The History and Benefits of Pay Transparency

The History and Benefits of Pay Transparency

It has become an ever-increasing focus for businesses to be more transparent about what they’re paying their employees. It wasn’t too long ago that the idea of listing a salary range for a posted job was completely taboo. Now, job seekers are looking to stop dancing around this crucial question and get right to brass tacks: “How much are you willing to pay me?” Up until recently, there were no laws requiring any type of transparency surrounding pay. Job seekers went blindly into interviews, not knowing if their salary range could be met; internal employees continued working at the same level as their peers, unaware the other was making a significant amount more. It seems these days of “if they ask, don’t tell” might be finally coming to a close. Here’s what you should know as a small business owner.

What is it?

What is pay transparency, exactly? According to The Balance, “Pay transparency is the practice of employers revealing salary data during the hiring process or within the organization. Different companies have various degrees of pay transparency, ranging from providing pay grades for job titles to offering a full list of the salaries of everyone at the company, from the CEO on down.” Transparency can be in the form of posting a salary range for open positions, or even publishing your entire company’s salary data on its website.

What does the law say?

To be sure, there are some jurisdictions where disclosing a salary range is already required. This is not the norm by any means, but a new crop of pay disclosure laws have been making their way into the light. For instance, New York City passed a law requiring employers to list the salary range for every open position, promotion, and job transfer opportunity. And as of 2022, there were 10 jurisdictions with some form of pay transparency laws in place—including California; Cincinnati, Ohio; Colorado; and Nevada. These laws can also encompass a ban on employers from asking candidates about their salary history.

What are the benefits?

The reason there is so much focus on pay transparency is partially due to the gender wage gap. Women tend to be less likely to negotiate their salaries than men; and even if they do try, these attempts can be met with significant resistance from the hiring company. Working to close the gender wage gap, in part by being up-front about salary ranges, ensures every employee can start off on more equal footing. Transparency can also help create an atmosphere of trust within a company: if employees know they are being paid in-line with the market value of their role, they’re less likely to seek other jobs. And finally, consider the time and resources managers put into vetting and interviewing candidates, only to learn their salary range doesn’t match what they’re able to offer. Being up front about the salary range can cull the candidate pool to just those who are truly interested—thus creating a more efficient hiring process.

Even if pay transparency isn’t legally required in your area, it’s still a growing trend—and it’s good business practice. Consider what your business may need to do in order to increase visibility around your pay structure. Getting a data-driven compensation strategy in place now will make it easier for your business to comply with any new laws, should they make it to your jurisdiction (and we predict that’s highly likely).

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