Where Do We Stand on Pay Transparency in 2024?
Do your employees trust you? Perhaps even more importantly, do job hunters trust you? Common sense suggests a company with a reputation for honesty, transparency, and ethical behavior is likelier to attract and keep high quality talent than one known for being secretive, paranoid, and amoral.
Research bears this truth out.
A 2023 survey by online career platform iHire shows most new job seekers are looking for companies known for honesty, transparency, and flexibility. Similarly, a recent survey by the talent management company Software Advice found the most important qualities that potential applicants seek in a new employer are “honesty and transparency.” Sure, everyone is looking for a good salary. But money only means so much when you don’t trust the very company you work for!
One of the easiest ways to build trust with your workforce is through pay transparency. But what is “pay transparency”? You’ll find a variety of definitions online, but the electronic payroll service Paychex describes it quite well: “Pay transparency is the practice of openly and proactively sharing information on organizational compensation practices, including pay rates for specific positions, pay increases, bonuses or commission structures, benefits, retirement plans, or any other specifics about pay. This information may be shared voluntarily on a company's website, in job listings, or upon request, although pay transparency may be required under certain circumstances in specific jurisdictions.”
At present, practicing pay transparency is the law in ten states. In January 1, 2024, Hawaii became the latest to join this select group, which also includes California, Colorado, Connecticut, Illinois, Maryland, Nevada, New Jersey, New York, and Washington state. In these states, employers must post salary ranges when posting job openings. (These are base salaries, not including bonuses and other compensation.)
In addition, it is now unlawful in all states for companies to prohibit or otherwise punish employees for discussing their salaries, according to the National Labor Relations Board (NLRB). This is in sharp contrast to how pay was handled in the past, when discussing salaries and pay rates with coworkers was often a fire-able offense.
Even if your company is not located or headquartered in a state with pay transparency laws, sharing salary range information as part of job postings, providing pay range data when employees ask, and educating employees on how their pay is determined are practices worth embracing. If your company has many branches or employs remote workers, determining who can and cannot legally discuss compensation based upon local laws and regulations becomes a major headache.
To save yourself from any number of costly legal entanglements, it’s better to err on the side of transparency. Keeping such secrets in the age of the Internet and social media is all but impossible anyway. With people freely sharing photos of even their private anatomy and evangelizing even the most extreme political views, the idea discussions of income are “bad manners” is laughably naive.
Perhaps most importantly, when employees can better understand why they are paid at the level they are—even if their salary is lower than an immediate co-worker’s—they are more willing to accept their status and not demand more. And finally, as discussed above, a company that practices pay transparency is more likely to be viewed by job hunters as an in-demand place they want to work—compared to one that does not.
Pay transparency has an added benefit of forcing managers to think more comprehensively about compensation decisions. Knowing that employees will compare what they make and requiring managers to determine renumeration for similar jobs based upon objective criteria such as job performance and tenure, instead of subjective gut instinct, goes a long way toward leveling the playing field with respect to pay.
Zooming out, as discussed at length in a January 2024 article published by SHRM, pay transparency has the added benefit of helping to close the gender gap suffered by so many working women. It points to a study published in 2022 in which researchers examined the effect of university pay transparency rules on 100,000 U.S. academics and found “evidence that pay transparency causes significant increases in both the equity and equality of pay [between the sexes].”
Certainly, implementing pay transparency practices is not inherently difficult, but it does require effort. Steps you can take include:
Ensure you are treating employees and external job candidates the same with respect to sharing salary range information. A 2020 Mercer-World at Work study indicated most employers provide more information about pay ranges to external candidates than to internal (current employee) candidates.
Train your managers so they are comfortable explaining your organization's pay practices to employees. This includes describing how pay decisions are made and why individual incumbents, when they ask, make what they do.
Use pay transparency to build trust amongst staff. Implementing pay transparency should be a “win” for both employers and employees alike. Leadership messaging that makes it clear to employees that you have nothing to hide with respect to pay practices, and backing up that messaging with action, can help garner greater trust in leadership at your company.
For more help on implementing the best pay transparency practices at your organization, and to make pay transparency a “win” for your culture, please contact me at laura@conoverconsulting.com. As a corporate culture and compensation specialist, I can support your organization in getting the best talent by embracing the best business practices.