The Cost of Living Crisis is a global phenomenon and US consumers have gotten off comparatively lightly. Nevertheless, everyone is feeling the pinch. Salaries have not kept pace with the rising cost of living, and in real terms, this means that people are working harder for lower material returns.

 

Job applicants and employees have become highly sensitive to salary-related questions. Issues like equal work for equal pay, always a hot topic, have become even more important to employees. They also want to know how salaries are determined and what they can do to reach the top of their pay band or advance to higher-paid positions. 

Legislators are on the same page, particularly concerning closing pay gaps, and have responded with new laws requiring salary transparency. Several states have already legislated disclosure of remuneration in job ads or on applicants’ and employees’ requests. However, this is more than just a legal compliance issue. In states with no salary transparency laws, many companies are benefiting from implementing salary transparency. They find that it attracts more job applicants, helps them to find better quality recruits, and promotes engagement among existing staff.

This article discusses the importance and benefits of salary transparency. It examines the perspectives of employers, employees, and job candidates, and takes a look at how salary transparency laws affect recruiters and the organizations they serve.

What Does Salary Transparency Mean?

Salary transparency refers to openness in sharing salary information with employees or job seekers. There are several levels of transparency to consider. For example, some organizations are happy to share their entire wage structure from entry-level to management. This is very rare. In general, salary transparency amounts to being open about salaries when advertising posts and disclosing how salaries are structured among employees performing similar roles.

Salary Transparency In The Workplace

Salary transparency in the workplace means that employees are remunerated for the work they do rather than their personal characteristics. For instance, if two clerks have similar responsibilities and exhibit similar workplace performance, the principle of fairness dictates that they should earn the same salaries. Historically, this has not always occurred. Women, people of color, and people who previously earned low salaries may find that their remuneration level lags behind that of their peers. The primary purpose of salary transparency is to address historical gaps and disadvantages in how people are remunerated for the same or similar work. 

Salary Transparency in Job Postings 

Salary transparency in job postings requires publication of the applicable range of remuneration that will be offered to the successful candidate. Being open about salaries when advertising posts benefits employers because they are better able to attract qualified candidates. It also has advantages for prospective applicants who would like to know what a successful job application may mean to them in material terms. From a wage equity perspective, it prevents businesses from offering remuneration based on a person’s salary history, race, or gender. Instead, it pegs remuneration at an appropriate level for the role. 

Why is Salary Transparency So Important?

Salary Transparency in Job Postings Facilitates Recruitment 

Salary transparency encourages a larger number and greater diversity of people to apply for posts offering a fair wage. Job seekers will be more motivated to apply because salary transparency assures them of your organization’s commitment to wage parity, fostering trust. For the organization hiring talent, there’s a wider pool of applicants to choose from and a better chance of finding the ideal hire.

The general quality of applications may be better too. A talented applicant is unlikely to apply for a post before they know whether remuneration matches their expectations or ambitions. Research confirms this. According to research published by the Society for Human Resource Management (SHRM), 70% of organizations report attracting a larger number of applicants when they are transparent about salaries, and 66% say they attract higher-quality candidates.

The figures are even more compelling when measured from a job-seeker perspective. 82% say they’re more likely to apply for a role if remuneration levels are disclosed. 74% report being “less interested” in roles when job ads fail to specify pay, and 73% say they have greater trust in organizations that are transparent about salaries offered. 

Salary transparency also saves recruiters’ and applicants’ time and resources. There’s a lower likelihood of candidates navigating the entire recruitment process only to reject an appointment because the salary offered is not to expectation. 

These benefits are clear to most recruiters, even when salary transparency during recruiting is not required. SHRM reports that even in jurisdictions where salary transparency in job advertising is not required by law, 67% of HR professionals include salary ranges in job ads. 

Salary Transparency and Employee Engagement, Job Satisfaction, and Productivity

Implementing well-defined salary ranges for posts helps to combat discrimination, as well as promote fairness and inclusion. It allows employees to see why they are paid a specific wage and they can confirm whether wage equity is occurring in practice because they have wider access to information on their peers’ salaries. Although there’s more to employee engagement and job satisfaction than fair remuneration practices, research suggests that it has a fundamental role to play.

Research published in the Journal of Industrial Psychology suggests that wage and job satisfaction are closely connected. According to the study, wage satisfaction is related to perceptions about what employees’ peers are earning. This finding highlights the need for salary transparency. When organizations fail to implement it, workers may form their own impressions whether they are accurate or not. If, on the other hand, remuneration policies are known, understood and demonstrably equitable, the chances of your employees being satisfied with their wages are greater.

SHRM has compiled some evidence to suggest that employees may work harder when salary transparency is implemented. It cites a study that noted an uptick in published research among highly paid academics when salary transparency was introduced. 

A larger study, involving 2,000 bank employees, indicated that salary transparency may be related to a stronger desire for advancement evidenced by heightened productivity. However, the research highlights the need for clear criteria indicating what qualifies people for wages toward the upper end of any wage scale. Without clear reasons as to why some people earn more than others, perceptions of unfairness can lead to disaffection. 

Salary Transparency and Employee Retention

Evidence of heightened engagement in organizations that are transparent about salaries can be seen in reduced staff turnover and a more trusting employer-employee relationship. Research by Deloitte concludes that for Gen Z and Millennials, inflationary living costs are turning pay into one of the top reasons why employees seek new roles. Salary transparency coupled with market-related remuneration may combat that. 

With career growth as a priority for people hoping to better their circumstances, wage transparency and conversations about career development and progression will encourage employees to stay on for longer. They may even choose to build entire careers in a single workplace. Failing to implement salary transparency, on the other hand, may lead to heightened staff turnover. According to Deloitte’s research, two-thirds of employees say they would consider switching jobs in favor of an organization offering salary transparency. 

How Does Salary Transparency Address Pay Gaps and Disparities?

The gender pay gap between men and women continues to be a current issue. On average, women are paid 16% less than men occupying similar roles. Add race to the equation and an even less equitable picture takes shape. On average, Latinas and black women earn 55% less than white men occupying similar roles. 

According to SHRM’s 2020 survey, black men earn an average of 13% less than their white counterparts, and Latin men earn about 9% less. Asian men, on the other hand, earn 15% more than their white male peers, which is generally attributed to higher rates of graduate-level education.

Apart from race and gender, basing remuneration for new recruits on their past earning capacity can result in disparities between salaries earned by people in similar roles. You’ll notice that several states have placed a prohibition on asking about past earnings. This has been done to eliminate the practice of using the amount earned in previous roles to set remuneration, resulting in wage inequality. 

Salary transparency addresses wage gaps by specifying how much you will pay employees based on the roles for which they are recruited. Applicants need not fear that they’ll receive lower remuneration based on other factors. 

Which States Have Salary Transparency Laws?

Salary transparency laws are relatively new in the regulatory landscape. Maryland and the cities of Cincinnati and Toledo were early adopters, passing regulations on salary transparency in 2020. 

Since then, momentum has grown, with state after state requiring salary transparency. Others are in the process of developing this type of legislation, and some have already done so and have set deadlines for its implementation. For example, Illinois will implement a salary transparency law in January 2025. 

Salary Transparency Laws By State

As of August 2024, 13 states have salary transparency laws or will begin enforcing them in 2025. There are also instances in which city governments have their own salary transparency ordinances. 

• California salary transparency laws require businesses with 15 or more employees to include salary information in job advertisements. Recruiters may not ask applicants about their salary history. Regardless of the size of the workforce, current employees must be given information about pay scales for their posts on request. Penalties for non-compliance range from $100 to $10,000. 

• Colorado requires disclosure of salaries and benefits in job ads. Current employees must be informed when posts are being advertised and must have access to proposed salaries and job descriptions. The law applies to all organizations and penalties range from $500 to $10,000.

• Connecticut law says that salaries must be disclosed to job applicants who ask for this information. In the absence of such a request, pay ranges for a post must be disclosed on hiring. Recruiters may not ask applicants about their earnings history. If employees ask about their pay scales or are moved to a new role, salary information must be provided. Job applicants and employees may open civil cases against non-compliant companies. 

• The District of Columbia (DC) implemented its salary transparency law in June 2024. It requires disclosure of salary ranges in job ads and information on healthcare benefits before the first interview occurs. The law applies to all businesses regardless of the number of people they employ. 

• Hawaii’s salary transparency law calls for accurate disclosure of salaries in job listings. However, it does not apply to organizations with fewer than 50 employees, roles in which remuneration is governed by collective bargaining, or in the case of employees being transferred to new positions. 

• Illinois pay transparency law requires salaries and benefits (including incentives) to be stated in job ads from January 2025. The law applies to all people employed in Illinois as well as people working for Illinois-based businesses. It does not apply to organizations with fewer than 15 employees. Fines of between $500 and $10,000 may be levied for non-compliance.

• Kentucky is considering a salary transparency law that was introduced to the state legislature in 2023 but it has not as yet been approved.

• Maryland requires salary disclosure to job seekers on request and prohibits asking them about their past earnings. The law applies to all organizations. The fine for non-compliance is $300 for a first offense and $600 for subsequent violations. 

• Massachusetts has passed a salary transparency law that will come into effect in January 2025. It requires all employers to disclose salary information if job applicants request it and prohibits recruiters from asking about applicants’ previous salaries.  

• Minnesota will implement a salary transparency law in 2025. It applies to employers with 30 or more employees, requiring them to disclose salaries and all other forms of compensation in job ads. 

• Nevada law requires transparent salary information for applicants who have been selected for interviews. It’s also a legal obligation to disclose salary scales to existing employees on request and when discussing transfers or promotions. Penalties include a fine of up to $5,000 and allowance for civil suits initiated by employees or job seekers. 

• New Jersey (Jersey City) doesn’t have a state law, but requires pay disclosure in job ads and when promotions or transfers are under discussion. 

• New York stipulates the need for salary transparency in job ads, and when discussing promotions and transfers. The law applies to employers with four or more staff and escalating penalties starting at $1,000 for a first violation will be levied. Ithaca, Westchester and NYC salary transparency ordinances predate state-level law and have similar requirements. 

• In Ohio, the cities of Cincinnati, Columbus and Toledo have ordinances requiring disclosure of salary ranges on request when recruiting employees. Ordinances stipulate that salary history should not be requested. 

• Rhode Island requires transparency indicating the salary range for positions on job applicants’ request, during the course of employment, and when employees are redeployed in new positions. Applicants may not be asked about previous salaries. The law applies to all employers and fines of between $1,000 and $5,000 may be levied for violations. 

• Washington requires salary transparency indicating the wage range when advertising positions, when employees are promoted, or when they assume a new role. All forms of remuneration must be disclosed. The law applies to organizations with 15 or more employees and violations may result in civil suits and fines. 

 A Step-by-Step Guide to Implementing Salary Transparency

Salary transparency within an organization can, and often does, go far beyond what the law requires. When done well, it can foster employees’ trust and encourage them to remain in your organization and work toward career advancement. 

However, introducing salary transparency can be a delicate process. It may make some employees feel uncomfortable since it amounts to sharing information they see as personal. When employees perceive discrepancies between what they earn and the salaries of their peers, questions will be asked. In the absence of good answers, disputes may occur. Thorough preparation and planning are necessary for a smooth rollout. 

Review Your Compensation Structure

Begin the process by taking a close look at your current pay scales, how job descriptions relate to them and how you evaluate worker performance. Try to create easily comparable job descriptions and performance metrics that allow you to align them with pay scales in a logical fashion. 

Using your data, compare your salary scales to “going rates” within your industry and assess any benefits your company offers in relation to your competitors. For your salary transparency initiative to have a positive impact, your employee remuneration levels should be both fair and competitive. 

Develop Your Remuneration Policy 

To be properly transparent, there must be a clear policy that guides your approach to remuneration. Capture the criteria you use to determine what salaries should be paid. Market rates are a starting point.  

Differences within pay scales should ideally be based on measurable performance criteria and applied skills, but this is not always simple, particularly when salary inequality already exists within current remuneration structures. Instead of looking at the current status quo at this stage of your process, decide on the principles that will govern your remuneration policy. For example, will you consider modifications based on tenure, or will performance be the primary focus? In a similar vein, consider whether academic qualifications are a concrete benefit that justifies their consideration in wage determination. 

Using your policy, determine the pay ranges that apply to posts within your organization.  Note the reasons why each range was allocated and which criteria should be fulfilled for salary adjustments to occur within each pay band. For example, if new employees start on the lower end of the scale, what requirements must they fulfill to advance toward the higher end of the band?

Your remuneration policy and salary scales won’t be static. Specify schedules and contingencies that call for possible revisions. These may include initial adjustments after implementation followed by periodic review. For example, you may specify annual reviews to maintain competitive market-based rates. Substantial changes within the organization’s structure or within individual job descriptions may also call for revised performance criteria and a review of remuneration levels.

Verify That All HR Personnel and All Managers Understand Remuneration Policies

At least some of your HR staff and management personnel will have been involved in your information-gathering and policymaking exercises. However, it’s your whole HR and management team must understand the goals of your salary equity and transparency initiative. They should be well-acquainted with the remuneration policy and how salary scales work in practice so that they can communicate this information to employees. 

Engage in presentations and question-and-answer sessions to help gage their understanding. Then provide collateral such as documents and explanatory diagrams so they can help employees better understand remuneration policies.

Communicate With Employees

Degree of Transparency

You will have to consider to what degree you want to implement salary disclosure. Even stringent salary transparency laws only require people to be aware of their pay range in relation to their peers. 

Some organizations take this to the next level, sharing information on salaries at every level with all employees. For example, Buffer is so upfront about its salary-determining formula that it shares it online and Whole Foods employees can view a full salary report on request. 

There’s a lot to weigh here, however. Because personal information is sensitive, many companies feel that sharing pay scale information rather than specific salaries for individual employees is the most appropriate solution. 

Explain Why You Are Implementing Salary Transparency 

Whether you are implementing salary transparency for the first time or have simply been working to fine-tune and clarify your remuneration policy and structure, your employees will want to understand the principles as well as the details. Although legal compliance is a possible reason for implementing transparency, it should not be your only one.

There are several possible points to emphasize when communicating your salary transparency policy to employees. These include the goal of achieving equity in remuneration regardless of race or gender. Help employees to see how salaries are aligned with roles and performance-based measurables and offer career planning advice for those who hope to advance to higher salary grades. 

Consider Adopting a Phased Approach

If you have a large workforce with multiple teams, it may be best to adopt a phased approach. This will prepare employees to embrace a workplace culture in which salary transparency is implemented. 

Two-way communication can be difficult when many people are involved. As a result, some companies phase information sessions, beginning with a pilot project that allows them to review and refine the methods they use to communicate salary transparency information. It also allows them to gauge responses and better estimate the resources they’ll need to deal with feedback. 

Encourage Comments and Questions, and Give Feedback

Whichever approach to communicating with employees about salary equity, there are sure to be comments and questions. There may also be individuals who are not convinced that their salaries are fair and this should be addressed. 

Encourage open, positive dialogue, invite private consultations with HR, and take fair comments and feedback on board. Employees may raise valid concerns that you have not taken into consideration, and they deserve to know what you will do with the information. Schedule meetings with managers and HR to share information, discuss employee feedback, and action any additional measures that have been agreed on. 

Throughout the process, emphasize fair remuneration while recognizing individual concerns. With the cost of living crunch curtailing their spending power, encourage employees to find out more about what they can do to advance to higher salary bands.

Make Adjustments and Carry Out Regular Reviews

If it’s been some time since you reviewed salary scales and job descriptions, or you are attempting to introduce formalized salary scales for the first time, you may need to make adjustments. 

This could mean implementing larger performance-based salary increases for underpaid employees, for example. You will also have to consider what to do about employees earning salaries that are higher than the norms you’ve set. Simply freezing certain salaries will lead sow discontent and may impact worker performance. Adding extra responsibilities to affected roles in consultation with the relevant employees may be a constructive way to justify current earnings, allowing for future progression. 

To prevent new wage disparities from developing, review compensation practices at intervals and ensure that salary increases fall within the peer-based range and are well-motivated. Encourage managers and HR practitioners to listen to employee feedback and report on any valid issues that have been raised. 

Implementing Salary Transparency? Add Our Tools for a Transparent Hiring Process

Your commitment to equal salaries for equal work is a big step towards promoting fairness in the workplace. Now, it’s time to follow through. Employment equity in the workplace begins with hiring practices. Broadbean offers a set of curated tools that will help you refine your recruitment and candidate selection processes for absolute fairness in hiring. With fair recruitment and fair remuneration on the table, you’ll be well-positioned to win the race for talent.