What Is Pay Transparency?

Pay transparency is dominating the career and job search headlines. Do you know what it even is? Given its expansive and nuanced nature, many of us fail to grasp what pay transparency means and looks like for the workplace. Modern laws and younger workers are paving the way for transparent conversations about pay and salary.?

By Mariah Flores

Pay is by far one of the most fiercely debated topics in the career and job search space.?

If you think about it, getting paid is probably the main reason many of us are working. Of course, being in a role that you’re passionate about or at least can tolerate is important — but being paid your worth matters, too.?

Oftentimes, we find ourselves daydreaming about that perfect job that pays well, both mentally and monetarily.

The sad reality is it can be hard to find both, especially while job seeking or even in your current role. We sometimes have to make sacrifices, weighing the pros and cons of what matters in our future positions.?

But what happens when our pay just isn’t cutting it? The answer for many of us is to leave, especially during — and now after — the pandemic. I am sure you have heard of the “Great Resignation ” (otherwise known as the “Great Reshuffle ”) by now.?

In fact, a recent Pew Research Center survey found that low pay (63%), lack of advancement opportunities (63%) and feelings of disrespect at work (57%) are the top reasons Americans quit their job last year.

And those who quit and found new jobs? Well, those “now employed elsewhere are more likely than not to say their current job has better pay, more opportunities for advancement and more work-life balance and flexibility.”

Finding a new job with better pay is certainly easier said than done.?

Many companies are not upfront about their salary or hourly pay, consistently leaving this significant information off job postings. Additionally, current staff doesn’t always feel comfortable discussing pay with their coworkers.?

With major issues, such as the gender wage gap and bias , you’d think employers would be doing more to stand out to prospective candidates, while also providing comprehensive explanations for their pay practices to current employees.

Enter pay transparency, the new “must-have” for any forward-thinking company.

Pay transparency is not just a new trend . It can be the answer to attracting, hiring and retaining top talent. Such transparency can also help combat pay inequity. Modern job seekers know their worth and an employer’s lack of transparency can cost them a fantastic employee.

Defining Pay Transparency

Plainly speaking, it’s sharing your salary with your colleagues or advertising it to prospects as an employer. If you need a more formal definition, look to Built In , which defines the term “pay transparency” as “[A] strategy for talking about employee salaries within the company.”

Pay transparency looks different for every company. The most common practice nowadays is clearly stating a position’s salary on the job posting. But it’s also very important to have transparency once you get within the company or organization.?

Pay Transparency in Practice

Pay gap strategist Michelle Gyimah explains in “Inclusive Tech: Closing the Pay Gap ” that pay transparency is actually a spectrum. She goes on to break it down into five points:?

1. What – Tell your employees how much they'll get paid every month
2. How – Share market data; helps employees see where they fall compared to others
3. Where – Compensation plan with a breakdown of salary, salary benefits and the cost of a whole benefits system, along with a specific pay range for each employee
4. Why – Clear processes on how pay is decided; train managers on how to hold these conversations, which should occur on a fairly regular basis
5. Whoa – A totally transparent pay system, where everyone has access to everyone else’s salary

With this spectrum, you, as an employer, organization or HR professional can assess where your organization lands on the spectrum. And with a rise in pay transparency laws around the U.S., it may only be a matter of time before your company is required to adopt similar practices.?

Stephanie Penner , a senior partner at consulting firm Mercer, spoke with TIME back in 2017 about pay transparency. She stated that companies could benefit by getting ahead of the narrative as public pressure continued to mount.

Now you may be thinking, “That spectrum above seems quite extreme” and that’s certainly valid. As mentioned before, every company needs to approach pay transparency in a way that works best for their employees and industry. What works in the tech sector may not translate well to construction.

“I think typically we think of most workplaces as something in between [full secrecy and extreme full transparency],” said Zo? Cullen , assistant professor at Harvard Business School , when asked how transparent “pay transparency” is.?

She goes on to explain that some employers have policies on the books, stating that employees should not disclose their salaries, known as gag laws/orders or pay secrecy. These policies may also be passed around by word of mouth from higher-ups.

“Under the National Labor Relations Act , enacted in 1935, private-sector employees have the right to engage in ‘concerted activities for collective bargaining or other mutual aid or protection,’” NPR reports .

But, as I’m sure most of us can attest, pay isn’t discussed at work amongst colleagues because it’s considered taboo. A work faux pas of sorts — and who wants that??

However, as employees, it’s our responsibility to know our rights and the nuanced laws surrounding pay transparency.

Pay Transparency Laws

There is a growing number of state and local governments drafting and adopting pay transparency laws. It’s a step in the right direction, protecting employees and making employers more transparent. And for Gen Z, transparent workplaces are no longer just millennial preference. No, it’s an expectation .??

Young workers are leading the charge, breaking down the workplace stigma and taboo surrounding salary. How else will you know you’re being underpaid? According to a recent Bankrate.com survey , 42% of Gen Z workers and 40% of millennial employees have shared their salary information with a coworker or other professional contact.?

Having said that, employers play the biggest role and that’s why pay transparency laws are so integral. Here are some noteworthy laws in various states and cities:?

California

First state to pass a mandatory pay transparency statute . State lawmakers have now drafted a bill that “doubles down on pay transparency ,” through proactive wage range disclosure and pay data reporting. If the bill is passed, employers would need to “announce, post, publish, or otherwise make known any opportunity for promotion … to all current employees on the same calendar day and prior to making a promotion decision."

Colorado

The Equal Pay for Equal Work Act requires all employers to include a pay range (and benefits) on job postings. A model for the aforementioned California bill draft, the law also ensures that current employees are notified of all promotion opportunities, along with having employers keep records of job descriptions and wages.?

They even cover remote work. Companies with a least one employee in the state must post pay for any remote job that could be performed in the state. They also require “opportunity transparency ” for all employees (whether in Colorado or remote).?

New York City

Just recently, in April 2022, New York City employers are now required, by law , to list the minimum and maximum salary on all postings, promotions or transfer opportunities. Some businesses claim this new law will make it harder to diversify candidates .?

Other states and cities with pay transparency laws include Cincinnati, OH , Connecticut , Maryland , Nevada , Rhode Island , Toledo, OH and Washington .?

There are even more pay transparency laws to come, with bills in consideration in Massachusetts, South Carolina and New York.

Pros and Cons of Pay Transparency

With most things in the modern working world, there are upsides and downsides to any area. Pay transparency isn’t any different. It’s an expansive and pivotal topic, with many things to take into consideration.

You can find several articles, opinion pieces and blog posts discussing why pay transparency is effective. On the other hand, there are several opponents with reasons it can hurt both employees and employers :

Pros

• Supports pay equity
• Employees are happier
• Biases are less likely to take root
• Helps candidates when negotiating salaries
• Leads to better workplace culture and experiences
• Inspires transparency in other aspects of the workplace
• Responsibility is shifted to employers, not employees, to make sure their pay is fair

Cons

• Many employees and job seekers are uncomfortable with negotiation (women and other underrepresented groups tend to undersell )
• New openings may have higher pay than what’s currently being offered to some employees in the same role
• If disclosed improperly, transparent pay systems can be taken out of context
• Companies may hire or retain fewer people
• May spark to jealousy in current workforce

All in all, pay transparency only works if there are clear, open communication and systems already in place. As an employer, you may need to reassess current practices regarding salary ranges and job postings. Yes, it’s extra work, but it can lead to far more good than bad — for everyone .

“Pay transparency is more about having the structures and frameworks in place that ultimately help to reduce bias, and reducing bias helps you to close pay gaps,” said Ruth Thomas , pay equity analyst at Payscale told CNBC .

Top Takeaways?

Pay transparency is a hot topic. Here’s why:?

• Leads to more open discussion and listing of salary ranges, both for current and prospective employees
• Understanding the potential cons can help you develop better strategies
• It can lead to happier employees, decreased pay gaps and better talent?
• Several states and cities have established pay transparency laws