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    What is Pay Transparency? [Overview + Best Practices]

    6 mins

    Pay transparency is by no means a new concept, but the way we think about it has shifted. Once a major business taboo, greater transparency is now considered a crucial step in achieving pay equity. By making compensation information accessible, pay gaps and inconsistencies in salary ranges are much easier to spot and resolve, creating a more inclusive, equitable workplace.

    In this article, we’ll talk about the benefits of greater pay transparency and give you some tips on how best to integrate it into your organization. Let’s start by defining what pay transparency is.

    What is Pay Transparency?

    At its simplest, pay transparency is the practice of making compensation information available to employees within your organization. It operates on a sliding scale, with the legal bare minimum being sharing salary details with your employees and allowing them to discuss that information with each other. Greater transparency includes practices like detailing how compensation rates are decided, providing a rationale for payroll decisions like raises, and making all company salaries publicly available online.

    What to Know About Pay Transparency

    This isn’t just a trend. Pay transparency is a proven key to reducing pay gaps, and legislation requiring some degree of transparency is increasingly common at the state level. Familiarizing yourself with the basic requirements of pay transparency is necessary, but it’s worthwhile to lean in, too. Your organization will benefit not just from meeting the bar set by state laws but by embracing greater pay transparency beyond minimum requirements.

    The Benefits of Pay Transparency

    Laws requiring transparency set a bar for your organization to reach, but there are reasons to go beyond those minimum requirements. Transparency helps to close pay gaps and increase employee happiness, leading to some significant benefits to your organization’s bottom line.

    • Pay transparency promotes pay equity. Naturally, by making compensation details accessible, it’s easier to spot disparities, the first step to closing wage gaps and creating a more equitable work environment.

    • Your organization will more easily attract top talent, particularly if you are offering salaries at or above market rates. It’s easier than ever for job seekers to find salary averages. Making it easier for them to find you, too, can only benefit your organization when you need to fill a position.

    • Pay transparency builds trust and fosters openness and communication, key factors to ensuring employees feel valued. This, in turn, improves engagement, job satisfaction, and overall work culture.

    • With a strong compensation communication strategy, retention increases. According to this survey by payscale, workers who are denied raises are more likely to remain in a position if they receive a sufficient explanation for the denial.

    • Pursuing and achieving pay equity will promote diversity in your workplace, which in turn increases employee innovation and engagement.

    Colleagues discussing pay transparency in the workplace
    Ferrantraite via Getty Images

    Pay Transparency and Legal Compliance

    No matter where you live, some degree of pay transparency is a legal requirement. At a minimum, an employee’s right to discuss their salary with their coworkers is protected at the federal level by the National Labor Relations Act (NLRA), and they can be entitled to compensation if found to have been discriminated against for discussing compensation or disclosing their salary to a coworker.

    Beyond that, individual cities and states may have further legislation promoting pay transparency. As of 2023, 19 states and Washington DC have pay transparency protections in place. Most often, this manifests as visible reporting of pay ranges on job listings – New York City just implemented such requirements in late 2022.

    Make sure your organization is meeting the minimum requirements wherever it operates, including where remote employees work. Research local legislation and communicate with company leadership to ensure compliance at all levels.

    Integrating Pay Transparency in Your Organization

    Whether you’re preparing to meet the requirements of new legislation in your area or just looking to reap the benefits of pay transparency for your company, we’ve got some tips to help you implement higher pay transparency at your company.

    1. Start With a Look at Your Current Policies and Payroll

    Before you start making changes, you should review and audit current policies, job descriptions, and payroll. You’re trying to accomplish the following:

    • Figure out where your company stands on payroll transparency at the moment. This will give you an idea of how much work will need to be done to achieve the level of transparency you’d like for your organization.

    • Ensure job roles are clearly defined. When job roles have clear responsibilities and boundaries, it becomes a great deal easier to establish an organized pay structure for tasks.

    • Track down any compensation discrepancies and address them. This includes a lack of salary scales, compensation far below current market averages, unfair wage gaps, or employees outside of established salary ranges.

    2. Get Company Leadership On Board Early

    For many, sharing salary information still feels taboo – and in some organizations, it’s still outright discouraged. If you’re looking to successfully push greater transparency, make sure it is embraced from the top down.

    • Educate managers and C-suite employees on the benefits of greater pay transparency. Focus on concrete, positive results of well-implemented practices, like improved retention, improved performance, and the likelihood of better fit from new candidates.

    • Find a champion for the initiative in company leadership. Having even one person supporting the push can make a huge difference.

    • Come up with a strategy for communicating compensation information with employees. Pay discussions can be fraught – money is why most people work, after all – so it’s crucial that managers be trained in how to speak to employees about their compensation with composure and empathy.

    3. Find Out What Your Employees Want

    Familiarizing yourself with the sort of information your employees want gives you a quick roadmap to where you should expand your transparency. You can start with a look at demographic data from surveys conducted by companies like Glassdoor, but be sure to poll your own people, as well.

    Pulse surveys, interviews with current employees and promising candidates, and discussions with managers can paint you a picture of what top talent at your organization most wants from pay transparency.

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    Ben Koubek
    Ben Koubek
    Enjoys exploring the realm of benefits in depth.

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