Pay Transparency Is on the Rise
- Pay transparency involves companies being open about salary and pay rates.
- As pay transparency laws take effect across the country, both companies and employees benefit.
- Salary is often an important factor for job seekers.
- Salary transparency can improve employee experiences and bolster pay equity.
Pay transparency is the practice of employers being open about a position’s salary. Companies might list a position’s salary, or range, directly on the job ad, letting prospective candidates know the expected compensation. They may also host the salaries of current employees on their public website.
Pay equality advocates suggest that widespread pay transparency can help close wage gaps arising from gender and race. A 2018 American Association of University Women report states that white women earn 79% of what white men make. Women of color fall nearly 10-20% less, with black women earning 63%, Native American women earning 57%, and Hispanic women earning 54%.
Why Pay Transparency Matters
Advertising one’s salary, even privately, used to be taboo. But a study by Mercer published in 2022 found that pay transparency can affect everything from how attractive potential hires find a job posting to employee satisfaction within the company itself.
In their study, Mercer found that clear communication about compensation improves employees’ experience within the company. About 23% of survey respondents reported that their organization’s level of pay transparency had a measurably positive effect on employee retention, engagement, satisfaction, motivation and attraction to employees and potential hires.
Similarly, a study conducted by PayScale in 2015 indicated that when the salary pay scale is clear, job satisfaction doubles among employees, rising from 40% to 82%. Both prospective candidates and current employees want to see a direct link between the work they do and their compensation.
What Are the Benefits of Pay Transparency?
Mercer’s study indicates that pay transparency benefits companies in three main areas: compliance with new laws, employee experience, and closing the wage gap.
Pay transparency laws are being implemented in many states, making it a legal requirement for companies to be open about compensation with prospective and current employees. Colorado’s Equal Pay for Equal Work Act requiring employers to include compensation in online job listings took effect in January 2021. Later this year, New York City will institute its own law compelling companies with more than four employees to make salary ranges public.
Employers who actively discuss compensation with their employees improve workers’ experience with and perception of the company. Pay transparency can reassure employees that they are being compensated fairly. It reduces employee fears that they are being discriminated against or working more than they are being compensated for.
Finally, pay transparency can help close the wage gap between men and women. A 2019 study by PayScale affirmed that pay equity was achieved in many occupations due to pay transparency. Women who reported that their pay was transparent earned as much or more than men for every dollar.
The current workforce expects employers to be inclusive and fair. Pay transparency benefits companies looking to attract and retain a diverse cohort of employees.
States With Pay Transparency Laws
By January 1, 2023, 10 states will require employers to provide salary information. At the time of publication, there are 21 states who prohibit employers from asking pay history questions.
Challenges of Pay Transparency
Pay transparency may eliminate key barriers to access and entry into the workforce. But there are still challenges for companies and employers looking to enact pay transparency policies.
A 2020 survey by WorldatWork found that even though 67% of companies understood pay transparency as an important factor, only 14% undertook “significant” discussions with employees about pay. Sometimes, managers and hiring committees are not adequately trained to discuss compensation with employees or prospective hires. Companies take on greater risk if they do not have a defined strategy for communicating salary rates.
And while pay transparency is effective as an anti-discrimination tool, when salaries are made public, it can introduce internal strife among employees who feel underpaid. Employees may become dissatisfied with the company, become less productive, or even leave.
Sometimes, pay transparency can even deter potential new hires who feel the compensation is inadequate for their level of expertise or job demands.
How Salary Transparency Could Impact the Job Hunt
How does salary pay work? The answer to this question can be unknown for many job seekers. While on the hunt, they might be dazzled by promised benefit packages or excited by the prospect of landing a job that fits their skills. However, the thrill of a job hunt can be quickly lost when a candidate reaches the final stages of the interview process, only to discover that the compensation is well below their hopes or expectations.
When companies disclose salary rates or pay scales upfront on job postings, it takes a lot of the guesswork out of the process for prospective hires. Job hunters can expedite their search when they have the information they value, like pay rates.
Job seekers report abandoning an interview process or never applying for a role based on salary information alone. But still, greater transparency can ensure that an employer is attracting and retaining the candidates who are the best fits for any given position.
Why Pay Transparency Is Not a Solution to Wage Disparity
Salary transparency has numerous benefits for companies, employees, and prospective hires. It can be used as a tool to prevent discrimination and assist in closing the wage gap. It can also reassure employees that the compensation for their work is fair. It can attract the right kind of workers to apply for a job.
However, pay transparency laws may not be a solution to wage disparity. When it comes to the pay gap between men and women, particularly between white men and women of color, transparency about salary only addresses one aspect of a larger problem. And experts report that they are unsure whether pay transparency solves “the right problem.”
Wage disparity might arise from other factors, like recruitment policies and company culture, which many historically marginalized groups may find alienating. Salary transparency is only one tool to combat these larger, systemic issues.
Frequently Asked Questions About Pay Transparency
Can an employer tell me not to talk about my pay?
It is unlawful for an employer to ask employees not to talk about their pay. According to the National Labor Relations Board, the National Labor Relations Act gives employees the right to discuss their wages with other employees both face-to-face and in writing. These conversations are protected and allow employees to discuss compensation with others at their company.
Employees can talk to their employers about raises, compare compensation with other employees, and get help bargaining for higher pay from outside entities like lawyers and other established unions.
Can you be fired for discussing salary?
No. Under the National Labor Relations Act, employees are protected by law when discussing salary. You cannot be fired for discussing salary in oral or written communications.
Should you talk about your salary?
As pay transparency becomes a more accepted practice, the taboo of not talking about your salary is fading away. Employers cannot legally punish or discriminate against you for talking about your salary. But still, the social stigma around sharing salary and pay rates silences some.
Employees may worry about comparison, jealousy, or even being treated differently by their colleagues. And yet, much like pay transparency itself, sharing your salary can benefit everyone involved. From striving for pay equity, defeating the wage gap, and improving morale, talking about your salary can keep companies honest and employees satisfied.