Is Salary Transparency All It’s Cracked Up To Be?
One of the last taboos of the American workplace—discussing salaries—is headed for extinction. This year, pay transparency laws went into effect in California, Connecticut, Maryland, Nevada, Illinois, Rhode Island and Washington state, requiring companies with 15 or more employees to post pay ranges in all job postings, and to provide that information to any employee who seeks it out.
This comes on the heels of a similar law adopted in New York City last fall and New York state last December, which mandates salary-range disclosure for employers with more than four workers. (Colorado led the trend, adopting a pay transparency requirement in 2019).
Even in areas with no formal pay transparency laws, the trend of disclosing pay ranges to applicants and employees is growing. The number of U.S. job postings that include salary information more than doubled between February 2020 and February 2023, from 18.4 percent to 43.7 percent, according to a new report from Indeed.
Many champion the change saying it’s never been a better time to start talking about money. And here’s why:
It Combats The Gender Pay Gap
Remedying pay gaps in individual organizations starts with understanding how dramatic they are. The median pay for full-time workers in the U.S. who are women came to roughly 83 percent of men’s pay in 2021, according to federal data.
Women of color fare even worse. Black women make 64 cents for every dollar paid to White, non-Hispanic men, according to the National Partnership for Women and Families.
Other pay gaps, for example for workers with a disability and LGBTQ+ workers persist too. While transparent salaries alone won’t be the thing that solves it, it will nonetheless be an important step in the right direction, by ensuring that people are paid for what they do, not who they are.
Publicly available salaries will make it easier to question the decisions behind them and any unfair inequalities will be quicker to identify. And it gives people an opportunity to advocate for themselves.
Leading the way for future workplaces are organizations like Next Century Cities on The Hill Job Board which is currently seeking nominations and applications for an Executive Director.
The successful hire will serve as both chief executive officer and organizational spokesperson for the non profit. As well as listing a salary range, there are full details available on the generous comprehensive benefits package.
It Helps Improve Company Culture
A company that’s happy to publish its salaries is more likely to compensate its people fairly, manage performance consistently and communicate on other matters clearly.
Pay transparency can create healthy competition, dispel hierarchies, and orient the entire team towards a shared goal. Knowing how salaries are structured and who makes what for which responsibilities, enables employees to better manage their own career paths within a company (and outside of it, too).
If you see that you’re doing more than your colleagues, while getting paid the same, you can make demands to improve your position in the company.
Conversely, if you’re underperforming, you can easily benchmark work goals by comparing with your peers. A study from the National Bureau of Economic Research suggests employees are actually more productive when they learn what their managers make.
A company that embraces pay transparency conveys so much more than just the salary itself. It’s the subtext in treating everyone like an adult and establishing a culture of openness.
Check out progressive organizations like Bread for the World which lists all open positions with pay ranges. Right now, it is looking to hire a Senior International Policy Analyst who’ll ideally have a Bachelor’s degree in public policy or related area, or equivalent work experience, and at least six years’ of experience on Capitol Hill, a federal agency or similar work experience.
It Offers A Better Candidate Experience
Applying for a job without knowing what your earning potential for the role can be frustrating and, occasionally, a waste of time.
In fact, 72 percent of job seekers say they want some kind of pay transparency when it comes to job ads. An additional 32 percent want absolute full transparency in job ads and information on what employees with a company are making.
Companies that meet the demands of job seekers are sure to reap the benefits with improved candidate experience and more engaged talent pools. Consider leading firms like the American Gas Association. A Washington-based position for a Coordinator, Governmental Affairs & Public Policy comes with supportive work-life benefits including the flexibility to work a hybrid schedule with three days in the office and two days remotely.
The Cons
Ironically, the biggest strength of pay transparency may also be its Achilles’ heel. When salaries are made public, it can sometimes create an environment of judgment and comparison where individuals may be labeled or stereotyped based on their pay instead of the value they bring to the table.
This can lead to resentment, jealousy, and discrimination ultimately affecting employees’ productivity.
Unless a company has a carefully developed plan for both pay structure and communicating its approach to compensation to employees, workers might not understand the reason behind salary discrepancies (think education, geography, experience, credentials and other factors).
Also, when overall salaries get compressed, higher-qualified candidates may feel less valued. With pay being a key driver for retention, this type of situation could lead to quality talent actually leaving the company. If an employee’s individual performance isn’t sufficiently rewarded, it’s tempting to go elsewhere.
For all the potential upside of pay transparency regulation, experts also warn that it should not be considered a panacea for making the labor market fairer overall. To address structural inequities, companies should be conducting honest pay audits and offering better policies relating to things like parental and carers’ leave. Equal pay for equal work is a noble goal that does not end at pay transparency––but it can certainly begin there.
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