Companies that practice pay transparency are open about how much employees earn, which can help retain talent and cultivate a better workplace environment.

Imagine this: You’ve just applied to your dream job, and you excelled at every step of the interview process. You’ve invested many hours on intro calls, meeting with the team, maybe even completing a take-home assignment, and finally, the big news: You got the job! That’s the good news. The bad news is: The compensation package is less than you expected. Way less. Suddenly, this imagination game isn’t so fun anymore. Sorry about that. However, this imaginary scenario is often all too real. And it’s a reality that could be avoided with one simple concept: pay transparency.

What is pay transparency?

Pay transparency is the practice of making employee pay data accessible and available. This can include everything from listing salary ranges on job postings to making salary information including employee benefits, raises, bonuses, and other forms of compensation, available to all employees upon requests.

Pay transparency might also include cultivating a company culture where open discussions about pay information are normalized, rather than happening in the shadows.

How pay transparency benefits everyone

Salary transparency is, first and foremost, a step toward closing the gender pay gap (Women in the United States, for example, earn 83 cents for every $1.00 earned by a man). Salary transparency isn’t a one-size-fits-all solution to workplace inequality, but it can be a powerful move in the right direction.

How pay transparency benefits applicants and employees

  • They know where they’re starting. When pay ranges are listed on job postings, applicants can make more confident decisions about moving forward with their candidacy. No one wants to waste anyone’s time, and pay ranges allow applicants to take things like the cost of living and any potential life changes that may come with a new position into account before even submitting an application.
  • Compensation conversations are less stressful. Talking about money is hard. Pay transparency can make those conversations much, much easier, and by extension, create a more relaxed and productive workplace environment. By ensuring that conversations about compensation are welcomed and encouraged, employees can rest easy knowing they are working somewhere where their work is valued.

How pay transparency benefits employers

  • It helps attract and retain talent. According to a 2022 study, 79% of job candidates and employees would prefer some form of pay transparency and 68% said that they would be willing to change jobs to join a company with salary transparency (as long as the salary was consistent with what they are already making). What’s more: 16% of employees are more likely to leave a company without pay transparency.
  • It puts them ahead of the curve. In some places, salary transparency is—or soon will be—required by law (New York City’s recent wage transparency law is a notable piece of legislation in this regard). Being an early-ish adopter of pay transparency might signal to applicants that company leaders are ahead of the curve.
  • Less wasted time. Just as an employee wouldn’t want to reach the end of a job search process only to find that the salary range is well below what they were expecting, employers can avoid sinking dozens of company hours into a candidate only to realize compensation expectations are mismatched. Listing salary ranges on job postings can help ensure candidates are matched to the positions they’re applying for.
  • It cultivates a better workplace environment. A survey of 71,000 employees revealed that when an employer dedicated time to speak with them about their pay their job satisfaction rose from 40% to 82%. That’s more than double! While conversations about pay can sometimes be sticky, the benefits are undeniable.

How pay transparency benefits society as a whole

  • It can help to ensure equal pay. The pay gap is real: As of 2020, women were still earning just 84% of what men were for their same positions. This disparity becomes even larger for women of color: Black and Hispanic women make just $0.57 and $0.64, respectively, per every $1 earned by a white man. The good news is, in some places, that gap is closing—and pay transparency can help close that gap even quicker.
  • It can reduce burnout and stress. Given that two of the six leading causes of burnout have to do with equal compensation in the workplace, making pay data available to employees can help create healthier and more sustainable work environments.

Pay transparency and the law

Under federal law, it is unlawful for covered employers to prohibit employees from discussing their compensation with others at work. However, some states are taking it a step further and requiring even deeper levels of salary transparency.

New York City is probably one of the most high-profile cases of city-legislated pay transparency. As of November 2022 (a 6-month delay from the original timeline), all New York City employers that have four or more employees, or at least one domestic worker, are required to list expected salary bands for all job postings, including for full-time employees, part-time employees, interns, and independent contractors. Given New York City’s high cost of living, this is an important step toward ensuring job candidates have confidence that a job can provide a realistic livelihood before they take the time to apply. But they’re not alone.

California was the very first state to pass a statute that requires all employers to provide job applicants a pay range for the position they are applying for if the applicants ask for it. In August 2022, California’s state legislature passed a bill that would require employers with 15 or more employees to list the salary or hourly wage on all internal or external job postings. This bill mirrors laws that are already on the books in places like Colorado, but given California’s size and economic standing in the county, some feel like this is setting the stage for a major national push to adopt similar laws.

The California bill is currently awaiting signature by the Governor, who has until September 30, 2022 to sign or veto the bill.

The bright future of pay transparency

Whichever way you look at it, all signs are pointing toward more pay transparency, not less. And that’s a really good thing. While it might seem daunting to integrate pay transparency policies initially, the benefits are clear: Higher retention, more competitive recruiting, and more equitable pay for everyone.

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