- Organizations with a policy of pay transparency are open about salaries and other benefits
- Pay transparency is one way to ensure pay equality; it can also better engage employees and build trust
- Implementing pay transparency can take many forms, from posting salary ranges on job ads to publishing exact salaries of all employees
Openly discussing salaries with co-workers, friends, and networks was once considered inappropriate, even off-limits. But that’s changing today, driven especially by younger workers seeking assurance that they are being paid fairly. Surveys show that about 42% of Gen Z workers (ages 18-25) and 40% of millennials (25-41) have disclosed salary information with a professional contact—that compares to only 19% in the 58-71 age group.
While more employees are eager for salary information and are comfortable revealing their compensation, only 17% of employers are participating in the discussion by implementing pay transparency. This post takes an in-depth look at pay transparency and how it connects to pay equality. We’ll also examine other potential benefits, as well as considerations for implementing a pay transparency policy.
What is Pay Transparency?
Pay transparency is when organizations are open about the salaries they pay and the compensation packages they offer.
It can take the shape of:
- Publishing salary ranges in job ads
- Internally sharing pay rates or pay scales for each position
- Publicizing specific salary figures for all individuals
Pay transparency is not just a number. In their efforts to be transparent, businesses should also clearly communicate salary structure and calculations (for example: a base salary plus additional money for experience, sales, or accomplishments).
Pay Transparency Laws
In most of the US, whether and how to implement pay transparency is up to each business. As more and more pay transparency legislation is being adopted, however, it is important to check on the status in your area.
Several states and cities require employers to post salary range and benefits in every job posting, or to provide the information after the first job interview. As of January 2022, jurisdictions with pay transparency laws include:
- Rhode Island
- Cincinnati and Toledo, Ohio
- New York City (Fall 2022)
At least 14 states legally prohibit employers from asking about a candidate’s wage history. And at least 20 states protect employees’ right to discuss salary.
Those doing business with the US federal government should be aware of the Office of Federal Contract Compliance Programs executive order 11246. Under this Order, individuals have the right to ask about, disclose, and discuss their own compensation or that of other employees, without fear of discipline or repercussion.
The takeaway? Pay transparency is becoming not only accepted but expected—and soon may be a requirement across the country.
Three Reasons to Implement Pay Transparency
Increasingly, transparency about salaries and how they work is being recognized as a smart business move.
1. Ensure pay equity
At a time when women are paid an average oF $0.82 to every $1 earned by their male counterparts, and female members of visible minorities are paid even less (Black women, on average, earn $0.64 to every $1 earned by a white male), pay transparency is a step towards reducing the gender and racial wage gaps.
Public pressure for pay equity will only continue to rise. A business with a policy of pay transparency and a display of pay equity will be perceived as a leader and a socially conscious place to work—and attract more and diverse applicants.
2. Match perception to reality
Employees are more likely—50% more likely, says one survey—to leave their job if they believe they are being underpaid. But are they? In fact, 42% of people who are paid above market average think they are underpaid.
Making salary information available allows current employees and potential employees to compare positions to see where they fit into market pricing. And face it: sites like Glassdoor and PayScale are making it easier for employees to research what others in similar roles are getting paid.
3. Boost employee satisfaction
Employees who know they are being paid market rate (or better) are usually happier at work and thus more productive; if they feel underpaid, that’s likely not going to be the case.
Transparency at all levels of business builds trust between employer and employee. Helping employees feel empowered by sharing information openly fosters better communication, engagement, and loyalty.
Overcoming Pay Transparency Challenges
Pay transparency is a relatively new concept, and is met with some hesitation from organizations used to keeping compensation under wraps. Here are two potential challenges, and ways you can proactively avoid them.
Potential lower retention
For companies that demonstrably pay lower wages, it may be difficult to hire highly skilled talent. If competitors know what current employees are being paid, it may be easier to poach them.
The solution? Understand where you fit in the market. Use this information to control the narrative. If your budget does not allow you to pay top wages, can you offer other benefits, such as remote work, flexible schedule, more time off? Pay transparency can encourage an open and welcoming culture, which goes a long way to attracting and keeping employees.
Pay differences without context
Of course, compensation is based on many factors—experience, skills, performance, location—other than job title. These factors may not be immediately obvious and may result in questions of pay equity. Some employers fear complete transparency will result in friction between employees.
Overcome this by clearly communicating pay practices and pay scale structures. In return, you’ll gain the trust of your employees—and you may motivate them to take the steps required to move up the pay scale.
Implementing Pay Transparency
Review compensation regularly
Examine each employee’s salary, as well as the broader company picture, regularly. Ask questions like:
- Do you see any wage gaps?
- Are individuals in similar roles paid the same?
- Has anyone not received a raise in a long time?
- How do your salaries measure up with market rates?
- Are roles defined by skills required and a clear pay structure?
- What benefits do you offer?
- Are they competitive?
Develop a plan
Of course you’re not going to jump from pay secrecy to full transparency overnight. Consider the steps you can take toward being more transparent, and how you will work through them. For example:
- Find out what you are legally required to disclose and when, and ensure you meet these requirements.
- Share the pay range for specific roles: make employees or applicants aware of the pay range (and compensation) for their position.
- Share all pay ranges: share pay ranges of all roles, company-wide, with all employees
- Full transparency: share specific salaries of all employees
Certain companies, such as social media business Buffer, have taken the additional step of publishing all salaries publicly (names included) on their website. The company reports receiving more applications after implementing this policy—not because it offers the highest pay, but because candidates appreciate the culture of openness.
Offer Total Compensation Statements
A total compensation statement clearly shows employees the total value of their benefits and compensation package (salary, incentives, bonuses, health insurance, retirement benefits, paid time off, etc.).
A detailed, complete compensation statement is beneficial to employees and illustrates your efforts toward transparency. With an all-in-one HRIS system, employees can access their total compensation statement at any time.
Communicate compensation strategy and structure
Transparency is more than publishing a number. Being transparent about pay positioning and pay ranges will enable productive conversations with employees: what’s ahead of them on their career path? When can they expect raises? What skills will help them move along the pay range or qualify them for other positions?
Publish pay information internally when possible. Be sure to have frank discussions about salary during annual or performance reviews.
Deliver Clear and Transparent Salary Information with an HRIS
An all-in-one HRIS like SentricHR simplifies payroll and tax filing, and will give your employees anytime access to their complete salary and compensation picture with specific software for payroll.
To learn more about SentricHR, schedule a demo with one of our product experts today!