
The Behavioural Economics of Ambiguity
Negotiation is not conducted by perfectly rational actors. Ambiguity changes behaviour. Candidates who are uncertain about the available budget may ask for less, avoid negotiating or withdraw altogether. The perceived social cost of appearing demanding can also vary across gender, age, culture and career stage.
A review by Recalde and Vesterlund concludes that institutional reforms are generally more effective than telling women to negotiate differently. Their evidence suggests that gender differences in negotiation diminish when expectations are clearer, making transparency a “fix-the-institution” intervention rather than an attempt to correct individual behaviour.
This distinction is central. Confidence will remain valuable, but it should not function as a hidden pay premium. A transparent range narrows uncertainty and creates a common factual base. It does not guarantee equal outcomes, yet it reduces the space in which one candidate’s lack of private information can be mistaken for lower economic value.
A Range Is Only as Honest as Its Architecture
The usefulness of disclosure depends on range design. A vacancy advertised at €40,000 to €120,000 is technically transparent but economically uninformative. It tells the candidate almost nothing about the organisation’s likely offer and may signal that compliance has been treated as a box-ticking exercise.
Experimental research on labour-market reactions to salary-range disclosures suggests that the width and credibility of a range can affect willingness to apply and negotiate. Broad ranges may preserve managerial discretion, but they also recreate the uncertainty the reform is designed to reduce. Employers will therefore need to explain what separates the bottom from the top: experience, qualifications, scope, location, performance expectations or scarce skills.
A credible range is not merely a minimum and maximum. It is a compact statement of remuneration philosophy. Candidates should be able to understand what the organisation values and how progression occurs. Existing employees will ask the same questions when advertised ranges reveal what new recruits may earn.
What Early Job-Posting Evidence Shows
Recent evidence from US job-posting mandates illustrates why the consequences may reach beyond individual negotiations. Arnold, Quach and Taska’s large-scale study found that transparency laws substantially increased the share of vacancies disclosing pay. In the Colorado setting, posted salaries and realised wages rose, while the authors found no significant negative effect on labour demand. Their interpretation emphasises market competition: when workers can compare offers across firms, employers may need to improve pay to remain attractive.
This is not a universal forecast for Europe. Institutions, collective bargaining, labour shortages and national implementation differ. The evidence does, however, show that posting a range can alter the wider market. Incumbent employees gain external benchmarks, candidates redirect applications towards better-paying firms, and employers observe competitors’ compensation strategies.
How Employees Should Negotiate Differently
Greater transparency improves the candidate’s starting position, but it does not do the negotiation for them. A stronger approach has four elements. First, understand the range: is it base salary, total cash compensation or a package including variable pay? Second, identify the criteria for placement. Third, present evidence—revenue generated, costs saved, projects delivered, teams led, risks managed or specialist capabilities. Fourth, negotiate progression as well as entry pay: review timing, performance thresholds, promotion pathways and benefits can matter as much as the opening figure.
Candidates should also resist volunteering salary history merely because the employer cannot ask. Research by Cowgill and colleagues found that many workers disclose voluntarily and that men are more likely to do so unprompted. Silence can itself become a signal when some applicants disclose and others do not. Clear organisational policies should therefore state that past pay is neither requested nor used, reducing the pressure to reveal it indirectly.
The Employer Is Negotiating Too
Transparency changes employer behaviour as much as candidate behaviour. In an opaque negotiation, the organisation can tailor an offer to what it believes the individual will accept. Under a visible range, every offer also communicates how the employer values the person relative to the role and to existing employees. A low placement therefore needs an explanation, while an exceptional premium may create an internal comparison as soon as the vacancy is advertised.
This should improve discipline. Hiring managers will need to distinguish between evidence and preference: is the candidate placed higher because they bring scarce capability, or because they negotiated forcefully? Is a lower offer based on a genuine development gap, or on the belief that the person will accept less? Transparent criteria make these questions visible and encourage organisations to price jobs before they price individuals.
The negotiation may also broaden beyond base salary. Where a candidate is already near the top of a band, employers may compete through variable pay, flexibility, learning opportunities, leave, pension contributions or a clearly defined promotion review. Transparency does not make compensation uniform; it makes the trade-offs more explicit.
How Employers Should Prepare
Employers need more than compliant job advertisements. They require defensible salary architecture, documented placement criteria and managers trained to explain ranges consistently. Otherwise, transparency may reveal that two departments value similar roles differently or that recruitment offers have drifted away from incumbent pay.
The best organisations will use the reform to improve job evaluation and career clarity. A candidate who understands why a role pays what it does is more likely to trust the offer. An employee who understands what is required to move through the band can make more informed development decisions. Transparency becomes valuable when it connects pay to work, contribution and progression—not when it merely publishes a number.
Part III turns to the harder side of openness: wage compression, internal equity, litigation risk and the possibility that transparency changes bargaining power in unexpected directions. It concludes the series with practical recommendations for employers, HR leaders, employees, boards and policymakers.
References
Arnold, D., Quach, S. and Taska, B. (2025). The Impact of Pay Transparency in Job Postings on the Labor Market. NBER Working Paper No. 34480.
Chen, C.X., Gallagher, E.A. and Williamson, M.G. (2025). Labor Market Participants’ Reactions to Salary Range Disclosures. SSRN Working Paper.
Cowgill, B., Murciano-Goroff, R. and Tucker, C. (2024). The Gender Disclosure Gap: Salary History Bans Unravel When Applicants Volunteer Their Income. IZA Discussion Paper No. 17065.
European Union (2023). Directive (EU) 2023/970 on pay transparency and enforcement mechanisms. Official Journal of the European Union, L 132, pp. 21–44.
Hansen, B. and McNichols, D. (2020). Information and the Persistence of the Gender Wage Gap: Early Evidence from California’s Salary History Ban. NBER Working Paper No. 27054.
Recalde, M.P. and Vesterlund, L. (2020). Gender Differences in Negotiation and Policy for Improvement. NBER Working Paper No. 28183.
