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Why pay transparency is important



Pay transparency is how open an organization is about sharing their current and prospective employees’ compensation. An organization that adheres to Pay Transparency principles would openly make available employee salaries to everyone in the organization. Which could range from posting salary ranges in the job descriptions to full-blown disclosure of all salary data – including salaries or hourly wages, bonuses, commissions, raises, benefits, retirement plans, and other forms of compensation. 

Majority of jobseekers today agree that transparency is important in the workplace. 


Breaking Pay Secrecy

Pay secrecy is a workplace policy that bans employees from talking about their salaries. This practice is mostly illegal. 

Women, on average, make 18% less than their male counterparts. This system of pay secrecy is one of the main culprits in the gender pay gap. Pay Transparency laws intend to make it safe for people to discuss pay openly.

Pay secrecy is often used to fuel competition among employees and to hold down wages in many traditional organizations. The secrecy surrounding employee compensation has led to frustration and dissatisfaction amongst employees, who may feel undervalued and underpaid. 

With pay transparency, companies can bring the benefits of transparent salary systems to all employees and be more open about how the organization operates.

Benefits of Pay Transparency

An overwhelming majority of jobseekers  agree that transparency is important in the workplace. Here are a few arguments to build the case for the importance of pay transparency in building a solid workforce:

Creates a more equitable workplace

This practice can help to create a transparent work environment where everyone is compensated fairly, which in turn creates a trust-based culture promoting effective cooperation and productivity.

Increases Trust

​​Companies that are secretive and close down avenues of communication will find it difficult to build trust with their employees. It is only natural for the employees to become dissatisfied and resentful if they discover their pay is not equitable for the work they are performing or they’re paid less in comparison with their peers.

Attracts Top Talent

Employers who are open and transparent about salaries will have a competitive edge in persuading top talent to interview with them. Pay transparency is a valuable tool for recruiting top diverse talent, building an excellent employer brand and company culture, and boosting productivity and retention.

Talent acquisition teams can share pay ranges early on and quickly eliminate candidates who won’t be a fit, instead of wasting precious time and resources in the often long recruitment process. It will allow them to focus their valuable time on candidates who will potentially accept an offer. 

Increases Performance and Retention

You might be able to hire talent for less than what they are worth. But they will probably not stick around for a long time. It will end up costing you considerably more to continually find, recruit and replace employees than to simply pay professionals what they are worth in the first place. People are happier in companies that are transparent about pay.

Great for Brand Building

Several companies have successfully implemented pay transparency into their brand. As a result, they have earned a reputation for their trusting culture and transparency. On the other hand there are companies that only pay lip service to pay equality, get trolled on Twitter and other social media. They are publicly shamed by bots such as #talkpay and @paygapapp. 

Implementing Pay Transparency

Since it’s an evolving idea it is imperative for companies to stay on top of the latest. Pay transparency laws are taking effect over more states each year, and companies can face significant financial penalties if they don’t comply with legal requirements. To implement pay transparency in your organization:

  • First, determine where your company currently stands on the pay transparency scale, and where it wants to be. 
  • Look at how well defined your jobs are and if a compensation philosophy exists.
  • Collect employee compensation data to determining the pay structures and ranges across your organization
  • Share relevant pay information with prospective and current employees.
  • Conduct Payroll Audits to determine whether they are being consistent and competitive regardless of race or gender.
  • Be open and honest with employees and start a conversation in order to ensure your employees understand the hows and whys behind their compensation.

Pay Transparency in 2023

The salary transparency movement may still be in its early stages, but it is gaining significant momentum. Pay transparency laws are already in effect in Colorado, New York City, California, Washington, and Rhode Island. The year 2023 will see many more cities and states follow the suit. 

All organizations, even if they are not subject to imminent legislation, need to start thinking about their pay policies.

We have put together an in depth guide that will answer all your questions about adapting to pay transparency laws in 2023.